Managing global accounts Based on the article by George S Yip and Audrey.J.M. Bink Harvard Business Review, September 2007

Understanding Global Account Management Global Account Management(GAM) is the natural extension of national account management The worldwide operations of global customers are treated as one integrated account Consistent pricing, product specifications and service

Why MNC customers prefer GAM Centralised purchasing leads to more transparent price Consolidation of orders means Volume discounts Ability to manage product specifications and service more effectively

When is GAM appropriate? From a suppliers’ perspective, GAM is appropriate if : Products and services need global coordination and are profitable enough to justify it MNC customers want GAM These customers are important to the business Competitive advantage can be gained from GAM

Products and services Prime candidates are complex products and services like computers and services like computers, process cotnrols, specialty chemicals and corporate banking High margin products Globally consistent or compatible Must meet complex specs across borders

Customers’ wants Customers may expect Suppliers to provide a single point of contact Coordinated resources for serving them Globally uniform / consistent prices/ discount schemes Globally standardised products and services Globally consistent service quality/ performance

Importance of MNC customers Amount of revenues accounted for by such customers Importance of specific customers in terms of revenue share

Competitive advantage Useful in global/regional bidding situations If competitors offer GAM, no option but to replicate them

Which customers are candidates for GAM? Good size and revenue potential Geographic spread Integration capabilities Existence of appropriate structure, processes and information systems Integration capabilities are high if Strategies are developed at the global level Most businesses have global P&L Country heads focus on servicing the activities of global business lines, functions and customers Global teams manage or coordinate most primary activities Information is captured and shared globally in real time A truly global culture permeates the organization

Forms of GAM Coordination GAM Control GAM Separate GAM

Coordination GAM GAM unit is weak National sales organizations retain a great deal of power GAM managers coordinate the sales and support activities of the national operations National operations may take the lead in sales but deals may have to abide by global terms GAM managers take the lead while expanding accounts into new product lines or regions where the supplier has no business

Coordination GAM (Contd) This approach makes sense when Local relationships are extremely important The need to standardise services across borders is relatively slight The supplier lacks the integration capabilities needed to manage MNC customers This approach is Easy to implement Does not disturb the existing organizational structure Is less costly

Control GAM Divides responsibility for global customers between GAM and national operations Upper hand remains with GAM. GAM has ultimate responsibility for the account. GAM managers have the authority to enforce actions worldwide and the final say when disputes with national managers arise. Usually some form of matrix structure is used. Local managers report to the national organization as well as GAM. Usually includes a support team that identifies opportunities, makes plans for the global account, manages information and communication and strengthens the relationship network.

Control GAM (Contd) Costs more than coordination GAM Involves changes to the company’s organizational structure Creates friction between GAM and national operations Aligns the organization behind one customer focal point Achieves a better balance between global integration and local autonomy Engages many parts of the company at multiple levels

Control GAM is most appropriate when Product and customer attributes point to a strong need for GAM Compelling reasons exist to anchor the account in national operations Supplier is moderately capable of integrating its global sales, delivery and service

Separate GAM A separate business unit can be created with total responsibility for global accounts Frontline employees belong to the GAM organization GAM also has its own technical support and sales and service But GAM does not contain or control back end functions such as R&D and manufacturing

Separate GAM implies Unified control of customer relationship Less friction between global and local operations Makes it easier to manage account information Results in better customer services Involves a major reorganization Results in less sharing of best practices with other parts of the company

Separate GAM is suitable when All the drivers for GAM are strong Customers provide a lot of business that is big and profitable enough to support the additional costs Suppliers and customers have the advanced capabilities for coordinating and integrating their transactions and other activities

Customising GAM for different customers Different customers may need different types of GAM But it is hard and expensive to do this The best solution is to customise one form of GAM. The customisation can be with respect to The number of items covered Strictness of the terms and conditions that apply to the individual national operations of a given customer Level of service Involvement of the suppliers’ national operations

Conclusion GAM must fit into the context of a company’s overall strategy/structure Do not start with an ambitious approach Start with coordination GAM As integration capabilities improve and global relationship deepens, separate GAM can be adopted