How to Compete and Communicate in Nature Industrial Products

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UNIVERSIDADE NOVA DE lJSBOA

FtUuldade de ECQnomi(1

r

llUOW TO CONPETE AND COMMUNICATE IN NATURE INDUSTRIAL' PRODUC",[S'~ Jorge A. Vasconcelos e _Sa

Working Paper·NQ 79

UNIVERSIDADE NOVA DE LtSBOA FACULDADE DE ECONOMIA

Trnv. Estevao pinta Campolide

INDUSTRIAL MARKETING COI1l'ETITIO!l

PROMOTION

KEY SUCESS FACTORS

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ABSTRACT

This article addresses the subject of how manufacturers of mature industrial products conpete among thereselves and how they

corrmunicate with customers. Data collected.in this research lends credibility to the hypothesis that within mature industrial products there are ',prOf01.U1d di fferences regarding how firms compete {based on

cost, quality or delivery) and which variables 'firms use "to

promote their products (advertising, sales force I etc).

The survey data suggests that i t is possible to predict which type of competition and prorr.ot.ion wili dominate! based on two contextual characteristics faced by the firms: The risk of proauct malfunction and the risk of product availability.

The study concludes by advancing suggestions for tuture

research and by suggesting some implications fOLmanagers. The

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implications respect which areas of the firmsF'should managers FOCUS on~ That is, which areas of firms should receive most of

I - lNTRODUC'l'ION; 'J't-lE RESEARCH PR0!3LEt,1

Competition is pervasive in th~ market place. Discounting

a few exceptions such as natural monopolies (which society controls

through regulation, nationalization and antitrust laws) I firms generally compete against other firms in the market.

Competition can take many.forms, however. It ca:1 center on

product durability, product cesign, product colour, time of delivery, product cost, and so on.

The question ari.ses as _to whether - even within a narrow

domain - i t is possible to find distinct col7tpetition modest and

whether i t is possible to predict what those competition modes

will be, based on the contextual characteristics faced by tho

firms.

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Addressing these issues is the purpose of/this research.

Its specific aim will be:

1 - To test whether or not different'competition modes can

pe !oun~"L~~~~ven 'V,tt thin a .. specific dumai.p: (mature i:ndus trial products).

2 - To deve_~op a model which predicts the comEetition moces_ adopted .. by 'fim.s, based on the contextual characteristics they

face.

In order to text these hypotheses the following steps \':ill bl'!

followed:

First: Definition of the research concepts~ They are;

(Section II)

- the contextual variablesi - the competition modes;

the attributes used by fi~s to implement each

competition mode.

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Second: Development of the research's model

(Section III)

Third: Drawing the hypothe~"".

(Section IV)

Fourth: Selection of industries(ta test the hypotheses}

(Section V)

Fifth: Data col~ction through expert panels {one panel for each industry) I in the U.S. of America.

(Sectfon VI)

Sixth: lJ'ests on the data (Sec,\;lon VIII)

Seventh: Discussion of the results i implications for practicionneers;: (Section VIII) and suggestions for future rese~~c11

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The domain selec~ed for this study is mature industrial

products. These products are of great iffiportancc, both in terms

of their relative numbers and in terms of their contribution and

value in the. Amerlcan economy. The maturity phase has been DXlicated as one of the most important phases in the product life cycle.as

well ,(1)

II - THE CONCEPTS

II - l~ The contextual variables~

Two concepts were culled fron industrial marketing literature in order to hypothesize which the dominant modes of comgetitlon

are in different types of mature industrial products. Those co~ts

are; The Eisk of ~~duct malfunction, and the risk of product

Both types of risk entail a situation in which the outcome of buying a product is not certain, but the alternative outcomes

are either known or can be estimated (3)

As their names indicate hm'lever, the uncertainty associated

with the risk of product malfunction regards the use of the

productl while the uncer.tainty as~ociated with· the risk of

availability regards the timing of delivery (i.e. \vhether the

delivery will be made on the right date and in the right quuntity)~

I L l . l . THE RISK OF PRODUC1' HALFUNCTION

A buyer perceives the use (functioning) of a product as

"risky" if i t is:

1 - Complex, meaning that the buyer is tmcen.;U.n about how the

product will actually perform.(4)

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2 - The pricE~ and criticality of the product' are high ..

In such a case the buyer has much to lose if th~

product malfunction)- (high oportunity cost). Therefore,

the higher the complexity, price ana "criticality of a given

,product, the larger the risk (of product malfunction) the buyer associates with the use of the particular product (5) ..

There 1s:considerable variance among industrial products regarding their level of risk of product malfunction. For instance if a metal cutting machine tool malfunctions, the factory in which it was installed, may have to halt its operations ternporaly until the deficiency which caused the

problem is discovered first and then corrected.

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~hat means that machine tools generally rate high in terms

of criticality. Since they are also usually higly priced an~

technically complex buyers generally perceive these products as risky.

In contrast, the conplexit.y I price and criticality of

industrial mature goods such as office supplies (pens r _marking

devices, paper, etc) are low. Consequently buyers do not perceive these products as possessing a high risk of product malfunction.

The importance of the concept of the risk of product

malfunction to predict the behavior of buyers, and thus to indicate the tactics that sellers should use and the strengths

they should possess, has been stressed by several authors. (6)

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II. 1. 2. THE RISK OF PRODUCT AVAILABILITY

Besides the concept of risk of product malfunction, wilson in his 1965 work indicated the risk of availability as another type

of risk which can help explain the behavior of buyery (7) ~

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By risk of availability lvilsan (op.. cit.) meant both the

probability that a delay ,in the delivery of a OOm1c<lity will

generate a loss for the buyer which is to use it, and,the

amount of such loss if the delay in the delivery does indeed

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occur. The risk of availability associated with the purchase

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o~ a ~ty depends upon.

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1 - Whether the Eurchase ~ that camcdi~ can be delayed (new

office furniture, for an organizationrs headquarters for

example) •

2 - Whether the deliver~' date of that commodity ca~ be postponed.

In the case of industrial products this depends upon the importance of the arrival of the new product to the firm's

activities (e.g. r new machinery to replace old equipment in use)

and upon the stockability of the product, which in turn is a function of its unit e.ricet bulkiness, and ~

£!:

consurr~ption.

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3 - How !itar!d~_~'i.~ze£L'!J:L~" c01lli1LQci

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is and therofore, hO\>J eilsy

i t would be to locate an alternative supplier for the

'commodity in the event that'the first 5uppli~r failed to

deliver as promised .(e~g., office supplies versus anti friction

bearings)~

Consequently, the risk of availability

is

maxim~ for

fabricated materials and components which are not standardized

and whose purchase or delivery cannot be postponed v15..thout

threatening to"halt the organization's operations. It is lower for capital goods, since the buyer can continue to use old

machinery during the delay in the delivery of the new machinery.

