VALUE SELLING AT SKF SERVICE (A) Case Study Solution
Taking under consideration the advantages and disadvantages of participating in the reverse auction; the company is advised to not participate in the reserve auction by making extraordinary-exceptions to the value driven strategy. If the company participates in the reverse auction by making extraordinary exceptions, it would be faced with the threat of losing its value selling approach, the competition in the market would shift to the price, competitive position of the company would be eroded making the company unable to command the higher premium price in the market and the extraordinary exceptions might become a common way because of the fact that other customers would find reverse auction more profitable and feasible. In addition to this, the company would also lose its customers, anticipating that the lowest quality products are being offered in the market with extraordinary exceptions to the value driven strategy.
Should you refuse to participate in it and face the consequences, including the probable damage to your relationship with ITC and Steelcorp?
There are numbers of disadvantages and challenges of participating in the reverse auction,such as:losing 4 million dollars annual orders from Steelcorp, losing a major part of the business with its distributor and damage to the relationship between ITC, Steelcorp and SKF.Based on the number of facts, such as: ITC and Steepcorp are among the largest customers of the SFK’s service divisions and currently Steelcorp accounts for 1.32 percent of the total service sales of SKF, because Steelcorp is the regular customer of SKF. In the similar way, all interactions with SKF are performed through ITC, and Steelcorp buys 50 percent of its bearing from ITC – one third being manufactured by SKF.
In addition to this, SKF has brought a depth inits relationship with ITC, as ITC is recognized as the most important channel partner of SKF in the US,and since ITC is the second largest supplier in the US; SKF accounted for approximately 8 percent of total annual sales of ITC of 2.1 billion dollars. Furthermore, Steelcorp bought close to 12 million dollars in bearing from ITC, which is nearly 50 percent of the total sales from distributors,due to which ITC is one of the exclusive one-stop-shop suppliers of SKF in North America. The values of SKF and cornerstone of the company’s success include: good customer relationship, and strong relationship would be harmed if the company refuses to not participate in the reverse auction(Jackson, 2015).Also, the company always stresses over the significance of strengthening the customer relationship, due to which the long term sustainability and the company’s success would be at risk if it refuses to participate in the reverse auction. Furthermore, despite participating in the reverse auction by making extraordinary exceptions to the vale based strategy; the company should arrange a meeting, as a short term plan with Steelcorp and ITC with the purpose of demonstrating the value measurement as well as delivery with DSP, and offering end user to Steelcorp, helping it in achieving its target of cost reduction by highlighting the total ownership cost..............
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