In this chapter, background of the research problem and problem discussion will be presented. It will be followed by the purpose of our research, delimitations, target group and disposition of the thesis structure. We will end this chapter with explicating our research questions.
1.1. Background of the research problem
In my opinion, a company could only consider itself a successful one whether it satisfies its customers with their final product or service. According to Kumar (1999), the most natural way of obtaining extraordinary returns on investment (ROI) for companies is to create and retain long-term client relationships with their consumers. Therefore, companies should try to generate products or services that could last and benefit longer to their consumers than their competitors. According to Bowman (2012, p.277), the current contemporary companies are constantly in activities of seeking and approaching new consumers instead of concentrating on keeping their current customers. However, it is also the part of fundamentals of economics, it is believed that the sustainable growth through sales could only be achieved through preserving the existing customers of companies (Bowman, 2012, p.277). Nevertheless, due to increase in competitions among companies in every market, companies are desperately trying to survive in the market by delivering superior value to their current customers and in this way, try to expand and retain their target market rather than exploiting them for a short-term profit (Ellis, 2011, p.19).
As it is vital for businesses to obtain customer loyalty and retention, it is also proved with numbers that it could be up to 20 times more expansive for companies to find new customers than retaining the existing ones (B2B International, 2013). Nowadays, when we consider successful businesses, we will see that these companies have loyal customers and this gives them competitive advantage in the market. As mentioned before, this consumer behavior is highly related with how much companies satisfy their consumers so that customers do not even think of shifting to alternatives. When we investigate B2B environment we can see that companies are doing business with other companies, where it encompasses all the product and service deals that two parties conduct. Compared with the traditional B2C market, B2B activities are higher in economic values and consist higher risk and complexity. Therefore, we can say that cost of switching to other supplier for a company is much tougher than a customer switching to another brand. In an aggressive economic environment, companies are obliged to consider cost effectiveness and stable profitability therefore, it is indispensable for companies to obtain strong and long-term relationships with their suppliers and buyers (Naghibi & Sadeghi, 2011, p.902).
In this paper, we will analyze relationship and network marketing for industrial companies where they achieve competitive advantage through these areas of inter-organizational marketing. It is crucial for decision makers to improve in relationship and network marketing where it is believed that the successful business could only be made when there is a sophisticated interpersonal communication between buyers and sellers in the industry (Oliva, 2012, p.30). This trend shifted the purpose of marketing where companies in efforts of generating long-term and profitable relationship with their targeted customers (Bridgewater & Egan, 2002, p.6).
In B2B markets, buyer-seller relationships are usually consisting of multiple contexts and rather long-term interactions between companies (Håkansson, 1982, p.25). These networks help companies to obtain relationships that gives mutual benefits to both parties (Hart, 2003). Inside a network, interactions between sellers and buyers could bring up several problems as well as could lead to further opportunities in the future as well (Håkansson & Waluszewski, 2013, p.441). These interactions between both supplying and buying parties will start with adaptation process where two parties get to know each other better and then followed by business effectiveness of both parties which will consequently result in stabilizing and generating the network relationship (Mohamed, 1989, p.2). As a result of this successful relationship where the interactions are made through creation, utilization, adaptation and idea exchange, efficiency and innovation would be the inevitable consequences of these interactions (Håkansson & Waluszewski, 2013, p.445). These interactions are highly affected by the characteristics of each actor in the industry where it strongly influences processes, cooperation and coordination between buyers and sellers (Ellis, 2011, p.126). Such characteristics could have different effects on different networks where it could either improve or prevent the efficiency and innovation.
Recent economic globalization and advancement in technology has led to growing opportunities for people and businesses as well as to a complex, dynamic and an uncertain business environment (Tåg, 2008). Local businesses which are aiming to expand in overseas have experienced severe challenges from different environments when creating and managing customer and business relationships. Therefore, it is crucial for businesses to consider the differences among the characteristics of networks in different international industries at the global business scale (Bridgewater & Egan, 2002, p.33). This has caused local businesses to differentiate their attitude towards their network actors in different contexts and markets where it is believed that these cooperation and collaboration in these business networks are crucial for each company that want to be successful overseas.