Raw _{materials, agriculturaf} produ~tsT' operating

supplies, and maintenance and repair items stand in between, but

nevertheless can be seen to form two distinct clusters, one with

a higher and the other with a lower risk of availability~ The

first 1s constituted by raw materials and agricultural products,

the second by operating supplies and rnaintenance ...and repair

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items'. The first pair of products is charact~rized by lower

standardization and,by lower possibility of delay in the product

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delivery without threatening to halt the operations of the !

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buying organization. _{• !}

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It 1s important to note that according to several authors, (8)

both types of risk, are buyers' z:.ot sellers' risks. The risk becarnes

a concern of the seller only because different amounts of it lead to

different types of buying behavior (extent of search for information) and differences in the relative importance of the several product

characteristics (quality, cost, etc.) Thisl in turn, requires the

seller to concentrate on some activities rather than on others:

personal sales versus advertising,applied. R&D versus process R&D,

I I - 2 The basic modes of coopetltlon

Competition can assume many fOrIns. It can be based on product

design f product durability t siz.e of the product, tin',€' of delivery, cost, and so on. It is useful, however, to summarize all these possible modes of competition under three basic categories:

A - Product Quality Co~petitio!1f where the terf:l quality is

used in a broad sense in order to include all product characteristics such as durab.ility I design, colourI and any other special features.

B - Product Cost Competition, in which each firm tries to outprice its competitors; and

c - Product Delivery COffioetition, that is, co~petition based

on the delivery of the product at the ri9ht time and in the

right quantity. '

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II - 3. The firmts attributes.

The final category of concepts of this study is the firms'

attributes. These are the variables used by the firms in order

to implement the three basic competition modes (quality, delivery

and cost) + Within the firms' attributes, a distinction can be

made between the attributes which are technically related and

those attrib~tes which are basically communication (promotional)

tools. A total of ten <technical and promotional attributes were selected to be used in this research. Six are related to

technology, and four are related to communication. {pronation}

Technically related attributes:

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1 - APPLIED PRODUCT RESEARCH AND DEVELOPMENT(activities

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directed towards ~odifying, improving, adding new £eatures and developing new products).

2 - SERVICE (quality and availubility) (installation, coaching the customers in using the product and repairs).

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:3 - DISTRIBU'2ION (·!.:ransporta~ion I warehousir.g and

expediting); ability to maintain low output and input distribution

'costs and to assure that the deliveries of the outputs are made on the right date and in the right-quantity.

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4 - LOCATION OF T~H~E_~~~~N~U~F~'A~CTURTNG ~CILITIES (proximity to ,

the market; to transportation means, such as iakes, rivers, railroads,! highways or to sources of raw materials and labor)

5 - pROCESS RESEARCH ( engi.neering act1vitics directed toward changing not the products themselves, but the way the

products are made). , /

6 - FIRM S':rZE, (to exploit econorr.ies of scale due to

greater mechanization as well as ~conomies' in the materials handling

administrativeI marketing and financial areas).

COMl,IUNICATION (PROMOTION) AT~'RIllUTES:

7 - IMAGE (goodwill, prestigeI reputation). The extent

to which the name of the organization creates a generally positive

atti tude in the minds of t.he customers, and whether the

organization 1s market visible or not.

8 - TECHNICAL KNOWLEDGE OF THE SALES FORCE ,technical

knowledge of the methods used in producing the products, ability

to advise customers regarding what is technically feasible,

ability to evaluate the capability of the organization in meeting

9 - MARKETING KNOWLEDGE OF THE Sf,LES FORCE (ability to persuade customers t cover the terri tory -well, kum...ledge Of the

marketing-credit, delivery, etc~ - policies of the organization and knowledge of the custotnerl·s needs and values) ~

10 - ADVERTISING AND SALES PROMOTION (all types advertising including television, radio, billboards, direct mail, newspaper

and speciality magazi:,€:st all types of sales promotion activities

including sampling and trial, shov/s and exhibitions, price incentives and premiUEts). -"'" ''''- -~ ~

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The list of technical and communication attributes used

in this research was li:ni ted to tep.. because d-ata had to be

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coll~cted through questionaires addressed to CEOS and Presidents of organizations~

A longer list of 'variables would decrease the response rate or/and induce the respodents to dedicate/less time to ca..:h

of the questionairel,s 9uestions. In either case the quality of

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the data would be affected. Moreover, to test this research's

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hypotheses ten variables listed will: suffice, as will be

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demonstrated by the model to be developed in section IV. _•

The 'next section will present the model fro~ which the

research hypotheses were drawn. The underlying rationale of the

model is as follows; within mature industrial products the levels

of the risk of product malfunction and of -the risk of availability

will determine what type of competition wi~l d~ainate among

sellers. That, in turn, will influence what the most critical

attributes for performance ~re(those attributes which are

instrumental in implementing the dominant mode of competition). Those will be the key success factors. (see figure one)

IX! - THE MODEL

Depending upon the level of each type of risk a buyer

perc.eives in a product, the buyer will b€ concerned with quality,

delivery or cost when acquiring that product.

When the risk of product malfunction is high, the buyerls dominant concern will be the quality. of the product, making

competi tion among sellers focus on product qualit~{ rather than on delivery or cost.

When the risk of availability

is

high, the timing of

delivery becomes tite,.crucial mode of cO!T'.petition among sellers.

when both types of risk(malfunction and availability) are low, the buyer's main criteria in choosing among several product

-brands wi.ll be neither quality nor deliverYl but:- their respective

prices. As a consequence, cost (price) competition becomes da~t.

In schemel the influence of the contextual characteristics

{levels of risk of product malfunctioning and of product availability}_{. . .}

on the importance of each competition mode, can be seen in a 2x2

table as ShCMlLln figure two. .

IV - THE lIypm'HESES

-One can now hypothesi~e which are the most critical

attributes for performance, in different contexts (cells one

to four in Figure ~wo).

Following the distinction made in section. !I between

technical and communication attributes, one Wilifirst make hypotheses ¢n the technical related and then on the communication related

attributes.

