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Summer 2012
Master of Business Administration - MBA Semester 3
Mk0010 – Sales, Distribution and Supply Chain Management- 4
Credits
Book ID: B1220
Assignment Set- 1 (60 Marks)
Note: Each question carries 10 Marks. Answer
all the questions.
Q.1 Explain any two types of sales
organisation structures.
Answer
: Different types of Sales Organization
1) Organizing the Sales Force
:An effective sales
force is a powerful asset for any company. Doctors & physicians in United
States have consistently ranked Pfizer’s sales force as one of the best in the pharmaceutical
industry. As a result, when Parke-Davis launched its blockbuster
cholesterol-lowering drug, Lipitor, it entered into an alliance in which
Pfizer’s sales force helped selling the drug to physicians throughout the
United States. A company’s management process is fundamentally affected by the
firm’s overall business strategy and its strategy for accessing its target
markets. The relationship between business strategies, a firm’s marketing
strategy, and a firm’s strategic sales force program is discussed in this unit.
Sales force organization is primarily a function of properly sizing the sales
organization to assure that customers and prospects receive appropriate
coverage, company products get proper representation, and the sales force is
stretched but not overworked. The appropriate planning of the sales force will
also depend on the size of the opportunity a firm faces and its expected sales
level.
2)Roles & Structure of the Sales Force:
To be successful and
produce profitable results, the sales force must implement a firm’s business
strategy and market access strategy. In other words, strategic plans are
implemented through the activities and behaviours of the sales force. Key sales
force behaviours include calling on certain types of customers and prospects,
managing customer relationships and creating value for individual customers.
The role of the sales force in implementing a firm’s market access strategy is
very important. To meet customer needs efficiently and effectively and to sell
the firm’s products and services, a sales force must be well organized. Sales
force structure decisions influence how customers seethe firm because sales
force structure will affect the selling skills and knowledge level required of
salespeople. In turn, sales management activities such as compensation,
recruitment, training, and evaluation are affected.
3) Building Sales Competencies:
Sales managers are
responsible for hiring salespeople with the appropriate skills and backgrounds
to implement the sales strategy. Good sources must be found for new hires, and
those who are weak in these areas must be carefully screened out. In addition
to hiring qualified people, salespeople’s competencies are usually developed
through training before they are sent into the field. Sales managers are
responsible for making sure that training is completed, and they often conduct
some of the classes. Most initial training programs are designed to familiarize
salespeople with the company’s products, services, and operating procedures,
with some time devoted to development of selling skills. Because sales training
is expensive, the sales manager is responsible for selecting the most
cost-effective methods, location, and materials.1
4)Leading the Sales Force:
Effective sales
managers know how to supervise and lead their salespeople. Sales managers
provide leadership by inspiring people to grow and develop professionally,
while achieving the revenue goals of the firm. Good leaders provide models of behaviour
for employees to emulate, often developing strong mutual trust
and rapport with subordinates. Leadership styles vary, but effective leaders
are adept at initiating structure – that is, organizing and motivating employees,
setting goals, enforcing rules, and defining expectations. In addition to
leading the sales force in business results, sales managers are also expected
to lead by example in encouraging ethicalbehavior within the sales force.
Salespeople are continually confronted with ethical dilemmas. Sales managers
use a variety of tools in their efforts to motivate salespeople to work more
efficiently and effectively.1
5)Goal
directed effort:
There are many techniques that have proved to
be effective motivators, including sales meetings, quotas, sales contests, and
recognition awards. The most powerful motivator for salespeople is often a
well-designed compensation package. Money is an important consideration for attracting
and motivating people to work hard. A key task for sales managers is to devise
an effective mix of salary, bonuses, commissions, expenses, and benefits
without putting the firm’s profitability in jeopardy.
6) Evaluate the performance of the
sales force:
The final step in the sales management process
is to evaluate the performance of the sales force and develop the skills of
their people. This involves analyzing sales data by account, territory, and
product line breakdowns. It also means reviewing selling costs and measuring
the impact of sales force activities on profits.
Q.2 Explain different sales strategies.
Q.6 Assume yourself to be the sales manager of
a car showroom. How will you ensure that the selection procedure is smooth and
you select right candidates for the job?
Master of Business Administration - MBA Semester 3
Mk0010 – Sales, Distribution and Supply Chain Management- 4
Credits
Book ID: B1220
Assignment Set- 2 (60 Marks)
Note: Each question carries 10 Marks. Answer
all the questions.