Managing a company is a challenging task, where in big multinationals it is made by group of people and yet a final decision about a company's future could still turn out to be a mistake even though there are dozens of managers in the company. These managers could easily choose their own good rather than company's or simply not good enough for the job. Nevertheless, these managers are in the end the ones whom are key for conducting the B2B relationship between companies. These managers should respond to changes in the market environment, endorse the ongoing B2B agreements and should concentrate on value creation from these agreements (Bradford & Weitz, 2012, p.417). Successful firm strategy creates superior value for consumers and help company to improve in the areas of marketing, engineering, finance or production. Inter-organizational marketing activities could be advanced if only decision makers seek to improve their business and the future of their fellow companies.
This research revolved around the case of biotech company Novozymes, which is acknowledged as a leading global company engages in the research, development and provision of biotechnology solutions (Schaefer, 2017). The company has listed number 20 in Forbes' Top Multinational Performers list reaching to $12.2 billion market cap as of May 2017. Moreover, company is listed in top 1000 highest market value companies in the world and by 2016 is listed on 82nd place in the most innovative companies list (Schaefer, 2017). Novozymes holds an estimated 48% share of the global enzyme market which puts them as a market leader in the industry (Novozymes, 2017). Furthermore, Novozymes named 2017 as their most innovative year ever. Sales numbers have increased immensely compared to the year before where they have recorded 9% which is again one of the highest in company's history (Novozymes, 2017).
The significant advancements and improvements in technology has led biotechnology market to grow more than 7% annually and expected to reach to market worth of $727.1 Billion by 2025 (GVR, 2017). Biotechnology uses biological systems or living organisms for the development of its products mostly biopharmaceutical drugs. The leading regions for the global biotech industry are the United States and Europe. There are more than 650 companies and over 200 thousand employees settled mostly in the United States and Europe generate more than $130 billion biotech revenue as of 2015 (Statista, 2018). The United States is the main hub for biotech companies where more than $100 billion revenue solely generated in this country. San Francisco Bay Area is the highest concentrated place where biotech companies are located and revenues generated that more than 100 thousand people are in this sector in the US (Statista, 2018). There are key themes in the industry where it helped this growth become this significant. Advancements in regenerative medicine and genetics in diagnostics and the fact that companies are focusing on these issues has led the growth in sector and is expected to continue through 2025 (GVR, 2017). Biotech is crucial for the research and development process for finding cure for cancer where multiple drugs have been made throughout the century (Statista, 2018). Moreover, it is also used in agriculture, beverages, bakery, textile and so many more industries that is why it is still considered as a very broad and growing industry for new companies as well.
The recent technological improvements in the biotechnology market has led to an increased competition in the market. This ever-growing intensity in the market has increased the importance of companies' activities of strategic networking, coordination and cooperation with their business partners and at their supply chain activities as well. As a company like Novozymes, it is crucial for their business to maintain and strengthen these relationships with their business partners, buyers and end-users operating in several different fields. When doing business internationally there are several factors that multinationals should consider in order to establish strong ties with their foreign business partners. Factors such as culture, languages, economic variables, attitudes and political stability among the countries have a crucial importance for multinationals (Turnbull P.W., 1979). Therefore, decision makers should analyze all these variables and create strategies for each market and its different conditions. This changing environment around the company sphere creates interesting topics to write about in an academic paper where it will be investigated that how these knowledge is transferred to company database and its relationship with the company strategy in different markets around the globe. For this reason, we will dig into Novozymes' strategies of doing business in different regions and how company perceives arising challenges from these markets and reduces the potential pitfalls.
1.2. Problem Discussion
In B2B environment, industry is mostly shaped by the complexity of the products, availability of buyers and the value of the orders among the organizations in the market. Since generating sales and eventually revenues are crucial for every organization for survival in the market, it is important for companies to reach out to the available information, privileged knowledge about both the market and competitors in the industry. Therefore, in order for companies to generate strategic plans about which product to provide in which way, it is essential for decision makers to know what are the competitive advantages as well as weaknesses at the targeted market (Pitt & Nel, 1988). Moreover, inter-organizational relationships are almost important as considering changes in the market outside the organizational relationship level. As B2B markets growing rapidly every year it is not enough for company managers to rely solely on factors in the market but also should concentrating on improving the quality of relationship with its buyer companies which are their consumers in our context.