IV - 1. Technical related attributes:

To implement the three basic competition modes (quality,

delivery or cost), firms recurTto different variables. When

quality competition dominates, firms try to obtai~ an edge over

competitors tprough excellence in attributes such as product R&D and service. When competition centers on product delivery, firms seek competitive advantage through their distrttbution system and

the location of plants and facilities. vlhen the focu~ is or.

product cost competition, attributes such as process R&D and pla~t

size (to exploit economies of scale}· b·ecome critical. (10)

In any case, the roost successful organizations will

be those which are superior to competition in the attributes

related to th'e dominant mode of competition

Therefore, the 2x2 ~able presented in figure two, can be

changed in such a way that instead of indicating within each

cell the most important ~ode Cs} of competition, one can present

the attributes which implement those most important types of

competition. Those are the attributes hypotesized to be critical for performance. See table three - A.

Insert Figure three about here

11 IV - 2 ~ Communication attributes~

Just as was hypothesized for the technical variables, i t

can also be argued that different competition modes require

different variables to cOfrununicate with the customers. Quality competi tion is dominant when the level of the ;tisk of product malfunction is high~ In such a case, the buyer is willing to . bear the cost of looking for informa.tion in h~gh quantity

(completeness and detail) and quality {trustworthiness and expertise} "

The way for a seller to provide information in this

quantity and quality is through a sales force with a strong .

technical background (11).

The image of a seller does not give the buyer very

detailed nor very technically elaborated inforrr,ation. All i t gives is a general impression regarding the seller's skills and

reliability. /

It is, howe~erf very important in situations characterized

by high risk (product malfunction and/or product availability).

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Since a' sel_ler cannot manipulate its OWn image one hundred percent - by,opposition to advertisement claims - image becomes

a credible ,and trustworthy source of infortnation from the buyer's

pOint of view in high risk situations~ Therefore in these situations

buyers opt for sellers with very favorable market reputation in

order to decr~ase the perceived risks associated with the purchase

of the products (12).

When both types of risk (malfunction and availability) are lower, the buyer's requirement of information in great

quantity and technical detail decreaEes~ As a consequence

the marketing knowledge of the sales force becomes an

~te~means to communicate with buyerse At very low levels of both types of risk, advertising and sales promotion

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In summarYt depending upon tho vulue of each type·of risk,

the buyer will care about one Qr another ·aspect when buying a

product. t\'hen the risk of product malfunction is high, the buyer I s

dominant concern is with the quality of the product. Therefore, image and the technical knowledge of the sales force become

critical. I~age is equally critical in those purchases where the

buyer perceives a high risk of availability. With both types of

risk

low,

the buyer, when selecting among several brands of a given product, focuses less on quall.ty or del.ivery and IT.ore on

the price of the product. As a consequence, first the marketing

knowledge of the sales force, and then adv~rtising and sales ,

promotion increase in importance.

The 2x2 table presented in figure three-B indicates which communication attributes are hypothesized to be' critical for

performance at different risk levels.

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SELECTION 0,' TilE MATURE INDUSTRIAL PRODUCTS

v - 1. The first step to test the hypotheses was to select

several mature industrial products. They had to satisfy several

criteria such as low exports, high ho~ogeneity and high variance

(in terms of risk of product K~lfunctio~ and availability be~

each two pairs of products).'. Low exports was required in order

to avoid the possibility that some products which are mature in

,th~ United St:ates:, be in the early, stages

of

the px.:oduct life cycle in the other countries.

Industries had to ba harcgeneous since they would othe.rwise

contain'within themselves different strategic groups. It· has been hypothesizedJdifferent strategic groups have different key sucess

factors {14}. Thereforel when selecting the industries, either

they were homogeneous (in which case they would :Coht'ain a single

strategic group; ahd the industry -:s a whole CQuld be used as the unit of analysis of the study, as 1s the case with the coal and

iron ore induatri~s}t or the industry was not homogeneous (and

a strategic group wlttin the industry had to be selected). In such

a caso, the selected strategic group was the unit of analysis of _{, .}

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the study. That i-s·, the reaSOn why in figure four a subset of

compressors, machine tools, valves and bearings was focused on (lS} .

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-The final selection criterion was variance, both in terms .of risk of product malfunction and of risk of product availability_

Low variance between the products belonging to the >

same type of "

industrial goods (equipments. components and raw ,materials), and high

variance among the products b~longing to different types of industrial

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goods. At the end the products indicated in figure four were selected.

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Insert figure four about here

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2,. How Risk of Product Malfunction Varles AmO~9 the Selected

IndUstries

Machine tools and compressors are equipment goods, ~ally

characterized by high prices; high technical complexity and high

critical contingencies. If the heavy equipment malfunctions the

factory may have to stop its operations implying considerable

monetary loss. As a consequence, the risk of product malfunction

in these products is high.

Iron ore and coal (lndustries n95 a~d 6 in figure four) and ~haracterized by lower prices, lower complexity (higher

standardization) and lower criticnl·contingencies than

equipment goods. Their risk of product malfunction is consequently

lower.

Valves and bearings {industries n93 and"4j occupy middle

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ground between the previous two pairs of industries. Their price,

complexity and critical contingency (and therefore their risk) is lower than that of capital goods and higher than that of iron

ore and coal.

In summary, the risk of product malfunction is higher in compressors and machine tools than in valves and bearings, and higher in these two industries than in iron ore and coal.

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Given the similarity among products within each cathegory

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of figure seven, in terms of price, technical 90mplexity and

,

,I critical contingency ( one can hypothesize the' prod~cts to have

$imi~ar risks of pr~:i9.U{i:t malfunction.

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3. How Industries ~ in Terms of tho Risk of Product

AvailabiI ity

It will be recalled that section II.l~ introduced the

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variables where the levpl of the risk of availability is dependent

upon (bulkine_ss, standardization, etc). Based on these variables,

one can hypothesize tha~ the risk of availability is highest for

valves and bearings since they are not standardized and their

purchase or delivery cannot be postponed without threatenning

to halt the organization's pperations.

Although capital goods cannot be stocked in great quantities because of their high prices and because they are not standardized, the buyer can continue to use old machinery during the delay in the delivery of the new machinery. As such the risk of availability of capital goods is expected to be lower than that of valves and bearings.

Iron ore and coal stand in between: They have lower unit prices than valves and bearings which enables buyers to steck them in large quantities and, consequently, to be less concerned

with the reliability of a supp~ier regarding delivery.

Iron ore and coal are also more standardiz.ed than bearings

and

valves~ This makes i t easier for a customer to change

suppliers instead

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having to stick to one supplier who failed

to deliver on the promised date. That is,the costs of switching

suppliers are lo~er. Thus, in spite of the fact that iron ore

and coal are bulkier (and consequently) less stockble than _,

b~arings and valves, the lowe-r unit price and 'higher standardi­

zation of iron ore and coal make buyers of those products less concerned with delivery considerations when selecting among

alternative suppliers~

Figure five summarizes the previous discussion. It presents

the hypothesized level of both types of risk _,(p1:oduct function~ng

and product availability) in machine tools W\d compxessors (equip-Tments ',. valves a,rid l¥earings (components) and iron ore and coal

(raw. materials) .

