Global account management - what next?
Elsevier Food International Vol.8, No.1, February 2005 Fiona McTavish
Many challenges, both internal and external, arise when implementing a global account management structure. However, there are tangible benefits to be realised for those suppliers who enter into global relationships with retailers, these include improved customer relations, joint business planning, and the sharing of data.
Global account management emerged as a major topic for the food and grocery industry about five years ago as a direct consequence of an acceleration of international retail expansion. As retailers began to establish their international operations they started to look for alternative ways to work with their suppliers and to leverage the advantages associated with international scale.
As a result, retailers have sought to create global trading relationships with international branded suppliers whereby suppliers are encouraged to do business with their global customers in the same manner in every market in which they operate, regardless of their market share. Since the late 1990s, global account management has been gathering pace and most of the leading multinational suppliers now have a structure in place for managing global customers.
The IGD survey reveals that global trading relationships between retailers and suppliers are entering a new era. There are clearly some suppliers that are finally realising the financial benefits of global account management, having invested substantially over the past five years. It is evident, however, that global account management is a challenging and long-term project and is not a solution for every supplier.
Understanding the challenges
Many challenges arise when implementing a global account management structure internally. The greatest include:
• Managing conflict between head office and national sales teams.
• Realising the financial benefit of global relationships.
• Implementing the right management structure.
Equally challenging, however, are the obstacles that suppliers face whilst managing their global customers externally, for example:
• Retailers failing to deliver agreed projects,
• Poor quality of data sharing,
• Retailers lacking a strategic long-term focus.
The greatest challenges arise when a retailer has neither the capacity, nor the willingness to enter into a long-term strategic global relationship.
Suppliers highlighted the importance of choosing a suitable partner in terms of size, strategy and culture. Global account directors emphasised that it was essential to understand their customers' aims, needs and key performance indicators (KPIs).
Equally, both parties must be open and honest about what they expect from a global relationship and what they are able to deliver. It is essential that collaborative partnerships are built on a foundation of trust.
Realising the benefits
There are tangible benefits to be had for those suppliers who have entered into global relationships with retailers, who share a common vision with their global customers, and who are willing to work in a collaborative and open manner.
Suppliers mentioned the following top three realised benefits as a result of their global relationships
1. Building a better relationship with the customer: 79 per cent.
2. Joint business planning: 54 per cent
3. Data sharing: 54 per cent.
Building a better relationship with the customer
Seventy-nine per cent of respondents are already benefiting from 'building a better relationship with customers' as a result of their global relationship. The relationship that a supplier has with its customers can be developed in many ways as a result of global account management. A global relationship offers the opportunity to create a more strategic platform on which to work. Furthermore, joint business plans and collaborative projects contribute towards developing a more beneficial global relationship.
This is often seen as a fundamental shift in customer relations, and for many suppliers, it is a welcome next step. Suppliers perceive that a global relationship will enable them to move the agenda forward from resolving market-specific issues to focus more energy on developing a long-term, strategic agenda. This relationship should be meaningful for both suppliers and their customers and also concentrate on global issues whilst resolving market specific issues.
Joint business planning
Fifty-five per cent of the surveyed companies are realising benefits from the joint business planning elements of their global relationships with retailers. There are several retailers who are now working with suppliers to create robust joint business planning as part of their global relationship, for example, Carrefour and Wal-Mart. For many suppliers this provides an opportunity to meet face to face with the retailer’s senior managers and discuss how they envisage their businesses working together. These business plans are often central to the relationship.
Data sharing
Fifty-four per cent of suppliers are gaining benefits from data sharing with their customers. Data is either provided as an Excel spreadsheet for global account directors to manipulate and pass on to the national sales teams or via the Internet as is the case with Wal-Mart's Retail Link. In this way, both buyers and suppliers can monitor the performance of their products.
For some suppliers, this data provides for the first time a global, up-to-date view of the performance of their products. This means that they are able to react quickly to any issues and provide detailed solutions. In some instances, suppliers are able to see the performance of competitors' products in the category and which products are bought alongside their own. This data can be very useful for promotional planning as suppliers are able to demonstrate their products as traffic drivers. Finally, suppliers can also use data analysis to investigate global trends and make comparisons by markets and formats. Applied in the right way, retailers' information is invaluable and can be a source of competitive advantage.
For many suppliers in the early stages of global account management it should be reassuring that suppliers who entered into global relationships five years ago are now realising tangible benefits. However, suppliers should not expect to gain tangible financial benefits until their global account management structure has been in place for at least four years. The following chart shows a typical sequence of benefits derived from global account management. Although there are clear benefits to be gained from global relationships, global account management is not necessarily for all companies. To be successful it needs to be supported by the whole business and form part of the company's long-term strategy.
