Evaluating the Effectiveness of Ace Distributors Salespeople - Example

Evaluating the Effectiveness of Ace Distributors’ Salespeople Table of Contents Executive summary 3 2. Introduction 7 3. Report body 7 3 Company profile 7 3.2 Situation analysis 9 3.3 Analysis of the industry 10 3.4 Market analysis of the firm 12 4.1 Conclusion 16 5.1 Recommendations 16 17 References 18 Appendices 20 1. Executive summary The research report endeavours to produce an analysis of the reasons that lead to the poor performance in the distribution operation of Ace Manufacturing. In order to create a logical recommendation and suggestion to fix the distribution channel problem, the research report follows a logical analysis. The analysis starts with a brief history of the Ace Manufacturing to set the background. The next step of analysis includes analysis of the present situation, analysis of the industry and market analysis of the firm. Based on the understanding deduced from the various kind of analysis, recommendations are made in light of the internal resource of the firm. The distribution channel is traced to the poor relationship between the dealers and the distributors. Suggestions are made on how to fix the relationship between these two entities based on the availability of the internal resources of Ace Manufacturing. Letter of Authorization Central Research Institute 1 July 2013 I hereby permit the bearer Mr/ Ms. __________________ to identify the issues related to the distribution channel of Ace Manufacturing so that the problem areas in the logistics and supply chain can be identified and specific solutions can be suggested. I also authorize the senior research associates of your company to access the information that would be required in the process of this identification of the problem. I am taking the responsibility of the terms and conditions that are stated in relation to this project. However, the time and cost constraints will have to be considered by you while conducting the research. Sincerely, Mr. Eugene E. Orsag, Vice President of Marketing for Ace Manufacturing Letter of Transmittal 1/July/2013 Mr. / Ms. XXXXXXX Designation XXXXXX Company XXXXXXX Address XXXXXXX Dear Sir, The survey report derived from the interview of the appliance dealer and the competitors of your company has been presented below. As explained, our interview survey has identified the requirement for escalating the competitive advantage. In the report, there are various features related to management and production, which supports in recommendation. A detailed document will be prepared so that the recommendations can be effectively cited for the report. It can be ensured that these recommendations would surely escalate the competitive advantage and edge of the company. We extend our gratitude towards the management of your company for permitting us to assess the information of your company. If any requirement of interpretation arises, do let us know and we will be there to assist you. Sincerely yours, Senior Research Associate Outline 1. Executive Summary 2. Introduction 3. Report Body 3.1 Company Profile 3.2 Situational Analysis 3.3 Analysis of the Industry 3.4 Market Analysis of the firm 4. Conclusion 5. Recommendations 6. References 7. Appendices 2. Introduction The objective of the report is to indicate the various factors that led to the poor performance of Ace Manufacturing in the television market. Despite having an efficient supply channel the company is plagued with poor relationship between the dealers and distributors (Bagchi 2006). Due to the same reason the company is not able to enjoy the full potential of the distribution channel. The report gathers the facts that lead to the construction of valid suggestions and recommendations that can be used with the current resources, so that the relationship between the dealers and distributors can be improved. 3. Report body 3. 1 Company profile History Ace Manufacturing Company has enjoyed the number one position in terms of brand popularity in the past few years. The high quality of the television sets compounded with a very competitive price has catapulted Ace Manufacturing Company as the number one brand among the customers. The good quality and the affordable price are not the only factors that added to the popularity of the brand1. The relationship between Ace and the distributors was one of the key factors that also added to its popularity. Apart from that, the relationship between the distributors and the dealers played a significant role in enabling the sales force put in the extra effort which resulted in increased sales and good customer service2. Mission, vision and goals The mission of Ace Manufacturing is to bring the world into the living Room. At the same time the company wants to achieve a market share of 55% within the next 6 years, and then divest its existing manufacturing and production line of TV sets into production of refrigerators. Its goals are to achieve 55% of the market share through product diversification and market expansion. Stakeholders The stakeholders of Ace manufacturing can be segregated into internal and external stakeholders. The internal stakeholders are employees, managers, owners/shareholders3.  