It should be noted that figure five is ultimately aU

hypotheses whose validility is an empirical question to be

answered by the data and the tests to be performed on that

data

Insert figure five about h~re

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4. The hypothesized importance of the attributes in the

selected mature industrJ:.~l products ~

Based on section V.2 and V~3 it is now possible to

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section II) will be in the three pairs of mature industrial

products of figure four.

Figure six presents the hyp~theses~ ~or each attribute

a diagram is presented on the right-hand side of the figure. The

horizontal axis represents the industries~ The vertical axis of

the diagram indicate the hypothesized ratings. A scale of one (low importance) to seven (extremelY'important) was used. The ratings are a direct deduction of a previously hypothesized

relat~on between:

-First the importance of each attribute at levels of risk (figure three),

-Second the hypothesized levels of riskjn each product.

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(figure five) I

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The graph of advertising and sales promotion deserves

special ~ention since this attribute is hypothesized 'never to

achi,eve high ratings (beyond 2.5). Illd,eedt these promotional

variables a~e predict€d to be most important when the risks are

l'ow. Since industrial products are always reasonable complex,

the buyer tends to perceive them as risky (in terms of malfunction of the product). One can therefore hypothesize that adver.tising

and sales promotion will neVer achieve high importance in industrial

'products 116).

Insert figure six about here

VI - THE DATA COLLECTION

In order to collect data on the importance of the

ten attributes in the selected mature industrial products in the

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pnited States, six experts panels were forrr~d (one panel for each industry).

The experts panels were asked; "Would you rate on a scale of one

to seven the importance of each of the following variables (distributio~#

process R&O, image, etc), for the profitability of a firm in industry xi'''

All variables were presented alphabetically with accompanying definitions . .

The respondents included in the panels had to satisfy several _.

criteria~ They had to be experts that is,people with profound knowledge of the industry and of the requirements for sucess ·in i t~ 1'1oreoverI their

knowledge had to come from experience, from pratical origins, not from

textual sources or _, second hand information.

Thi-s meant that the panels' memb.ers had to be practicioners

such as industry consultants from management consulting. and engineering

firms, buyers from the lndustry of interest or managers of firms in

thf;'! industry. Hanagers constituted the bulk of the members of the panels. They typically came from the following departments! research and development, marketing, planning, engineering and manufacturing. Care was taken so that

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th~ six industry panels represented a similar cross section of respondents~

In order to avoid incubation. (that 1s , the respondents answers

would portray beliefs shared by a group of people and not ~hcir own

individual opinions) two measures were followed when developing the panels.

1 - only one person per organization received the questj.onnaire

2 - questionnaires were sent to different types of

organizations, such as firms in the industry, buyers from the industry of interest, etc.

To maximize the reability of the data, que~tionnaires for

both the first and second panels were subjected to pilot tests before being used to cOllect data. That made i t possible prior

to data collection to detect and correct problems t associated

with the questionnaires such as lack of unidimensionatily, face validity of the questions and reliability.

Telephone calls were placed to all respondents prior to maili:ng ;.. the questionnaires.

A total of 150 questionnaires were ma"iled, distributed in the

following way: 24 for compressors, 29 for, machine taoIst 28 for

bearings, 30 for valves, 25 for coal and 14 for iron ore~ One

hundred and seventeen questionnaires were received (response rate of 78%). The lowest response rate for a single industry panel was

70% '(valves).

Figure seven shows how each panel rated the importance of the

·ten attributes in each industry. The attri~utes are listed by the

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average rating they received. The variance of each attribute is qlsQ presented~ ,,'ther statistics such as the coefficient of

variance, skewness, kurtosis and range were also computed and presented reasonable values.

Insert figure seven about here

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VII - THE 'I'ESTS

'Two types of texts were performed·on the data: analysis of yariance {ANOVA} and T tests. Each test addressed cne of the two basic hypotheses of the research:

1 - Whether or not one can find within mature industrial

products different competition modes {ANOVA test)i and

2 - Whether or not can predict which type of competition will

be dominant (in a specific subset of the industrial mature

products) based on the contextual characteristics (risk of availability and risk of product malfunction)_T test

.

The discussion which follows will focus first on the former and then on the latter hypothes1s.

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VII -1'~1. ANOVA on technical variables~

The ANOVA test was performed on the' following ·index8s: :

- Product quality competition (average of the ~atings of

the attributes service and. product R&D)i

- Product cost competition (average of the ratings. of the attributes process R&D and plant size;

Product delivery competition(average of the 'ratin9~. of

the attributes distribution and location).

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The r~sults in figure eight indicate with a high de~ree

of statistical significance that the irnportance{as judged by

the six expert panels) of quality, cost and delivery competition changes from risk level to risk level., .just as had been predicted by, the model developed _. previOusly in section _{. .} !II.

Insert figure eight about here

VIII -1.2. ANOVA on the communication variables

Figure nine presents the results of the &~OVA test

performed on the communication variables, for the three ~~pes

,9:f ind~~trtal goods (equ1pments, components and raw materials) §

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f·

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Again the results indicate, at a high level of statistical significance, that the importance of image and of the technical

kno~;le6.ge of the sales force I cliange from industrial product to

. industrial product{each characterized by a certain level of product malfunction and product availability risk}.

However, the importance of advertising, sales promotion and

of the marketing knowledge of the sales force seems to be similar

-in all six types of mature industrial products.

These results will be discussed next in section VIII

Insert figure nine about here

VII - 2. Is there a relation between the levels of product

aval~abil~ty and product malfunction risk_, and the

im~ortance of each competition mode? .~

The model developed in ,section III predicted that the level

of functioning and availability :rillks ·,vould determine, the iIl1J.X>rta.~ce

of each competition mode (quality cost or delivery?~ This, in turn,

wouLd affect,the importance of the various communication and

~echnical attributes. In scheme,

Levels of Product

Malfunction and availability risk

Type of competition which is dominant

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Importance of the communication and technical attributes

sud) \·:as the logic bchi!-,d the gra?hs presented in figure

six. Basco On the data collec~cd i t is now pOfisiblc !:o CO;;;iJarc

those hypothesized graphs 'With the 9raphs which rc;:;ultcd from

. . h ' ' •. t ' xp~~ts That co.~...;>r ::>son is made t h e oplrl10rl of t e 1J)005 rles c ~A •

~---in figure t-en~

~.---~-.--Dlse.rt figure teD cbout here

.~.----.--The left side of figure ten is equal to fig~re six. It

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presents the hypothesized graphs (in a seven polnt scale) of _eC!ch

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variable~

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. The right side of figure ten presents the opinions of the'

I

industries panels. The rating attributcd~to,each pair of proG'...lcts

_,

is the averege of the ratings 9iyen by the experts to the product 1

J - - ,

belong~!lg to that pair.