Possible scenarios
It is clear that the current state of play is unlikely to be the final scenario of global account management. As suppliers and retailers gain a better understanding of how best to work on a global level, they will make a decision as to whether global account management is indeed the right strategy for them. Companies are likely to adopt one of the three following scenarios:
1. Backtracking.
2. Focus on facilitation.
3. Moving to the next stage.
These scenarios are not mutually exclusive and a given retailer or supplier may follow a different scenario with different categories of trading partners depending on their strategy and capability.
Backtracking
It is likely that a number of retailers and suppliers will decide that global account management is not the right solution for their business. This may take place following experimentation and failure to realise benefits. Some businesses may even take the decision up-front, once they realise what managing successful global relationships actually involves. As a result they will pursue a strategy that does not involve negotiating on a global level.
This scenario may be followed by retailers with existing international operations but a very decentralised structure, meaning that the potential to achieve international synergies is limited. For these retailers, creating a competitive advantage at a local level may be a preferred option to engaging into head on competition with much more powerful global competitors.
Likewise, some international suppliers may decide that managing retailers globally is of no benefit to their strategy, too costly and that their organisation is not in a position to overcome the challenges. The issue for these suppliers, particularly the larger ones, will be to resist retailers' desires for them to enter into a global agreement. Instead, they will need to offer an alternative way of working and leverage this expertise for the benefit of both parties at a local level.
Focus on facilitation
It is expected that several international suppliers and retailers will continue to have global relationships in the future. However, the range of projects and scope of negotiation may be limited due to resource and operational constraints.
The main focus of these global relationships will be to facilitate negotiations at a local level, sharing best practice and developing a coherent approach between countries. Global account directors and their counterparts within retail companies will have a coordinating and consultative role towards the local team, which will continue to be accountable for meeting specific financial targets.
The key challenge in this scenario will be to strike the right balance between the respective roles of global and local teams to ensure that actual value is added through the global relationship.
This scenario is likely to concern international retailers and suppliers with significant international operations but without the operational capacity, resources and brand presence to truly leverage their scale on a global level. These companies will benefit from sharing data and best practice between countries and this will be the main focus of their global teams.
Moving to the next stage
It is expected that only those suppliers and retailers who are gaining major benefits from working on a global level will continue to develop their global relationships. In this scenario it is expected that only a relatively small number of multinational suppliers will have a dedicated global account director and multifunctional team for each of their major global customers, headed by a vice president of global accounts. Local plans will have been aligned to optimise local operations, understand local shopping habits and share best practice. Global relationships with retailers will be centred on collaborative projects and joint business planning. Suppliers will have a profit and loss account for all of their global accounts.
In this scenario, retailers and suppliers will increasingly work on a wide range of collaborative projects, with growing focus on delivering financial returns and realising efficiencies. Particularly, driving improvements in the supply chain on a regional to global level will become a major joint objective.
Only retailers who strike the right balance between taking a collaborative approach towards suppliers and leveraging their scale will be able to move to this stage. In a similar way, suppliers will have to be ready to invest sufficient resource and commitment in the long-term to reap the benefits of these relationships.
It is anticipated that as these retailers develop, they will seek to leverage their scale by negotiating trading terms at least at a regional if not global level. Managing the transition to negotiating trading terms from a local to an international level is likely to be the most significant challenge for suppliers who pursue this scenario.
Implications for suppliers
Suppliers are clearly at a stage where they are gaining tangible benefits from their global relationship but it is evident that global account management is not for everyone. Above all, suppliers developing their global account management strategy should bear in mind that:
• global account management must be part of a company's long-term vision and closely linked to its strategy and culture;
• they should take care to identify the right global partners who are willing to enter into a relationship based on openness and trust;
• global account management is a long-term process and tangible benefits will only develop in the medium to long term.
Which of the following benefits have already been realised for your company?
| Increasing sales and profitability | 38% |
| Meeting customer demands | 38% |
| Efficient negotiations/resolving conflict | 46% |
| Sharing best practice within company | 46% |
| Data sharing | 54% |
| Joint business planning | 54% |
| Better relationship with customers | 79% |
Fiona McTavish is senior business analyst at IGD, the UK-based research organisation for the food and grocery industry. She is the author of the IGD report ‘Global Account Management - What Next?’ on which this article is based. For further information visit www.igd.com/GlobalAccountManagement.asp or contact Fiona McTavish.
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