Essay: Essay on key account management

Abstract.
Due to the worldwide modernization in market and the ininvasions of huge global companies in Egyptian market we have been faced with several new business method and approaches turn around haw to educating the Egyptian market with those new methods and approaches through those multinational organizations.
With notes that the wholesale and retail trade one of the most basic economic activities in Egypt, where the contribution to the GDP at a cost of factors of production 12% of GDP, and the private sector accounted for about 97.4 % of the total activity contribution, while the public sector contribution towards 2.6%.
Hence, the private sector is dominant on the activities of wholesale and retail trade in Egypt, and share his cake large numbers of shops and small-scale enterprises owned mostly for corporate individuals, which is inconsistent with the evolution in the retail world, which is moving towards the dominance of private companies to large-sized multinational , and the creation of what is known as the chains Hyper Markets, which increases space and often on 200 square meters, a trend that has emerged since the eighties of the last century. Perhaps the rule pattern companies individuals in the wholesale and retail trade in Egypt means that the bulk of the damage scheduling decision to close the shops, but the latter is located in the responsibility of shops and small-sized companies. The total number of employees in the sector related for the companies working in relation with the consumer goods as producers or sell outlets in the Egyptian market including the multinational organization presenting around 20% from the labor manpower in Egypt in spite of there is no signification official figure of that.
Will tries to explain one of the major new concept in business which is Key Account Management (KAM) in the Modern Trade Sector (Modern Wholesalers & Retailers) for one of the biggest business segmentation Fast Moving Consumer Goods (FMCG) alternatively called as CPG (Consumer packaged goods).
Factors leading to importance of this emerging concept, criteria to determine key accounts from customer base, benefits to both buyers and sellers agreeing to practice it, stages of KAM relationship, conditions under which power lies with buyer or seller, outlines risks faced by both the parties, key success factors, challenges faced in implementing this concept and relevance to infrastructure sector.
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Introduction
After World War II a new industrial revolution began in the United states of America developing in the mid-fifties to result in drawing women to a new labor market that appeared on the surface consisting of new industries that developed – in addition to heavy industries as an industry iron and steel and cement as well as Industries of the durable products such as household appliances – appeared in multiple areas such as canned food and toiletries and since then surfaced new names of huge companies like GE, PEPSI, Coca Cola, Unilever, P&G & Nestle starting within the boundaries of their countries with the same time of rising in communications, transportation & banking in the same decade a new article’s appeared in Marketing, Advertising, Media & Packing which become a science plus the changing consumer behavior.
All this production was creating the opportunities to a new market segment and to introduce those products for consumers from retailers with the rise of sales, distribution, marketing & merchandising concepts.
As a natural result of development of this kind of producers & massive production with the overwhelming success they started to move on the next step of going international as a sales, operation& marketing process.
From this time we started to witness a new stage or module of retailers like Hypermarkets, Retail Chains like Wal-Mart, Tesco, Metro, and Carrefour which spread everywhere and become more and stronger in dealing with companies and producers. This new segmentation of retailers leading the market to be splitting into two segment’s the first one called Traditional Market and the other called the Modern Market which become the umbrella which covering this new modules. This kind of modern market creating the perception of Key Account due to the percentage it’s present from the companies’ trading in (The Theory of 20/80) by other meaning that 20% of market get 80% of business.
In 21st century, customer focused businesses attempt to identify few customers from the portfolio of their customer base and try to establish and nurture long term fruitful relationships. Many companies have created positions of key account managers for this.
1. Research Objectives, Research Questions and Variables
1.1 Purpose and Scope.
Emphasize the importance of developing and activating new concepts and theories of key account management (KAM) in the modern trade for the FMCG products in the Egyptian market in line with the concepts and theories of international order for this sector to contribute effectively to the development of society, as well as increase the national income in terms of competencies and human resources that represent the elements of an effective attraction of foreign investments.
1.2 Importance of Study.
Lack of Sales Management, Key Account Management (KAM) in both side in/out principles in Egypt. The study concentrated on the importance of the size of representation in this sector in the GNP and the internal volume of trade as well as it touches a wide range of labor market grows significantly and the forces and represent opportunities to attract more domestic and foreign investments. In addition to the intense competition within the sector and the focus is to provide competitive products and is what is reflected in the interest of the end consumer beneficiary.
1.3 Problem Statement.
During the new era of market modernization and the incremental for this segmentation of producers, consumers and markets outlets with significant classification in traditional trade and modern trade which become one of the highest growing trend in Egyptian market creating the needful of Effective key account management (KAM) Model for modern trade on FMCG sector in Egypt.
1.4 Research Question.
What are the determinants of success factors for an effective key account management (KAM) model for modern trade on FMCG industry inside Egypt?
1.5 Variables
Dependent.
Fast Moving Consumer Goods (FMCG).
Independent.
Modern Trade (Modern Retailers).
Moderating.
Key Account Management (KAM).
‘ Fast Moving Consumer Goods (FMCG).