../

,

The nu."tlbcrs below each ~iagrarn indicate the level of

i

statistical significance of the dj.fference of the :ratings,

of each attribute in two types of industrial goods. For

i

instance, .in the first graph of figure Len t the number between

_I

equipments and components, (O.1133) indicate the statistical

I

I significance of the differenc~ between the ratings of product R&D in equipment goods and in components (one tail T test) ~ The sar.;e applies !o the numbers between other types of products.

j

As was done wi th the ANOVA test one wi 11 next divice the discussion into two p2r~s: communication ana technical vari2~le5

-.

VIr 2~ 1. The g=zphs and T tests of the t:ec:.hn~c~.~2!!ri~!:

--'~---~-'-'~-.- - - - ­

Figure ten sho;..'s that amonq the six technical variables (proGuct R&D and service: distribution and location; pr~cess RSD and plant size) only: process :.R&O and location have actual graphs which differ in a significant way from the hypothesized

V~l 2.2. The grahs and T tests of the comrn~nicat1on'variables

•

,

I

It can be seen in figure ten that there is considerable

agreenent between the hypothesized .and actual shafes of .t.'1.e fOllOA'ing

•

graphs: image, technical Knowledge of the sales force and

marketing knowledge of the sales forc~.

I

A single exception exists: the graph of advertising and

sales promotion contratry to what was hypothesized assumes its

I

greatest importance in valves and bearings. This result will be

discussed next in section VIII.

I

!

I

1

VIII - DISCUSSION Of THE RESULTS, IHPLICATIONS FOR PRACTIONBRS, FOR FUTURE RESEARCH

VIII - 1. Overall

The quantitative empirical evidence col1ected in this

_,

study lends credibility to the following two' hypotheses:

1 - There are different ~ompetitioh modes within mature

industrial productsi and'

2 - 'It is possible to predict which the dominant type of competition will be/based upon two contextual characteristics; risk of product malfunction and risk of availability.

Evidence on the'first proposition comes from the ANOVA tests which suggest that the importance of the bctributes

related to each type of cornpetition(quality, delivery or cost} change from risk level to risk level.

The T tests and shape of the graphs also make credible the hypotheses that based on the two types of risk(malfunction

and availability} i t is possible to predict the importance of

the various attributes and consequently to predict the importance "

Four attributes deserve special mention. They are Process

~~q,

.

locatio!": I • advertising/sales promotion and rr.arketing

knowledge of the sales force. The actual graphs (as rated by

the E;xperts) of the first three attributes di£fer slgntficantly :fran their h¥pothesized graphs~ The attxibute marketing knowledge

of the sales force, seems to be an universal suc~ss factor in

industrial mature products, since i t receives similar rat,ings in all six product5~

Starting "lith Process R&D, contrary to what was hypothesized

the, experts rated the importance of this attribute higher in valves

and bearings than in coal and iron ore. That may well be a short­

-term reaction to the shock and charecteristics of "Japanese competition in the· valves and bearings industries.

In bearings and valves, Japanese competition,has been

especially strong in recent times. Japanese firm£ have been able

to out-cost U.s. firm~. That may explain why process research

(a cost-related attrihute) was rated by both the panels of

bearings and valves as much more important th~n was hypothesized.

These short-lived shocks temporarily change the ranking of the

I

importance of the attributes and influence the opinions of the

industry experts.

Regarding the attribute location, its importance was rated

by the experts as greater in iron. ore and coal than in valves and

bearin9s. Distribution, on the contrary, is similarly important

-of both cells. The risk of availability (and, therefore, the

importance of the timing of delivery) is greater in the latter than in the former industries. Delivery costs, however, are less

relevant in valves and bearings than in iron ore and coal where

the valvue of the product per unit of weight shipped is lower.

It ~ therefore that while distribution is critical

whenever the timin~ of delivery and/or delivery cost! are

relevant, the importance of location depends exclusively On

the relevance of deli~ery costs. That remains hypotheses for

future study.

= Ii _{"?"." ., •} R. , • ,..,9" • • h • *,,:W _{• Jj,"-:~'i'''}

'"-.([.M.;: ;~ • • $lQ4<L. t ... :e; .... _Of .~

24

Advertising and sales promotion never achieve a great deal

of importance in any type of mature industrial product. They

seem to be rather universally non-critical success factors in

mature industrial products. sales force marketing knol;lledge

appears to be anuniversal key success factor in mature industrial

products since i t achieves high. importance everywhere.

·Two reasons can be advanced to explain the universal

unirr,portance of advertising and sales _. pro~otion. First of alIt

.

the level of risk (most especially product malfunction) involved in buying industrial products, are in general terms, greater than

'in consumer products ~ 17). Second, the

type of industrial products with the lowest risks(operating

supplies and maintenance and repair it~~s such as heating fuel,

abr~$ives, office supplies, etc} were not included in the survey~.

One can reason that in these types of products, advertising and

sales promotion would assume greater importance. /

What ~s really unexpected regarding advertising and sales

promotion ratings., .is, that they did not come out as more ~rt.ant

in industries such as coal and 'iron ore than in compressors and machine tools •.

Most probably, that indicates the existance of a variable moderating the relation between risk level and the importance

of advertising and sales promot1on~ That variable may be the

horizontality of the market (18) ~ In other', words:one can ..

reason that for a given risk level, the more horizontal an industry is (that is, the greater the number of potential

customers),the greater the importance of advertisingi. That is an

hypothesis for future research~

Contrary to image and the technical knowledge of the

sales force whose importance saerr:;s to. be conttgel)t upon t.~e industry

one refers to, and contrary to advertising and sales promotion

which appears as unimportant in all types of mature industrial products included in the survey, the-marketing knowledge of the sales force seems to be important everywhere.

