Transnational Research Associates

Capabilities Based Marketing


Anglo-American Gem Distributors, Ltd.

Art Madsen, M.Ed.

I. Overview of Firm and Its Dual Problem Situation

Throughout the last decade, Anglo-American Gem Distributors, Ltd. (AGD) has expanded its operations in North America, Europe and Asia with considerable success. Less dynamic performance has been achieved in the Caribbean, Central and South America. From an operational standpoint, AGD purchases raw gemstones on a wholesale basis in Thailand from reputable sources, and ships them to the Philippines and Australia for rough cutting and final polishing, respectively. Approximately 70% of total raw gems, those of lower potential value, are shipped to the Metro-Manila for cutting; whereas, the gems of high value go directly to AGD’s expert finishers in Perth. This technical product support mechanism can be referred to as Level I, portrayed on Appendix A. It seems to be functioning efficiently and has consistently provided well-reputed gemstones for the world market. Obviously, the logistical and technical aspects of Level I do not constitute the marketing problem confronting AGD.

Level II of Appendix A displays the "trifurcated" nature of both the U.S. and U.K. customer bases of this firm. Relative percentages of product for each geographic sub-region are indicated. What cannot be portrayed, however, on this "master organizational chart" is the intensely critical problem developing in several major AGD markets, such as the two domestic sales areas, Japan and the EEC nations. Indeed, AGD figures demonstrate that gem sales seem to have reached a saturation point in both domestic markets, and have been decreasing slightly throughout the Pacific Rim and in Europe. Communication between AGD distribution representatives and retail jewelers has broken down. Once ever-expanding sales are now stagnating and jeweler resistance is developing, notably in Tokyo, Paris and Suburban Rome.

Capability based marketing measures that need to be adopted by AGD to reverse this situation, one that could also adversely impact other AGD markets, will constitute the balance of this analysis.

Within AGD, internal problems at Level II need to be eliminated, and both the U.K. and the U.S. offices must adopt a joint, mutually agreeable marketing strategy to immediately redress communication and relationship problems at the critical third level, i.e. the distributor/retailer interface. By applying the five steps of the CBM model, progress can be achieved. Figure I, below, outlines the five classic, capability-based stages in juxtaposition to AGD’s specific corresponding weaknesses, needs and priorities.

CBM Stages

AGD’s Needs and Priorities

Corporate Positional Assessment or Audit

Poorly defined position; need to enhance compatibility and internal dynamics

Enhancement of Capability

At distribution level, more energetic tactics; wider-range of gem products; re-evaluate retail gem price structure.

Market Appraisal and Research

Review saturation patterns; map territories; assess competition; base new strategy on research

Redefining and Determining of Position

Establish new goals; define desired AGD status in each market

Networking Moves

Select Proper Style; "Active Investor" and "Extrovert"; Force Issues to Achieve Ends

Sources: Adapted from Lecture Notes, Boe (1989) and Jarillo (1993).

Figure I

Serious thinking needs to be forthcoming at Level II, among executives in Boston and London, to iron out obstacles standing in their way and to develop a compatible, planned and synchronized tactical response to the distributor/retail dilemma confronting them at Level III.


II. AGD Headquarters Conflict Analysis

The Boston-London relationship paradigm can be simply described as an intra-corporate power based struggle in which each headquarters office is striving for control and dominance, geographically, financially, and strategically. The forceful individuals at the top of the personnel pyramid at each office must begin to collaborate in the overall interest of the firm. There must be urgent overhauling and restructuring of the decision-making authority base, perhaps through the neutral offices of a mutually acceptable ombudsman, heading an Arbitration Panel. Figure II, below, depicts how the present conflict-prone mentality might be effectively mediated and redressed.

The Board of Directors would, of course, appoint the ombudsman and his or her Arbitration Panel, consisting of perhaps three industrial marketing and management specialists. This group would meet regularly with AGD Headquarters’ CEOs and, using conflict resolution skills, would measurably enhance compatibility of both the London and Boston executives. Once this was achieved, the two CEOs would determine, still in the presence of the Arbitration Panel, a uniform, company-wide tactical strategy – involving precisely choreographed networking moves (CBM Stage 5) – for aggressively improving relationships at the distribution/retail jeweler level. This strategy, supplemented by input from CBM Steps 2, 3 and 4, would have to be formally documented, confidentially circulated within the upper echelons of both Boston and London, and, then, released for implementation at Level III of Appendix A, the Master AGD Chart.