In a highly competitive B2B market, it is essential for company managers to realize the importance of recruiting and retaining long-term customer relationships for company's sake (Ellis, 2011, p.320). In B2B marketing context, this is considered as the strongest source of competitive strength (Weitz & Bradford, 1999). Companies generate these relationships by applying B2B marketing communications strategies which is by far the costliest department for companies such as Novozymes in terms of business benefits. At the industry that Novozymes operates in which is mostly being a provider for consumer goods market, complex demands from the company makes it costly on time and resources in order to finalize their deals to conduct their business. For this reason, Novozymes now has more subdivisions in company to bring more managers in specific markets than before to concentrate more and show that they care all about their regions operating in. Recent analysis showed that this new arrangement in corporate structure brought significant benefits to the company which proved how important managers are dealing with consumers in Novozymes' business (Novozymes, 2016). Increased careful planning and clear guidance from the company managers have advanced the effectiveness of the company in most markets and resulted in positively consequently.
Novozymes is one of the oldest companies in the biotechnology industry that operates more than 70 years as of 2018. Even though their first mover situation in the market, it is still crucial and sometimes challenging for their business to attract new business partners and expand into new markets (Novozymes, 2018). In biotechnology industry B2B marketing is a crucial tool for companies where they market their products and services to each other. Therefore, technological innovation, reaching to new and valuable information are crucial for companies to develop and secure their business in the industry. As we look into successful companies in the industry, we could easily conclude that the successful companies are the ones that are constantly seeking and trying to improve in these areas such as Novozymes. As the company earns the 48% of the market share in industrial enzymes market, Novozymes operates in 130 countries and manufacture across three continents (Novozymes, 2018).
For a multinational company as Novozymes, where the purpose of the company is to work with innovative customers across the globe, providing products to these customers to help them produce more from less and make their products stand out and reduce costs in the end (Novozymes, 2018). As a company which delivers biological solutions to its consumers, Novozymes supplies innovations to the world's leading companies across 40 markets. The company believes they improve the sustainability performance of their consumers and their partners (Novozymes, 2018). Since 2000, the company has brought more than 100 new molecules to market to address specific industry and customer challenges. Moreover, company has the largest technical service team in the biotechnology industry to ensure that their experts are on the ground to provide successful solutions for their consumers (Novozymes, 2018). We believe that this is an important point to mention about since the relationship that Novozymes has with its buying actors is crucial for B2B markets as well as its relationship with its competitors and opponents. Hence, all the data that is related with the relationship strategy of Novozmyes will be in our interest throughout this paper.
1.3. Purpose of research
The main scope that this master's thesis paper will be on examining and describing the role of relationships that a multinational company Novozymes has with its business actors in B2B marketing context. We will investigate the broad network that company has and how does company deals with different problems in several markets that they operate in. We are aiming to understand how multinationals such as Novozymes which are present in several markets around the globe got affected from factors such as customer relationship and partnership management in B2B marketing. This paper is hoping to become a guidance tool for other multinationals that are conducting B2B business activities while explaining the complex marketing management and relationship strategies of Novozymes.
1.4. Research questions
The research questions in this paper are based on our own analysis of the company in B2B relationship marketing aspect.
The activities of Novozymes in:
have helped us creating our RESEARCH QUESTIONS.
- How does a company like Novozymes which operates in several complex industries got its business strategy affected by the changes in market place?
- What strategies does Novozymes create to deal with industry problems in B2B marketing context?
Within the scope of this thesis, we have mostly focused on the activities that company has in different situations in several markets. Novozymes is operating in five industries and each industry has its specific problems whereas in this paper we have only mentioned about the most important ones. Novozymes was chosen to be the case company in this paper both because the company is the market leader in its market nevertheless still trying to expand into new markets and strong connections that the author has with the company professionals to obtain primary data.