Fast Moving Consumer Goods (FMCG) alternatively called as CPG (Consumer packaged goods) are those consumables which are normally consumed by the consumers at a regular interval. Some of the prime activities of FMCG industry are selling, marketing, financing, purchasing, etc. The industry also engaged in operations, supply chain, production and general management around the world with the need of deciding how to react in this new era from the point of view of the producers.
FMCG industry provides a wide range of consumables and accordingly the amount of money circulated against FMCG products is also very high. The competition among FMCG manufacturers is also growing and as a result of this, investment in FMCG industry is also increasing, where FMCG industry is regarded as the fourth largest sector.
These fast moving consumer goods (FMCG) are the essential items we purchase when we go shopping and use in our everyday lives. They’re the household items you pick up when you’re buying groceries or visit your local chemist or pharmacy. FMCG goods are referred to as ‘fast moving’, quite simply, because they’re the quickest items to leave the supermarket shelves. They also tend to be the high volume, low cost items.
Cleaning and laundry products, over the counter medicines, personal care items and food stuffs make up a large bulk of the goods in the FMCG arena, but it doesn’t end there. Paper products, pharmaceuticals, consumer electronics, plastic goods, printing and stationery, alcoholic drinks, tobacco and cigarettes can all be considered fast moving consumer goods too.
The top FMCG companies are characterized by their ability to produce the items that are in highest demand by consumers and, at the same time, develop loyalty and trust towards their brands.
Some of the leading FMCG companies in the world include: Colgate-Palmolive, Coca-Cola, General Mills, H. J. Heinz, Henkel, Johnson & Johnson, Kimberly-Clark, Kraft, L’Oreal, Nestl??, Procter & Gamble, RB (Reckitt Benckiser), SC Johnson &Unilever.
Facts about FMCG Industry
FMCG, otherwise known as CPG, is one of the biggest industries in the world and there are a lot of facts that stand the FMCG industry apart as a career choice:
– FMCG companies are behind the biggest brands in the world.
FMCG is all about names, the products which everyone recognizes from trips to the supermarket or from ads on television. The brands that make up this sector are the high profile ones, the ones everybody knows and loves. Think Coca-Cola, Dettol and Dove. This is an industry that puts you in living rooms, kitchens and bathrooms across the globe.
– The FMCG industry changes fast and is constantly evolving.
It’s fair to say there is never a dull moment in FMCG. From the pace at which goods leave the shelves to the rate of product innovation and career progression, things move quickly. And it doesn’t end there. The brands themselves are changing just as quickly. 40% of brands on the top 100 list twenty years ago have already been replaced by new names today.
– FMCG firms thrive on employee and customer retention.
Employee investment is a big part of the ethos of the FMCG world. Perhaps it’s because we understand the importance of loyalty. Customer loyalty can make or break a brand. Take Twining’s, for example ‘ a century after they entered the top 100 brand list, they are still there and going strong. So it makes sense for FMCG companies to encourage the loyalty of their employees too.
– FMCG companies can beat the recession.
This is an industry that has proved itself very resilient to recession ‘ with the majority of companies in the sector weathering the financial storm in a way that very few others have managed. Why? Well, consumers will always need to buy the products created by FMCG companies. They may not buy big items like refrigerators or cars in a recession, but floors still need to be cleaned, clothes need to be laundered and aches and pains still need to be soothed.
– The FMCG industry thinks bigger & better.
This is an industry that offers things on a whole new scale. Where else could you find yourself handling $150 million accounts? Working in FMCG gives you the chance to be a part of some global success stories and influence the way consumers shop for products. FMCG firms are always thinking of the next great discovery or innovation ‘ always developing and ever-changing to meet consumer’s needs.
– FMCG has a history of delivering what consumers want.
Some FMCG companies’ roots are over two centuries old ‘ driving the industry to a value of $570.1 billion. In short, to quote Sam Walton, founder of Wal-Mart: “High expectations are the key to everything”.
‘ Modern Trade in Egypt.
Retail, according to concise Oxford English Dictionary, is the ‘sale of goods to the public for use or consumption rather than for resale’. Retailing is derived from the French word ‘retailer’ meaning ‘breaking bulk’, specifically, breaking bulk quantities into smaller saleable units. Usually, a retailer buys goods or products in larger quantities from manufacturers or importers, either directly or through a wholesaler and then sells individual items in small quantities to general public or the end users. As such, retailing is the last link that connects the individual consumer with the manufacturing and distribution chain. The world over retail sector has been growing rapidly with increasing sophistication and modernization of the life-style of households and individuals and also with increasing globalization of trade. The retail sector has strong backward and forward linkages with other sectors like agriculture and industry through stimulating demand for goods and through mass marketing, packaging, storage and transport. Moreover, it creates considerable direct and indirect employment in the economy. Also, the consumers have benefited in terms of wide range of products available in a market
The retail sector is broadly classified in to two groups; modern trade (organized trade) and traditional trade (unorganized trade). The modern trade (organized retailing) refers to trading activities undertaken by licensed retailers. These include the corporate ‘ backed hypermarkets and retail chains, and also privately owned large retail businesses. It is not just stocking and selling but is more about efficient supply chain management, developing vendor relationships, quality customer service, efficient merchandising and timely promotional campaigns. On other side the traditional trade (unorganized retailing) refers to the traditional formats of low-cost retailing. This market is more common in developing countries as in Egypt market.