Indeed based on the data supplied by this research the

marketing knovlledge of the sales force

is

close to being On

universal success factor in any kin:1 of mature industrial products. Theoretically the variable is ideal for dealing

with contexts where the risk of product functioning is average

and i t indeed achieves its highest importunee in valves and

bearings (medium risk industries).(Plcase tefer to figure ten}

The explanation may be that in products with high malfunction

risk (such as rna.chine tools, cranes, etc.) f the technical knO\"ledge

of. the sales force is critical. That, in its _, t~rnf enhances the

importance of the marketing knowledge of the sales force~

I.ndeCt1,'when "the product malfunction risk is hight the level of

interaction (in terms of number of people involvedI number of

purchaso criteria and time spent) bebicen the buye.t· and the

seller is large and consequently more than technical knowledge

is required" from the ~ sales. force .. The sau(s~n cannot

"

,

simply be technical wizards with no interpersonal· skills. 'fhey

must also be diplomats, that iSI persons highly quali=ied in

dealing with other human beings.,' . ". '

For this reason, the marketing knowledge of the sales

force seems always to be quite important within industrial mature products.

VIII - 2. ImElications for pr~ctioners

From the results of this research two basic messages emerge for practicioners: the first is a message of universalitYi

the second is a message of ~ontingency.

* .W ... S&#b'.=;# . M " ;y • In... _{$$ • "t.}

26

. The rrCSS<:lSfe of tmivcrsalitv is that. managers of organizations - • . """'m''_==---- ","H;;'...,.&'

manufacturing mature industrial products should invest less

heav,ily in advertising and sales promotion than in developing

their sales force marketin.g skills,' (human relation skills, good coverage of the territory, knowledge of the delivery and credit policies of the seller, knowledge of the customer's needs

ana. values,f etc .. ). This observation stands five to all lfIature

industrial products researched in this arti"cle.

The message of contingency respects all other attributes

(except advertising/sales promotion and the marketing kno1dledge of the sales force). It says that prior to allocating a budget

~o the various areas of the firm, tr,anagers should try to evaluate

the level of the risks of product malfunction and availability

present in the context of their firmsr That can be done by

looking at the causes of the risk discussed in section 11.1 •.

That is, managers should"ask themselves:' How techic~ll'y

complex is the product? What is the total price the consumer

.

.

pays for it'? Are there critical contingencies?/How bulky is th~

product? What is its degree of standardizati.on! and so on.

'l'he answer to these questions will provide managers with a good idea of the risks of product malfunction and

.

availability which the buyer faces when purchasing the product ..

The levels of risk will in its turn influence which

attr~butes should receive most of ma~ager's attention, firm~

budget and people.

.

The part of the. budget allocated to developing the

technical knowledge of the sales force or, 'a good image or, a good distribution system, or a good team of product R&D

or still a solid team of process research, and so on, should

all depend upon the levels of risk present in the firm1 _s

VIII. - 3. Suggestions for future research

This study suggests several directio!'ls for future research.

First[ the possibility that advertising and sales p~io~

will assume greater importa11ce at'very low risk levels should be

explored. That would require the inclusion in the sample of a

follow-up study r Of industrial mat.uFc products such as lubricfmts t

office supplies t etc (operating supplies and mainte~ance and . repair items).

Second, the extent to which a market is horizontal (number of buyers purchasing from that market) may very well be a variable

moderating the relation between the level of risk and the ~ttili~ce

I

of advertising and sales promotion in that market. This should

I

,

also be empirically researched.

/

I

Thir(l, i t remains to be determined whether the marketing

knowledge of the sa1:es" force will retain its importance in the

_,I

least risky of all mature industrial products: operating supplies

and r.1aintenat"lce and repaIr items.

. _,

Finally, i t would be interesting to replicate this study

by using the same methodology in order to analyze the importance

of the several promotional variables in other type of mature products I

in non-mature products, in consumer products and in services. This

2

3

4

Figure One:

-,--_.

__

._---­

Level of product malfunction risk?

1 What are the Characteristics

of the Task Environment. in terms L~vel of Product availability risk?

of:

1

{Therefore)

I---··--·~-~---The Buyer's Major concern Product quality

is with: Product delivery·

Product cost

---_._---_.

- - . _ - - - ­

The Dorntna:r.t Type of

Competition among sellers

is;

1

1

/

(Therefore)

Product quality ccmpetition Product delivery competition

Product cost competition

. (Therefore)

The Most Critical Attributes a seller should possess to gain competitive advantage are:

Product quality related {serv:io.:;, C!tC}!

Product delivery related(distribuUori

etc) ,

Product cost related (Pnxess '

FIGURE TWO

'!!ypoth~ses regard~"~ tho ~OS~ important c~~petition modes in different tynes of

context '

Level of Risk of Product Availability'?

~---H-~-~-h---~~

­

. High

Low

Competition alnong Competition

.sellers is based sellGtrs is

/

both on product on'products

_.

quality and on guality.

de1.~very. ' •

..

among

.

. based

Competition among competit~on among

sellers is based sellers is based

,on pr9duct . on p;roduct

delivery. cost~

,

I

1

_,

Level of Risk of Product -Ma1function?

FIGURE THREE

A- Hypotheses rcqard.inq the j.mportanc~

erf the TECHNICAL. ATTRIBUTES in different

.types of contexts (each context characterized by its risk levels) ,.

Level of Risk-of Product

Avafiability?

High

Low

- Product R&D

SerVice - Product R&D

High - Distribution - Service

Location r.evel of Ri.sk

of Product Functioning?

...

- Distribution - Process R&D

-: Location Firm Size

/

13 ... Hypothese.:;! ..£~ar4ing the importance of -the

COI-IHUNICATION ATTRIBUTES in different types .~f contexts (each context characterized by

its risk levels)

Level of Risk of Product

Availability?

-High

Image

-

Image

- Technical Knowledge

-

Techni cal Kn'''iledge

Level of Risk of Product

Funotioning

of the sales force ,

_,

of the sales force

1

,

Low

-

Image ... Marketing K.')'.);.;lecse

of the sales force

-

Advertising/ sales

-FIGURE ,'OUR

1 - S'fATIONARY COMPRESSORS OF ONE ~HOCS.n.ND HORSEPONER OR ~j used in large manufacturing :establishments' and in chemical

'process ' services, one exam.ple is centr.ifugal air compressors . . (The SIC codes are 3563101 - 18 and 3563142 - 53).

2 - z.m1'AL CUT'l'ING fA-ACH!!'§ TOOLS {SIC code 3541l ~ 'l'he err.phasis was on n~merically-I corr.puter-I or manually-controlled,

drilling/ grinding, and boring machine tools, transfer lines,

machine centers, and turning ,and milling machines.

SECOND CATHEGORY OF INDUSTRIAL PRODUCTS (COMPONENTS)

3 - STANDARD N,TIFRICTION BEARINGS (SIC codes 35621/2/3).

Here we focused on standard (cOIn.'1lodity type) bearings

/

manufactured in large batches (mass pr?duced). Custom­

-made 5pec!al.ty bearings, such as those of very large

size or those' with extrerr,ely high precision requirements

were excluded fro~ consideration.