Novozymes had a recent change in their corporate governance structure where they increased the allocation of vice presidents in a more responsive way, where they shifted their focus from solely concentrating on regions to concentrating both industries and regions in the same time. This changed has happened on March 2016 and has become a basis for this thesis paper where significant amount of problems were believed to be happening before this new allocation (Novozymes, 2017). Therefore, since this is a very recent change from the time that this paper has been written, the collected data would be both new, very reliable and does not mean that it will not change in different direction in the future.
In big multinationals such as Novozymes, business decision making relies on several factors starting from financial reasons to supply chain management, research and development of technology, logistics, country political factors and many more. However, in this paper, we will analyze only the sales network activities of Novozymes in B2B context due to the length of our paper and the scarcity of research time that we have during the preparation of this thesis.
1.6. Target group
This paper is not solely based on the case of Novozymes' business success but also it is also approached its way of company's dealing with its business problems in both critical and consulting point of view. Therefore, we believe that this thesis could be beneficial to not only Novozymes' management team but also other companies that are operating in similar business way in B2B Marketing. Thus, this paper could help other companies' sales network managers to develop solutions by analyzing the similar cases where Novozymes saved and enhanced its business in numerous markets. B2B Marketing is a growing and a wide scale activity for companies therefore we think that this paper could help more and more companies in the future.
1.7. Thesis Disposition
- Chapter 1 – Introduction provides the background of the studied. The purpose, research questions and delimitations are included as well.
- Chapter 2 – Company Background presents the information about the chosen firm, Novozymes. The company's business, different industry units, sales and partnership network will be introduced.
- Chapter 3 – Definitions introduces the concepts that have been mentioned in thesis.
- Chapter 4 – Theoretical Background consists of the relevant theories, concepts and models used in B2B Marketing analysis, network relationships and intra-organizational solutions. Further researches that are related with the subject of this thesis will also be presented.
- Chapter 5 – Methodology introduces the way we construct this paper from the beginning. The method of doing this and choices of data collection will also be determined and demonstrated.
- Chapter 6 – Empirical Data is the part where all the primary data collected from the interviews and the secondary data from the internet and company internal database are presented.
- Chapter 7 – Analysis is where the study is deeply analyzed and explained with the collected data and theories chosen.
- Chapter 8 – Conclusion provides results and presents the conclusion we made from the analysis in order to answer our research questions of this research. The section of suggestions for further research is also specified.
2. Company Background
In this chapter, our case company Novozymes will be presented starting from its historical background. Furthermore, it will be followed by the information about their business industries, their sales network and their recently changed corporate governance structure will be presented. This data is gathered from both primary resources such as interviews and secondary resources from the internet.
2.1. Historical background of Novozymes
Novozymes A/S is a global biotechnology company headquartered in Bagsværd outside of Copenhagen, Denmark. The company has exactly 6485 employees by the end of 2015. Novozymes is a multinationals where it has operations in a number of countries around the world including China, India, Brazil, Argentina, United Kingdom, the United States and Canada (Novozymes, 2015). The company is aiming to be successful in the areas of research & development and production of industrial enzymes, microorganisms and biopharmaceutical ingredients. Novozymes was found by the brothers Harald and Thorvald Pedersen in 1925 as Novo Terapeutisk Laboratorium and Nordisk Insulinlaboratorium with the aim of producing insulin (Novozymes, 2018). In 1941 the company's predecessor launched its first enzyme, trypsin, extracted from the pancreas of animals and used to soften leather which put Novozymes as the first one to produce enzymes by fermentation using bacteria in 1950s (Parameswaran, B. et.al., 2013). Furthermore, in the late 1980s Novozymes presented the world's first fat-splitting enzyme for detergents manufactured with genetically engineered microorganisms, called Lipolase to increase further of its range of business operations (Watts, 1989).