External stakeholders include customers, suppliers, government as well as distributors. Competition and current market position The television product market is moderately competitive and not highly competitive. Competition is not denoted by the need and ability to decrease the price. Rather the television market is characterised more by product differentiation than by price differentiation4. The competitors strategize on the differentiating features of the product to gain the competitive advantage. Some of the competitive firms are Todd Manufacturing Company, Apco Incorporated, Davis Manufacturing Company and Barr Industries Incorporated. Currently Ace is in the third position in terms of market share and popularity, where as it was in the number one position just a few months back. 3.2 Situation analysis Product line The product line of Ace Manufacturing includes different kind of television sets from varying size and features. There are mainly two categories of products; television sets which can be mounted in the wall and television sets which are set on the tables5. Operation strategy Ace Manufacturing does not employ any third party to carry out the job of manufacturing. The raw materials are sourced from 3 to 4 different types of suppliers. The suppliers are chosen on the basis of the lowest bidder. Once the materials are gathered, and then the process of assembling, attaching and patching are done on site. There are 4 different manufacturing sites where the process of assembly, patching and other process like welding and quality check are carried out6. The manufactured products are stored in the warehouse. The manufactured products are stored for a maximum of 1 month before dispatching them to the distributors end. Market position and market strategy The market position can be understood from the type of distributors Ace Manufacturing deals with. Most of the distributors are exclusive. The exclusive dealers sell the products to designated distributors. The distributors have access to niche markets. This means that the products are positioned to brand conscious customers, who would consider the features of the products more than the price of the products. The marketing strategy followed by Ace Manufacturing is Porters Generic Strategy. Porter’s Generic Strategy enables the Ace manufacturing with the ability to perform product differentiation. Apart from that, this particular strategy also enables Ace Manufacturing to focus on particular group of customers7. These strategies also enable the company to attain cost leadership. Supply chain The supply chain of Ace Manufacturing is mainly built to order model .This kind of model enables Ace Manufacturing to perform a quick manufacturing of products upon receipt of the order8. It is already mentioned that it is a niche market product so the built to order model is the most suitable type of supply chain for Ace Manufacturing. Performance The supply chain and the marketing strategy followed by Ace manufacturing are quite satisfactory except for the distribution of the products. The distribution of the products through the exclusive and selected distributors did not result in the required traction in the sales generation. This is the same reason for which the company is thinking otherwise to change its distribution partners. 3.3 Analysis of the industry External environmental factors The external environmental factors are the threat of the suppliers, the buying power of the customers, the threat of new entrants and the rivalry within the industry, and threat of new entrants 9. Apart from that, the other external factor that has a long term influence on the company is political, economical, legal, environmental, social and technological factors. Position of the competitors Source: (author’s creation) The position of the competitors can be seen from two indicators; market capitalisation and revenue. The market capitalisation of General Electronics is highest among all the competitors, while SNE has the lowest market capitalisation. General Electronics has the highest amount of revenue while PHG has the lowest revenue. New competitors The threats of new competitors are moderate to low. The threat on the national level is moderate, but the threat on the particular market segment to which Ace Manufacturing is serving is very low. Apart from that, the threat on the particular geographies where the company is serving is also high10. Ace Manufacturing is only 5 years old. The new competitors which are vying for the same market segment is only 2 to 3 years old, which indicates that the new competitors still need some time to improve operational efficiency and gain same position as that of Ace Manufacturing. Suppliers and buyers Ace manufacturing uses the local suppliers and the distributors to get the raw materials and distribute the finished goods. Ace Manufacturing is associated with exclusive and selected distributor house. So this puts Ace Manufacturing in a slightly disadvantaged position to enjoy a larger profit margin. The supplier pressure is almost nil in comparison to the distributor pressure11. 3.4 Market analysis of the firm Review of financial report Source: author’s creation The financial report indicates that the share price has shown an increasing trend in the price of the last 5 years. Source: (author’s creation) The gross profit has shows a typical s curve of the business cycle, with alternate troughs and peaks. Gross profit is highest in 2012 and lowest in 2011. In other words, the gross profit depicts an increasing trend. Source: author’s creation The net income decreased most in 2011, while it is highest in year 2010. It has rebounded back slightly in 2012. The decrease in the net income is due to increase in the operational cost and cost if distribution. SWOT analysis Strength Ace Manufacturing has strong supplier base that helps it to source high quality raw materials at cheap rate. It has a strong value chain. The market segment has growth rate of 25% each year. There are very few competitors who serve the same niche market segment. Weakness The weakness is it’s over dependency on the distributors. The distribution channel has too many intermediaries which puts pressure on the profit margin of the company (Mumford 2003). Opportunity The company can decrease the number of intermediaries from 2 to only 1 type. The direct interaction between the dealers and Ace manufacturing will help to decrease the pressure on the profit margin (Pollan 2009). It will also help to improve the customer satisfaction. Threat The inability to decrease the operational cost and the distribution cost is a cause