Academic Research学术研究连载

走进中国工业品牌管理与竞争的新常态

Entering into the “IB and HB branding management Era”

                               by Dr. Yang XiaoTong

 Edited by Eric and authorized for release

OVERVIEW

In this part, we will discuss more to help you understand, both technically and commercially, the reasoning why a premium ingredient brand, the component mining chain in our context here, is so crucial to the success of the host brand of a complete mining machinery into which it is incorporated. Furthermore, a mathmetical modelling with a range of different variables involved will be introduced to illustrate the point in a more accurate and quantified manner.                

The ingredient product we are discussing now is high-strength mining chain, which is a necessary component to armored face conveyor used on mining machines. Technically, various mechanical properties possessed by the chains, such as breaking load, resistance to abrasion and/or corrosion, are very critical in terms of not only ensuring the host machine functions well but also keeping the miners safe while at work underground. Normally, the chains account for more than 10% in value of each complete mining machine at the process of purchasing, which on average requires two (2) to three (3) sets of the chains during its entire service life. For a standard set of the mining chain, as specification or customer’s requirement for performance varies, its price can be ranging from a few hundred thousands to a few millions in RMB. For some special engineered mining chains, the cost would be even over tens of millions in RMB in budgeting. In this sense, mining chain is truly crucial both functionally and monetarily. With respect to underground operations, the failure of mining chains is a common problem that frequently results in downtime of host mining machines, which is very tough to deal with as it is an exceptionally time-consuming process for new chains to be cut, replaced and then examined before resuming operations. In addition, chain cutting with open fire is absolutely prohibited for the sake of safety of all personnel working underground. Due to that very reason, mining chains of reliable quality start to attract a great deal of attention from customers on the market and are deemed trustworthy for purchasing. As far as the market in China is concerned, the success of implementing ingredient branding strategy with the chain products first started with a large-sized heavy industry company making acquisition of a reputable foreign brand of industrial mining chains. With over one hundred years of manufacturing experience, this sort of mining chains in particular as an ingredient brand has made its way into the supply chain of many high-end global manufacturers of coal-mining machinery, and has been considered a premium option for purchase even by many other customers from other non-coal mining industries. Therefore, it enjoys a pretty good reputation worldwide with a fairly high degree of brand awareness across the global mining market. Ever since it was introduced into the Chinese market, our domestic mining industry had undergone a golden period of rapid growth in terms of getting high-strength mining chains upgraded to a higher level of quality. In the mean time, this particular brand as a crucial component started to be familiar to most of our domestic manufacturers of mining machinery with initial brand trust to be built up gradually.

Based on what we have concluded from previous discussion on the relationship between trust of ingredient brand and host brand in B2C market, we are making efforts to build up an extended theoretical model as follows, where Quality Orientation represents independent variable, customer satisfaction and customer loyalty represent dependent variable, trust of self-owned ingredient brand represents regulated variable, and perception of host brand quality represents intermediate variable.

Industrial equipment making in this article is closely associated with manufacturing of all sorts of host machinery that are applied to serve national economy and national security. In the context of our study it will be limited to the manufacturing of armored face conveyor for mining applications. Accordingly, the involved ingredient product we pick for study is high-strength mining chain. Previously we have explained how ingredient product relates to the host machine functionally.

In this model, we get all relevant variables defined in more details as the following,

(1)   Independent variable - Quality Orientation

We have already had a great deal of research works on the concept of quality orientation (Saraph et al., 1989; Flynn, 1994; Black & Porter, 1996). It has been concluded by some arguments that, an individual firm which is quality oriented performs better than its competitors in terms of business operations. Likewise, a specific firm that is market oriented will be able to outperform its rival with less market orientation (Sittimalakorn & Hart, 2004). As one of the three core parts of market orientation strategy, customer focus is to deal with the challenge of how to make it easier for a given firm to better implement market-oriented strategy in practice (Kotler, 1988). During the course of academic development, market orientation and marketing orientation converge to form a broader conception of market management (Park & Zaltman, 1987), which is far beyond what we traditionally viewed as means to launch promotional campaigns and places emphasis on customers’ post-feedback behaviors (Shapiro, 1988). Despite various limitations we have on prior studies concerning these market-centered business strategies, the quality of product itself is still a fundamental element to consider before any forms of these business strategies can be implemented. This is backed by Zeithaml’s conclusion from his study of marketing (1988) that, perception of quality from a customer’s point of view consists in an overall assessment he or she is going to make of all the attributes a particular product presents either within or beyond expectations. After comparison we have made of B2B market to B2C market in the former Section 2.1.5, it is believed that considerations given by industrial customers to the quality they can perceive from a specific industrial brand outweigh the effect imposed by market-driven promotional activities. Despite the fact that brand is crucially of symbolic meaning to the quality of the products it represents and can create intangible barrier towards potential competitors entering the market (Srivastava & Shocker, 1991), we still can’t deny all of this hinges on improved quality of the product physically. When it comes to the relationship between supply side and demand side in B2B industrial market, the number of customers is actually much smaller than that in B2C consumer market. Furthermore, the standard applied in B2B market for quality assurance is also much higher and stiffer than that in B2C market so as to ensure subsequent reproduction can be carried out smoothly. Undoubtedly, it is quite possible for a given firm to deliver on more differentiated business resources and better competitive advantages if all oriental strategies we mentioned above as supplement to each other can be applied in an organized way. However, in the absence of quality-oriented strategy, neither market orientation nor customer orientation will make it possible to deliver satisfactory business performance in a sustainable way. In this sense, we will look at the context where quality-oriented strategy is adopted for sustained development over a long period of time at business level, which is widely applicable to better reflect customers’ knowledge of and feedback of the subject brand.

The measure of quality orientation we are doing here is by reference to the study by Black and Porter (1996), which is consisting of ten (10) different dimensions, staff and customer relationship management, supplier relationship management, communication, customer satisfaction orientation, external interface management, strategy quality management, team structure, operational quality planning, quality improvement assessment system and lastly quality-focused company culture. In respect to these dimensions, we will conduct a questionnaire survey on a number of the major host brand manufacturers. Meanwhile, in order to better reflect what perceptions or assessments customers will have from the quality-oriented strategies adopted by the surveyed manufacturers (according to the customer-based perception of brand quality – Garvin, 1983), we pick six out of the ten dimensions for studying purpose, including staff and customer relationship management, communication, customer satisfaction orientation, strategy quality management, quality improvement assessment system and quality-focused company culture. In this way we are enabled to have a full understanding of how a given firm will be perceived by the customers from outside with its quality-oriented strategy. Throughout this process, we can also feel the gap of perceived quality with comparison to be made inside and outside that individual firm.

Thank you awaiting our next release…..

For contact with the author, please email to shanshan@towermind.com;

For contact with the editor, please email to yangls@skiplifting.com