III. Improvement of Distribution/Retailer Interactive Dynamics through Networking

Examination of the most important problem confronting AGD must next be placed on the agenda. How can AGD’s local gem distributors and representatives interact more effectively with retail jewelers, and market more gems through them in slumping markets in Tokyo, Paris and Rome, where there have been special problems, but also in other geographic sectors worldwide?

The Boston and London offices must develop a microcosmic strategy for marketing gems to specific type of jewelers, all the while remaining culturally sensitive to the countries in which this thrust will take place. As it turns out, the two headquarters offices have already brainstormed a working and functional policy that is beginning to produce results. The classic CBM networking elements discussed in such publications as Aaxelsson (1982), Baker (1994) and Jarillo (1993), plus some time-tested insights developed within AGD itself, seem to be bearing fruit.

Distributors are being instructed, at the local sectoral level, to implement, among others, the CBM networking options noted below on Figure III.

By-Passing and Circumventing: Obstacles are things that you see when you take your eyes off of your goals. In fact, goals in the gem industry must be actively and straightforwardly pursued.

Avoidance of Indirect Dealings: Pursue the target directly, in the case of AGD, the target is clearly the retail outlet.

Flanking must be implemented through intermediaries when called for: The intermediary can either be pursued by the target person, or vice-versa in the case of AGD. The distributor needs to pressure the intermediary to attain the target, decision-making retail jeweler who will access AGD products if so motivated.

Bridging uses one or more intermediaries: to achieve optimal cooperation from the targeted retailer.

Displacement can be used as a strategy by AGD only when culturally and legally acceptable: The ethical standards of AGD may preclude actual ‘take-over’ of authentic business, especially in the gem trade.

Separation of network members: can be productive if friction or blockage is occurring.

Sources: Lecture Notes, slightly adapted, plus Aaxelsson, Baker (1994), and Jarillo (1993).

Figure III

In addition to these tactics for improving distributor/retailer relations, AGD has injected some innovations of its own into the attempt to revitalize its business, particularly in the large urban markets mentioned, and in selected third world locations throughout Latin America. Their innovations currently consist, namely of:

Combined with tested CBM methods, these innovations have been proving progressively successful, given resolution of the Level II conflict and proper implementation of all strategies.

Justification for these measures can be provided by preliminary indications of more ‘ready acceptance’ of AGD gemstones by retailers in several urban and less densely populated markets.

IV. Value Enhancement Strategies

Because sale of gems at the local level relies on the interactive dynamics of the CBM model, and on the company employees implementing it, it is important to analyze how the "exchange of values" inherent in marketing actually occurs and what is being done by AGD at Level III, in keeping with CPM, to boost recognition of product value in the eyes of the retail jeweler being targeted.

Firstly, AGD distributors are being trained not to adopt an unplanned, passive or introverted approach to sales. No "homebody" or "reluctant player" type sales and marketing personnel can remain on the team for any length of time. In fact, many have been terminated and replaced by extroverted, active, financially motivated individuals. Once these employees are firmly in place, they are well suited personality-wise to strengthen networking relationships. In Section V, an illustrative example of effective value enhancement interaction is presented.

Secondly, value is being enhanced in the eyes of the client-retailer by advanced gemological training at the distribution level. Increased knowledge of product results proportionately in increased sales, AGD has discovered. If the product is perceived as innately valuable, the customer will, by transference, consider AGD credible, trustworthy and reliable, further solidifying loyalty.

Thirdly, phrases, catch-words and psychological tactics are being used by AGD, much like the now famous De Beers phrase "Diamonds are Forever", to entrench repeat sales at the retail level and increase demand. AGD’s distributors provide attractive, glossy advertising materials to retailers for promotional purposes, containing tasteful and highly effective wording. All of these measures seem to be further bolstering the link between AGD and its retailers. Indeed, the firm has found that the three broad techniques, mentioned above, are gradually resolving the sluggish market and sales dilemma referred to at the outset.