Egypt’s market is dominated by small retailers (with rising of new large retailers Hypermarkets such Carrefour, Spinney’s & Hyper One plus retail chains such Metro, Awlad Rajab, Al-Mahamal and BIM (Turkish Franchise).
New modern retailing systems and large retailers created disintermediation in the Egyptian distribution network. Independent small grocery stores used to buy their supplies from giant food retailers instead of wholesalers. Thus these larger retailers sold to small independent retailers as well as the ultimate user.
Another unique characteristic in the Egyptian retailing system is the scarcity of department or general merchandise discount stores. In Egypt most large food retailers are discounters. Although there are some specialty retailers and category killers, their prices are perceived as high. Toys are Us, Radio Shack and Virgin megastores are upscale retailers in Egypt. International retailers that specialize in furniture and home appliances starting to be exist in Egypt. The boom of new cities in Egypt occupied by affluent people is an opportunity for furniture stores. IKEA the European furniture retailer is opening now in Egypt.
Egypt is an attractive market for many reasons. The inflation rate is about 10% but is expected to drop due to reform programs and political stabilization.
Egypt’s economic reform program and exposure to global activities has led to a new lifestyle and more modern shopping habits in the country. These changes have helped to transition the Egyptian retailing sector from fragmentation, in which there are many individual and small retailers selling lower end items, toward retail concentration.
Several positive changes are occurring that make the retail landscape appealing and indicate a shift from fragmentation to concentration. First the growth rate is in an upward trend. In addition the youth population and rising middle class will seek more modern products. Finally the consumer base is poised for growth. Signs of retail growth in Egypt are evident. City Stars Egypt, Cairo Festival Mall, Mall of Arabia, Dandy Mega Mall, Sun City Mall and Maadi City Center, have opened in recent years. Many other planned shopping sites are under construction with in next 2-3 years. With notes that all this located on Cairo due to the high culture consumers and high income range. But some of them starting to operating out-of the capital Cairo like Carrefour in Alex, Sharm & plan to be in Delta and Spinney’s on Hurghada.
The concentrated shift is resulting in modern business and retailing practices in Egypt. This movement is being driven by Egypt’s youth segment. In addition of bricks-and- mortar changes, Egypt is also seeing changes in their e-tailing operations
The current Egyptian retailing landscape is providing business opportunity for international retailers. It is expected, based upon the survey results that the Egyptian retail market will expand. United States retailers have a clear investment opportunity in a country that is moving toward modernization and development.
‘ Key Account Management (KAM).
Key Account Management (KAM) has emerged, over the last 30 years, as one of the most significant trends in business-to-business marketing practice. It focuses on adding value to relationships and creating partnerships with a company’s most important and strategic customers. The emergence of KAM has been driven in companies of all sizes by an increase in large, powerful, global, centralized purchasing customers becoming the norm across multiple industries; KAM provides our current best model for servicing these customers. Despite the rapid growth in the use of KAM by companies, research into the process of KAM implementation and how companies transition from traditional sales to KAM orientation has been scarce. This is a gap that urgently needs to be filled. Without some agreement about which approaches to KAM implementation work there is a danger that companies will continue to struggle or even fail to implement KAM appropriately.
The emergence of relationship marketing in the late 1980s led to a growing interest in getting and keeping customers through relationship management. Relationship marketing was extended and developed during the 1980s and 1990s, particularly in business-to-business markets where formalized programmed as of customer management have gained increasing importance including: national account management; major account management and, more recently, to manage the most strategically important relationships of the business, KAM or even Global Account Management For ease of use we will continue to use the acronym KAM to refer to these related bodies of work. KAM is a systematic process for managing business-to-business relationships that are of strategic importance to a supplier. It first emerged as a response to the pressures placed upon supplier companies by globalization, increasing customer power, procurement sophistication and the need to find new ways to work with the most important customers. It involves the adoption of collaborative ways of working with customers rather than traditional transactional and adversarial relationships. Therefore it represents a fundamental change in the way companies operate their sales and marketing functions, not leading to a tactical shift in operations, but a more broad ranging change management programmed.
To explain concept of key account management (KAM), factors leading to importance of this emerging concept, criteria to determine key accounts from customer base, benefits to both buyers and sellers agreeing to practice it, stages of KAM relationship, power dynamics in KAM relationship, risks faced by both the parties, key success factors, challenges faced in implementing this concept and relevance to infrastructure sector.
KAM is considered as a management approach adopted by selling company. It builds portfolio of loyal key accounts (also termed as major accounts as they form substantial portion of selling company’s business/sales). Such accounts are offered on a continuous basis by adding value to standard product &/or service package. Appropriate technical, social and process links get established once this concept is accepted to be practiced by both; a buyer and a seller. The focus is on building relations rather than on transactions. But in last 20 years the concept of Key Account had been spread its umbrella to which became the overall concept for the management of major account, in all sides for the firm clients, customers, consumers, suppliers or even stockholders. It’s become a since to haw to manage your key accounts.