4 - S~~DAR~ yA!>_~.§. manufactl.u::ed in large batches, that is

commodity-type valves which are mass produced. Excluded fro~

consideration were custom-made specialty valves, such as most of those used in the nuclear and petroleum industries.

Withi~ the area of standard/conwodity-type valves, the

emphasis was on standard ball, butterfly, and gate valves

(SIC codes 3494362-5, 3494367-0, and 3494372-5).

THIRD CATHEGORY GROUP

QE

INDUSTRIAL PRODUCTS (RAW ~~TERIALS)

5. IRON ORE (SIC code 10).

Classification

0=

the - Products in terms of risk

level of Risk of Product Availability:

r~---~

High Medium Low

Machine Tools High _Compressors

.

Level of Medium \ Risk of Product • Functionning:

Low

..

__

. -"~-" ~ Valves _, / Bearings

.

.

,

Iron Ore Coal • • .

I

---I

I

'fl,'

ilJ

!l

;;:j ~

S

Lo~

lIigh Valves l3earings (6) Medium M.:lcltine tools oampressors(6.2)

,

Iron ore and coal I {4l I Lgr

,

I

valves (3) B~.arings

,

L

,

,

iron or'Ll

and coaL (1) ~1achine tools compressors, (7) FIGURE SIX

The hypothesized r~.!=-ings of the

technical and con~~nication variables

in the selected matur~ industrial

products (in a scale from one to seven)

Communication .. attributes

IMAGE

Risk of availability Hypothesized

~

-

_-

-

ratings 6.2 6 ---:-~---/

,

, 4 ~----r---~---~. 1 - . 1 -_ _' - - _ , , • ~,~,~-~ ' i

Compressor::; , valves iron cr

ana , a n d E4-.d

machin; bearings. coaL

, tools.

_.

'

'fechn.:!:.cal Knowledqe of the sales force

Risk of availability Hypothesized

ratings Med'~um Low _I

,

3

---r---, -­

,

--r-~--Machine Valves iron -",~~ls Beari:1gs ere and txirpressors coal ,' , "

.' valves ,and ,tbeii:ril1gs, . I : (6.5) _, iron

-.

om(S) , and _I

,

_coal

.

,

"~~.. Machine tcols CO:..'Ipressors (4.5) 34

FIGURE SIX (continued) .

:.M::a::r:::k:::e~~~nr;r__~K_~_?~w_le_d_~J the Sales

b =

Risk of availability Hypothesized ratings

Hi9h Nedic:m

LO~

6.5.--- - - ~

5 --- ---,- ... - - t

,

4.5

---r--- ­

,

M.:tchine valves iron ore

tools bear1ms and coal and

ccrrpressors

/ .,

'fo,dvcrtisingLSales pro!T',otion

Risk of availability Hypothesized ratings

I

,

High Medium Low

2.5 ---. - - ­ , -" I tn' ....-I"

-'

-

..

~

I

Valves j'and(2) '!BearinqS .. iron ore ~ _{and coal}

3,

_(2.5)

"

-

., Machine tools and canp.ressors (1) 2

, - - - ­

,

1 I--~---,----;---I

Madrloo tools Valves iron or:

carpressors .Bearings and coal

-

-FIGU~ SIX (continued) Technical related attributes

Product R&D Hypothesized ratings ., Machine tools , Carpressors (6.8) 2 ---~-.•

..j...---­

/ Service

Risk of. availability Hypothesized ratings

g-~~~~

7 ~

f.c­

....

,

'"

,

---~-

V~l_

-

-~in~sl

_

I

iron ore and (1) coal ~-Madline tools

_!

carrprcssors (7) , I 3 .~ ;

...,

,

'"

'I

'"

1 '!j \

'.!l

~

I

~

canpressors Valves iron crt?

and Bearings and coal

\j

Machine tools

.

-~---,

_ _ _ _ _ _ _ _ _ _ _ _- - k ___

High Mcdi urr, Low ..­

_.

_, , , Machine tool CC:n'pressors(2) alves :..earings , '5)

_{. c=-.._­}

. • _{iron ore} and (5.5) .g;;al

FIGURE SIX (continued)

Process R&D

Risk of availability Hypothesized ratings

~~

5.5

----,­

5 _...r.;___________I 2 I L - : " - _ - ' - - _..._ _

Madhine Valves Iron ore tools .E!carings and

and coal

cc:rrpressors

/

firm size

Risk of availability

. High :Medium Low

HY~:::::~:::_:::~:::

_____

r

(

8

.L'

r

..­

~\!:'

:\---

i

~)

..

':'

11

!l

'Ho ..~ , - I- ' - -_ _ _ ..l . . . . 1

_~_.

iI ..

Valvcs irc:o. c,­ ~ _{Bearings arxl} coal

-,

¥lIiJ

ves ~ringS

~---I

,_, , Machine tools canpressorE 12) I _, iron ore and coal (6l

-Distribution

~,

...

.

Risk of availability Hypothesized ratings

iron ore

and

coal

High Medium Low

7 ­

---;?f

·-I-·::~1f:t~·-

:'5~~_7

I

I

o:npressoE'._ , I

____...'.~_.__..J.I_._~__ . _ _

Mach.ine tools Valves iron ore cc.tTpressors bearings' and 003.1

(7)

I

Iooation

RIsk of availability Hypothesized ratings

,

A -

.

/

~Med~wn ~

./ 7 - - - -___ .

.

:==/:-

/ i

I

CCrnpressors Valves iron

Machine c::e

tools bearings and

coal

kives

[

Machine too],

.

and(l) cgrprossors~ 'and(6) Bearings , iron ore and (7) ooal .

.­

-- -- -- -- --

--

----

-

--Rli;SULTS OF THE PANELS DATA

IRON ORE _i

I

~

Attribute Average r \laria'ncc

Rating ~ Location Reserves 6.66

!

0.24 ~--Distribu­ tion 5.75 1.11 ~-Process R&D _- 4.83 2.15 Pers. Sales 4.15 Techu+Kldg 1.48 -~ Size 4.58 2.08 - ~

l-~

Product I MD 4.5 1.55

I

Pers.Sales mktg.Kldg. 4.25 3.11 Image 4.17 2.33 . Service 3 2.63

.

Advtg.'SP 2

l.09J

-COAL Variance Attribute

i

Average Rating Location

t

Reserves' 6.72 0.21 -Distribu­ tion

I

-­

I

5.66 1.41 Pers.Sales Mktg , ,'.55 1.41 Size lS.05 2.06 Image 4.88 2.10 ~ 1.68 4.5 Pers.Sales

_I

tech~Kldg. Process

.