of concern. The high cost of operation and distribution is putting a pressure on the profit margin. This will enable the competitor to gain cost leadership if Ace manufacturing continue to suffer from operational efficiency. Porter’s five force analysis The external environment is analyzed by the help of PESTEL analysis. The political scenario in USA is very stable. Political effects are more pronounced on those companies that rely on outsourcing from other countries12. As Ace Manufacturing sources from the local manufacturers so the there is no possibility of political situation affecting its out-sourcing abilities13. The economic condition in USA has started to bounce back with strong GDP growth and decreased inflation, thus boosting consumer confidence14. This will lead to increase in sales in the niche market since the customers have more disposable income. America has a large number of television viewers15. So television as a product will always have a significant influence on the American families. This is in advantage to Ace Manufacturing VRIN analysis Valuable Ace manufacturing used the advertising effectively in order to position the brand as a niche product. Strong supplier base provides high quality raw materials at a very cheap rate. Rare The manufacturing equipments and the manufacturing sites are ISO 9001:2008 certified, giving Ace Manufacturing the ability produce flawless products thus reducing the chances of customer complaints. Most of the competitive firms use non standardised products. Inimitable The high growth rate of 25% in the niche market segment is not an easily achievable feat at least for the new entrants. Non substitutable Ace Manufacturing has built a relationship of trust and dependability with the distributor which leads to value addition. Such kind of relationship is built not in a few days but in a matter of two years16. Dealers’ performance in Dallas, Chicago and New York vis-à-vis Ace Manufacturing and its competitors   Ace Manufacturing Tod Manufacturing Company Apco Incorporated Davis Manufacturing Company Barr Industries Dallas Average Average Fair Excellent Average Chicago Poor Average Average Excellent Poor New York Excellent Average Poor Average Poor Source: (author’s creation) The performances are measured in terms of sales generation. As in indicative, the dealers of Ace Manufacturing have performed from excellent to poor level. In other words there is no consistency in the performance level. Dealers’ experience with distributors’ salespersons from all five brands   Ace Manufacturing Tod Manufacturing Company Apco Incorporated Davis Manufacturing Company Barr Industries Dealers experience Poor Average Fair Excellent Poor Source: (author’s creation) Problem identification The comparison of the dealer’s performance is wide ranging from excellent to poor. The summation of the performance level will produce an average score. Although the poor experience of dealer with the distributors indicates that the two do not share healthy and effective business relationship. So the problem is in the relationship between the dealers and the distributors. 4.1 Conclusion The dealers are able to generate revenue which is average when compared with the revenue generated for other competitive firms. The full potential of the dealers can be realized only if the relationship between the dealers and the distributors are made effective and healthy. For the same reason despite spending heavily in optimizing the distribution channel the sales volume is not picking up and so is the sales revenue. 5.1 Recommendations The supply chain can be optimized by including suppliers who are able to supply better quality raw materials at a lower price. This will at least enable Ace Manufacturing to compensate for the decreasing profit margin for the time being. If the profit margin for the distributors is increased then the distributors will increase the supply of products to the dealers. The supply and distribution channel will be optimized using the Total Quality Management Technique. In order to make sure that the new strategies have led to the improvement of the supply and distribution channel, a quarterly review will be carried out of the suppliers and distributors as well as the customers. References Bagchi, Alaknanda. 2006. “Towards A Theory of Legal Reform.” European Economic Review 40 (2): 559-567. Dessler, Gary. 2011. Management of Leadership and Motivation. New Jersey: Prentice-Hall. Faris, Mar. 2000. “Hostility In Takeovers: In the Eyes of the Beholder.” Journal of Finance 123 (4): 142. Funder, David. 2008. The Personality Puzzle. New York: Norton & Company. Hackman, Jackson. 2010. “Motivation through the design of work: Test of a theory.” Organizational Behavior and Human Performance 1 (6): 250-279. Haire, Moore. 2002. “Cultural patterns in the role of the manager.” Industrial Relations 2 (2): 95-117. Harris, Robert. 2003. “Ethics, Market and Governance Failure and Globalization.” Wall Street Journal 231 (2): 145-170. House, Robert. 2006. “Path-Goal Theory of Leadership.” Journal of Contemporary Business 7 (4):12-23.Print. Johns, Gary. 2010. Theories of Work Motivation. Michigan, Harper Collins: College Publishers. Maslow, Abraham. 2007. Motivation and Personality. New York: Harper & Row. McClelland, Dickinson. 2000. Human Motivation. Illionis: Foresman. Mumford, Lewis. 2003. “European Takeover Regulation.” Economic Policy 43 (7): 835-923. Pollan, Michael. 2009. Business Ethics East vs. West: Myths And Realities, New York: Open University. Vroom, Jago. 2008. The New Leadership: Managing Participation in Organizations. London: Prentice-Hall. Appendices Table1 showing comparative performance of Ace and its competitors Table 57, Page 365 Table2 showing dealers’ experience with companies’ salespersons Table 57, Page 365 Table3 illustrating summary percentage of factors that influence dealers’ operation and performance Table 57, Page 365 Read More