Performance
Marketing
Rio Tinto aims to maximise the value of its low cost asset base through high performance sales and marketing. Customer facing sales and marketing activity is conducted at each business unit, or in some cases at a product group level, supported by a small central function, the Marketing Centre. The Centre collaborates with business units to provide rigorous and focused support to the development of marketing strategies and their tactical execution, performance measurement and monitoring, as well as talent development.
Strategically, we ensure that all our business units have a robust five year marketing strategy that combines a distinct positioning in target segments with clear customer value propositions and supporting price, product, customer and supply chain strategies.
Tactically the focus is on capturing value opportunities and developing and delivering short term plans aligned with each business unit's marketing strategy. Typically this will include determining elements such as target prices, volume of spot/term business and working capital management.
This structure enables us to deliver the One Rio Tinto agenda of realising cash flow benefits through economies of scale and scope, process standardisation and marketing best practice, while retaining the essential local knowledge of our customers and their markets.
It is axiomatic in this relationship that both the business unit and Marketing Centre must define and be accountable for the subsequent delivery of improved cash flow. The Marketing Centre has a rolling target of working with business units to identify in excess of US$100 million of incremental cash flow each year.
This kind of collaboration has generated over US$700 million in incremental cash flow for Rio Tinto during 2008. As an example of results achieved, a business unit worked with the Marketing Centre to determine how the customer portfolio should change based on a projected view of shifting demand growth. As a result, the business unit is implementing significant changes to its core customer base as well as to its product portfolio which will position it to take advantage of geographic shifts in demand away from historical markets and deliver significant incremental cash flow above plan.
As economic conditions have changed in 2008, our focus on executing a marketing strategy remains paramount. Whilst ensuring a flexible short term response to the challenges of the economic slowdown, especially in terms of cash flow management, business units remain focused on positioning themselves for future growth opportunities while maximising profit in the short term.
The changed economic conditions make the aim of maximising asset value through marketing even more imperative. In 2009, work will begin on further developing an integrated supply chain to better match demand with supply, accelerating Rio Tinto's entry into the Indian market and improving our short term price forecasting capability. 2009 will also see expansion of our sales and marketing hub in Singapore to better serve our Asian markets.
The Marketing Centre's total costs in 2008 were equal to the budget of US$8.5 million.