4.38 R&D 3.90

~2~l.88

Service I _" •

I

•

Product R&D i-- ~-~

2'6~M

Advtg!S? 2.38 L19

I

i

i

J

. MACHINE TOOLS

Attribute

r

Average Variance

r-- 1_ Rat_~g

I

, Service I 6.77 0.47 Pers.Sales _Te_chn.Kldg. 6.45 0.55 5.86 1.21

1

Image Product R&D 5.82 1.17

I

~

!

Pers. Sales 5.55 2.01 flktg.Kldg. I Process R&D ,

l

4.82. - ~ -~

.

1.49 Advertising SP 3.82 l.01 Size 3.05' 1.86 Distribu­ tion 2.95 2.81 ,Location 2.73

~

co co

- - - - -- -- -- -- -- -- -- - - -- -- -- -- -- -- -- --

-

-- -- -

---

- -

--- ---- -

--image 6.15 0.77 Pers~Sales Pers. Sales

mktg.Kldg. 5.5 1.56 i toktg.Kldg.

1­

Product

I

R&D 5.6 ___1._4l._ _l!l.\age 5.33 1.54 I Image

-Pets.Sales

I

Fers. Sales Product

'Icchn.Kldg. 5.25 2.62 i Techu.Kldg. 5.25 1.85 R&D

Process Product

R&D 4.05 1. 94 R&D 5.13 3.17 Size

-COMPRESSORS

-

,--

--- -~

Attribute _~){m~e Variance Attribute

-1.01

r

~is~-ribu-Service 6.2

I tion

-~

Pers .Sales _r Process

Techn.Kldg. 6.2 1.33 , R&D -f---- - ­ BEARINGS VALVES Variance ~v~ral!'a_loU

f--:-­

oS

I) _1.03 .5.9 ::.• 30 Attribute

I~istribu-I tion Process R&D flm~e 6.14 6.05 Variance O.iS 0.95 5.95 0.95 1.56 5.57 5.33 2.<)3 2.8 5 Size 3.65 Distribu­ tion 3.4 2.13 2.67 I-­

+--- ----­

Advig./sp 3.2 1.52 -. Location 3.15 3.50 Size Service Advtg/SP Location 4.92 4.33 3.58 3.04

.

1.82 Pers.Sales I Techn.Kldg. 4.76 1.49 -2.49

I

Set"vic~

4.43 3.36 ' ,1.8' Advte!SP 4.10' 1.99 ,

,

2.17

,

Location _. 3.9 1. 79 L . I .~~__._.~

NOTES: Technical Soph.Eqpt.- Technical Sophistication of the Equipment. Quality C,mt. Syst. - Qual ity Control Syste:n.

Work Force Techn.Kldg. - working cOerce Technical Knowledge. PeTS. Sales Techn. Kldg. - Personal Sales Tcchl:ical Kno'Wledge. Advte/SP - Ad.vertising and Sales Promotion.

,

""

FIGt:R~~ICH:!

~ysj.s oi,__v~d ?~ce of the te<:Enical~iables (related to each competition mode) in the three types of industrial products(equipments goods,

cornponcmts and rm'f materials) .

K(numb--.:':r of pairs; ~'3

m(N? of .n.ttributes within each pair) '~4

(2 product quality attrih.J:tes multipLied by t"...o 1t:o'.)stries) n:;:;Y..x;n"12

I

K(nmber ~irs of industries}=-3 m(N9of attxibutes within each -;;;airi Z'4

i2

proouct oost attributes multipJic~

,

I by b<.'O industries) =K>:m~12

J

R(number of pairs of industries)=3 m. (N? of attributes witJ:dn each pair)~4

(2 product delivery attributes multiplied by two indClStries) 'rP=12

,

,

i

i

_•

I Fratio O. DOC 1

i

I

The Fratio is sr.n.tistically signitica!1t at

(two tail t.est)

!

Product oost ~tition

I

' - ' - - - , - - - , - - - ­

I

within -cells (N-K) Fri'!!:i.o tegrr-cs of SUm of S4~,:rrcs fr~_ _\ ­

!

i

2

!

_,

7.7 9 2.9

The Frntio .:is statistically stgnif:icant at: the 0.022 level

(two tail test)

P.ro:!uct delivery ~!:i!:ion

-=

~rees of Sum of squa.i~es Fratio

freeclan

- ­

---­

arrong C€' Us 2 19.8

-(K-l) , 11 ---­

-

--,

-WitJ:dn <:>olls (N-K) _{9 8.1}

'fi1e lh:ati,Q is statistically significant at

o.oce_

level (t;,u tail test)

I

•

j

I

FIGURE ~

Analysis of vari·:mce of the comr::tunication

'!.~riables

in··-ilie three' typt;$ of industrial products

(equipments goods, components and raw materials).

I

I

Advertisinc

,

and sales Pro~ction"

­

,

-_

...

,

K (N9 of levels of

_I

_{Degrees of , F Ratio}

Source _{, Freedom} , _,

risk and index)~3

"

among

_I

m{N9 of variables _{cells 2}

(K-l)

I

within each level

11.45

,

,

of risk and index)=2

I

,

within ,_,

,

cells 3 " (one variable on 2 _(N-K)

I

.. _i industries) I_, ..

_,

n

=

K x m ;::: 6

rthe F Ratio is statistically

significant at the 0.039 level.

i

, /

I

,

Image

[

K (N9 of levels of

risk and index) =3

m' (N9 of variables

within each level of

risk and index)

=

2

(one variable On 2 industries) n::::.Kxm=6 , .... ~~-Degrees of

I

_, F Ratio Source _freedom Amena cells 2 (K-1) 10.3 Within cells (N-K) 3

The F Ratio is statistically significant at the 0.045 level

--K (N9 of levels of

risk and index)= 3

m (N9 of variables

within each level of

risk and index)~ 2

(one variable on 2 industries)

n= k :x: rn :::;; 6

K (N90f levels of

risk and index)= 3

m (NQ of variables

within each level of risk and j,ndex) =: 2

(on;e in,du ne variable stries) K x m

=

6 on 2

FIGGRE >lINE (Continued)

i

Mark.eting Knoltlledge of the Sales Force

~

Degrees of

Source _F:reedom F Ratio

amon.g c~lls ₂ (K-l) WithIn cells (N-K) 3

.

The F Ratio is statistically significant

at the 0.45 level

Technical Knowledgo of the Sales F9rc~

,

/ ~.

I

_, ,Degrees of I

Source _Freedom atio

,

C

_ among

.

cells (K-1) ₂ . 26.16 Within cells 3 (N-K)

I

The F Ratio is statistically significar.t at the 0.012 level.