V Difficulties Anticipated and Overcome

There have been set-backs in AGD’s strategic thrust. Major markets in Japan, France and Italy have been consistently resistant to some of the tactics and solutions discussed. However, the CBM approach is capable of offsetting many of the difficulties encountered through repetitive maneuvers and client-friendly strategies based on the interactive skills acquired by AGD distributors over time.

In one instance, outside of Rome, the following interchange occurred between a retail jeweler and a CBM oriented Italian AGD agent. It is clearly illustrative of the aggressive, yet polite, value-enhancing marketing tactics required to keep AGD positioned in the forefront of its industry, at the Appendix A Third Level – thus generating on-going profits for financially refueling the entire firm from bottom up.

Sample Distributor/Retailer Dialogue

AGD: "But, Lorenzo, these 12 carat Burmese Rubies have attracted clients in Europe for decades. They’re a mainstay of your business. Actually, although you’re not contracted to purchase more than you can turn over, we are prepared to increase your in-shop inventory, on consignment, making your display-case far more glamorous than your competitors’."

Retailer: "Yes, your products have consistently sold in the past. For some reason, though, I’ve not been able to generate interest among my return-clientele. With a shift in merchandise, toward Burmese Rubies for example, I could either further alienate them, or – hopefully – sales will sky-rocket."

AGD: "Exactly…Lorenzo…by featuring the ruby collection, your customers, potential and return, could be really enticed. Here, let me tell you about the origin of these stones, mined north of Chiang Mai in a previously unexplored alluvial region…"

Retailer: "Hmmm...go ahead."

[AGD continues the educational process, leaves an attractive display of Burmese Rubies in a variety of shapes and settings, including a costly necklace, and closes the deal with the once-reluctant retailer, now enthused.]

By stressing the capability of AGD to present a Feature Line of Burmese Rubies, while continuing to stock retailers with the standard array of gemstones, the Distributor was able to reassure his retailer that this merchandise could be ‘moved’ to the ultimate benefit of all parties.

If these types of ‘inter-actional’ networking techniques (further portrayed for the sake of clarity on Appendix B) can be sustained over time, and in less promising markets such as parts of South America, the Third World and remote Pacific Islands, AGD can steadily increase its worldwide market share while maintaining its stronghold positions in major western urban markets. CBM is a valuable tool for performing this feat, and can move the firm ahead, at Level III, while ensuring harmony at the Headquarters Level where much of the problem situation seems to have been, in the absence of a coordinated strategy, initially located.

* * * * *

[Note: The AGD intra-corporate scenario described above was predicated on an actual series of events transpiring within British Diamond and Thai Gem in the early 1990s. Their problem-situation was resolved by a combination of (early) CBM-type thinking and intensive networking of leads and contacts at all levels of their respective operations.]

(Total Word Count: 2040, including title and headings)


Aaxelsson, B. and Easton, G. Industrial Networks: A New View of Reality, Routledge, London, 1992.

Ames, B. and Hlavacek, J. Market-Driven Management: Creating Top-Line Growth, Irwin Professional Publishing, Chicago, 1997.

Assael, H., Marketing Management, Strategy and Action, Kent Publishing Co., Boston, 1985.

Baker, W.E., Networking Smart, McGraw-Hill, New York, N.Y., 1994.

Boe, A. and Youngs, B., Is Your Net Working?, John Wiley and Sons, Inc. (McGraw-Hill), New York, N.Y., 1989.

Bradley, F., Marketing Management: Providing, Communicating and Delivering Value Added, Prentice Hall, London, 1995.

Jarillo, J., Strategic Networks: Creating the Borderless Organization, Butterworth, New York and London, 1993.

McCalley, R., Marketing Channel Management: People Products, Programs and Markets, Praeger, Westport, Connecticut, 1966.

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Sample CBM Interactive Networking & Marketing Strategies

AGD Distributors à Jewel Retailers in Tokyo, Suburban Rome and Paris

Promote entire new product lines, focusing on a featured gem periodically.

Distribute merchandising literature displaying innovative gem designs & products.

Approach retailers with diplomacy & professionalism. Reflect properly on AGD.

Stress value of products and capabilities of AGD to please full retail customer base

Utilize intermediaries to enhance AGD image; capitalize on third party input.

[Note: See text of report for further elaboration of foregoing concepts]

Appendix B