Product details

By continuing to use our site you consent to the use of cookies as described in our privacy policy unless you have disabled them.
You can change your cookie settings at any time but parts of our site will not function correctly without them.
Prize winner
Subject category: Marketing
Published by: Institute for Management Development (IMD)
Originally published in: 2009
Version: 14.04.2014
Revision date: 12-Jul-2016

Abstract

This the first of a three-case series. Faced with growing competition and commoditisation of its core aftermarket business for industrial bearings, SKF develops a sales tool to document, measure and guarantee its customers financial benefits from the use of its replacement products and related services. The strategy is based on justifying premium unit prices that lead to a lower total cost and an attractive return on investment for the customer. However this strategy is not likely to impress Steelcorp, an important end user of bearings buying upwards of $12 million annually. A new procurement VP is asking suppliers of bearings, including SKF, to submit to on-line reverse auction where the lowest unit price is likely to win big orders. SKF senior management is considering a response to Steelcorp's invitation which is supported by the company's distributor but opposed by those inside the company who committed to value selling and total cost pricing. The students are to resolve the dilemma and make a decision whether to participate in the auction or refuse to do so and risk losing potentially big orders during recessionary market conditions.

Geographical setting

Region:
World/global

Featured company

SKF Service
Turnover:
USD 8.2 billion
Industry:
Industrial bearings

Featured protagonist

  • Phil Knights (male), President

About

Abstract

This the first of a three-case series. Faced with growing competition and commoditisation of its core aftermarket business for industrial bearings, SKF develops a sales tool to document, measure and guarantee its customers financial benefits from the use of its replacement products and related services. The strategy is based on justifying premium unit prices that lead to a lower total cost and an attractive return on investment for the customer. However this strategy is not likely to impress Steelcorp, an important end user of bearings buying upwards of $12 million annually. A new procurement VP is asking suppliers of bearings, including SKF, to submit to on-line reverse auction where the lowest unit price is likely to win big orders. SKF senior management is considering a response to Steelcorp's invitation which is supported by the company's distributor but opposed by those inside the company who committed to value selling and total cost pricing. The students are to resolve the dilemma and make a decision whether to participate in the auction or refuse to do so and risk losing potentially big orders during recessionary market conditions.

Settings

Geographical setting

Region:
World/global

Featured company

SKF Service
Turnover:
USD 8.2 billion
Industry:
Industrial bearings

Featured protagonist

  • Phil Knights (male), President

Related