Page 190 - DMGT547_INTERNATIONAL_MARKETING

Unit 10: International Logistics and Distribution Channels

Notes
not understand why you have to create an elaborate organisation just to interact with us,
your primary customers…”
“That’s true,” conceded Marwah, “but only to an extent. Dealer-sales account for
60 per cent of Pluto’s turnover; the remaining 40 per cent is our sales to large accounts –
companies whose purchase-volumes are high, and who prefer to deal directly with us.
These accounts are handled directly by our salespeople. While our margins on dealer-
sales are 8 per cent, the corresponding figure for sales to large accounts is 11 per cent…”
“And I think,” continued Mullick, “that Pluto feels it has not exploited the large accounts
segment, and is hoping that the CSO will change that. Isn’t that right, Mr Saraf?”
“Absolutely,” agreed Saraf. “We only have to look as far as our nearest rival, Bharat
Engineering, to realise that. Seventy per cent of its turnover accrues from sales to large
accounts. And, while this segment is growing at the rate of 25 per cent, our sales to dealers
have grown at just 10 per cent per annum.”
“Fair enough. Have you identified the CEO for the CSO? That choice will have some
bearing on the eventual success of your change-initiative,” pointed out Mullick. Saraf
pointed to Prabhakar Das. “I have managed to convince Prabhakar that he is the man for
the job. He raised two objections: the first revolved around his background as a HR
professional, with no experience in either sales or marketing. The other was based on his
understanding that the CSO would become redundant once the SBUs became operational.
Those are the very reasons that drove my choice.”
“As a HR specialist, Prabhakar can easily identify the skill-gaps in our salespeople, and
quickly develop suitable training interventions to bridge them. As far as I am concerned,
the primary objective of setting up a CSO is to develop selling competencies. Once that is
done, it is only natural that the CSO will become redundant…”
“And that,” concluded Marwah, “is a clear sign of success, not failure. In any case, selling
skills are generic while marketing is product-specific.”
Prabhakar was clearly the man in the hot seat. Having overcome his reluctance, he seemed
to be looking forward to his new assignment. “We should ensure that our salespeople
understand the business processes related to selling. We evaluate sales-people on the
basis of their annual billings, but we should start considering process-oriented factors,
like the time spent on calling on new customers, or the proportion of enquiries that lead
to a sale, too…”
“That is just why we should move out of our functional structure,” said Ashwin Kumar.
“By ensuring the right focus, a CSO contributes to the process of building critical mass and
developing competencies…”
“But this is exactly where you will run into a trade-off between costs and volumes,”
objected Agrawal. “I have seen this happen with one of your competitors, Indian Machine
Tools, which used to be the market-leader in the power tools segment. Soon after it
adopted the SBU structure in 1993, its costs spiraled out of control…”
Mullick chuckled. “No, I am not laughing at you,” he told Agrawal. “Just before I came to
India, I was approached by an American medical supplies-manufacturer, which wanted to
create the same structure as you are planning. And one of their managers raised the same
objection that you have just raised. Companies are the same everywhere.”

“Anyway,” he continued, “companies that willingly adopt change have to learn to look
beyond the short-term implications. It is imperative that you understand which sales-

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