However, the current Novozymes with the name, strategy and as a different identity company was founded in 2000 as a spinout from pharmaceutical company Novo Nordisk (Novozymes, 2018). In the 2000s Novozymes has aimed to reach the most markets possible and expanded through acquisition of several companies focusing on business outside the core enzyme business. Amongst these companies were the Brazilian bioagricultural company Turfal and German pharmaceutical, chemical and life science company EMD/Merck Crop BioScience Inc. (Bloomberg, 2010). These acquisitions helped Novozymes to develop and improve its business, and made them the leader in sustainable solutions for the agricultural biological industry (Vinluan, 2014).
As a company mission, Novozymes wants to continue its unique position towards the dedication to enzymes and microbes. For more than 70 years, company is constantly putting their efforts to collaborate with the biological problem solvers where in the end they believe, Novozymes is creating difference to the world that we share (Novozymes, 2018). More than 6000 employees of the company whom they called Zymers are trying to find ideas to make a difference which is the foundation behind the company philosophy. Therefore, we can say that the company's purpose is deeply rooted in their heritage which is achieving to solutions with their sales network that are their customers, consumers, governments, academia and others around them in terms of finding the sustainable answers that our world needs (Novozymes, 2018).
Sustainability is a key word for Novozymes' business activities that it drives the company's approach to decision making and is reflected in their purpose, strategy and long-term targets. For Novozymes sustainability means adding economic, environmental and social value to its sales network (Novozymes, 2018). The company's long-term targets are inspired and motivated by real and positive impact on the world that the biological solutions that they offer. Novozymes is trying to reach 6 billion people with their biological solutions by the year 2020. In this way 6 billion people worldwide will be using products made with their solutions at least once a week. In order to obtain this goal, company needs to be closely connected to their sales performance. Successful execution of the company strategy will help them to increase their reach to multiple industries in both emerging and developing markets where they believe they have the greatest potential. Furthermore, company is aiming to educate more than 1 million people about the potential of biology to attract more consumers in the future by injecting knowledge about science and sustainability to their consumers through reaching out to schools, universities and communities (Novozymes, 2018).
Moreover, company is aiming to catalyze 5 global partnerships for driving change in order to make the necessary impact on the world. By 2020, company is aiming to form five high-impact partnerships dedicating on solving key global issues with public and private organizations. Novozymes also wants to deliver 10 transformative innovations that has an impact on transforming markets in an innovative way which will create significant impact for customers and make the world more sustainable. In this way, another goal for company is to save 100 million tons of CO2 in 2020 by helping their customers to improve their environmental performance and will help company to fight against the climate change. This will happen by reducing their consumption of energy, raw materials and chemicals (Novozymes, 2018).
2.2. Novozymes' business industries
Novozymes is following the triple bottom line strategy on delivering value to its consumers and partners. The company believes that sustainability means adding economic, environmental and social value. These three values are the core ones for Novozymes' way of conducting business activities. Integrating sustainability is the core of the company's business and it is a key component of business strategies and management processes. Novozymes is always trying to ensure that they add value to their network and deliver sustainable solutions (Novozymes, 2018). Sustainability is governed by all company decision makers where the company's long-term targets are shaped by the UN Sustainable Development Goals criterion. Furthermore, company managers are always measuring the environmental impact of their solutions on a life cycle assessment basis where they identify and focus on the issues most relevant to their triple bottom line strategy. Company has several checking mechanisms which allows them to continually track and improve their environmental, social and governance performance (Novozymes, 2018).
Novozymes believes that their sales network more generally their stakeholders are crucial for their business success. As a B2B Marketing based company, they are well aware that engagement with their stakeholders is essential part of their current and future success. In the end, company creates value for their customers and bring solutions in order for them to cut costs and reduce their environmental impact. For instance, fluctuating raw material prices and volatile markets are an everyday reality for many of Novozymes' customers where the company help them use raw materials more efficiently to reduce, or substiture, use of traditional chemicals with more sustainable alternatives. Another example is where the company could help their customers to develop Life Cycle Assessment where they get informed about the areas of a product life cycle that represent the biggest cost saving opportunities. Lastly, with climate change high on the agenda, Novozymes think that they could use sustainability as an advantage to attract customers where the long-term company target about increasing global CO2 savings will affect other companies in a more environmentally friendly way (Novozymes, 2018).
...(download the rest of the essay above)