Q.1 What do you mean by physical distribution
management? Describe various components of it.
Answer
: This has been defined
as the study and evaluation of the relative profitability or costs of different
marketing operations in terms of customers marketing units, commodities,
territories or services.
As you read earlier in the lesson physical distribution cost in the third largest component in the total cost of business operations. Hence there is good scope for cost reduction in this area as it has not received the attention due to it till recent years.
One feature of distribution costs distinguishing them from other functional costs is that they have to be looked upon as a unit. Indiscriminate cost reduction in any one of the individual cost elements, such as inventory maintenance, warehousing, transportation or clerical services, can have a disastrous effect on the efficiency of the system as a whole e.g., if we cut inventories it will save capital investment and the costs of supplying capital and it may save some expenses in storage, taxes and insurance. On the other hand a cut in inventory levels may seriously affect reliability of the delivery service to customers. As Mr. John F Magee puts it, it saves money but destroys competitive position.
Similarly a cut in transportation costs will result in lack of flexibility and responsiveness to market changes more inventories at more stock points will need more investment and will increase the risk of obsolescence.
Again refusal to allow any cost increase may be equal damaging. It may mean wiping out an opportunity for improving the efficiency of the distribution system as a whole. The use of high speed data processing and communications may increase the cost of distribution. But they will cut down the delays in feeding information back to production and control the lags in the movement of materials into the distribution system in response to customer demand. Thus they may actually cut total distribution costs.
As you read earlier in the lesson physical distribution cost in the third largest component in the total cost of business operations. Hence there is good scope for cost reduction in this area as it has not received the attention due to it till recent years.
One feature of distribution costs distinguishing them from other functional costs is that they have to be looked upon as a unit. Indiscriminate cost reduction in any one of the individual cost elements, such as inventory maintenance, warehousing, transportation or clerical services, can have a disastrous effect on the efficiency of the system as a whole e.g., if we cut inventories it will save capital investment and the costs of supplying capital and it may save some expenses in storage, taxes and insurance. On the other hand a cut in inventory levels may seriously affect reliability of the delivery service to customers. As Mr. John F Magee puts it, it saves money but destroys competitive position.
Similarly a cut in transportation costs will result in lack of flexibility and responsiveness to market changes more inventories at more stock points will need more investment and will increase the risk of obsolescence.
Again refusal to allow any cost increase may be equal damaging. It may mean wiping out an opportunity for improving the efficiency of the distribution system as a whole. The use of high speed data processing and communications may increase the cost of distribution. But they will cut down the delays in feeding information back to production and control the lags in the movement of materials into the distribution system in response to customer demand. Thus they may actually cut total distribution costs.
Distribution Costs
The following is meant to be a tentative list of various costs of distribution. They are not exhaustive.
1. Costs of transportation by common carrier, contract carrier or firms own transport equipment.
2. Warehousing costs in public or private facilities
3. Order handling costs
4. Packing costs
5. Inventory costs of
a) Insurance
b) Taxes
c) Handling
d) Obsolescence
e) Capital invested
Ever since marketing managers began to express concern for the distribution function the total cost approach borrowed from logistics and operations research, many firms have achieved tremendous improvement in their performance and profitability.
Even before we can analyze the distribution costs by evolving proper criteria we face a major difficulty. Many concerns do not collect these costs under the separate heading of distribution costs. In actual practice these costs are lost in unlikely cost centres or manipulated to satisfy departmental or individual requirement. In other worth managements, as a matter of policy may not identify distribution costs. In a recent investigation into distribution cost in the U.K. the finding was that most firms contracted were unable to produce a composite breakdown of their distribution costs. In the final analysis the identified distribution costs varied from 3% to 42% of sales.
In some industries especially perishable goods and fashion goods industries distribution costs are critical and may represent the major trading cost.
The following is meant to be a tentative list of various costs of distribution. They are not exhaustive.
1. Costs of transportation by common carrier, contract carrier or firms own transport equipment.
2. Warehousing costs in public or private facilities
3. Order handling costs
4. Packing costs
5. Inventory costs of
a) Insurance
b) Taxes
c) Handling
d) Obsolescence
e) Capital invested
Ever since marketing managers began to express concern for the distribution function the total cost approach borrowed from logistics and operations research, many firms have achieved tremendous improvement in their performance and profitability.
Even before we can analyze the distribution costs by evolving proper criteria we face a major difficulty. Many concerns do not collect these costs under the separate heading of distribution costs. In actual practice these costs are lost in unlikely cost centres or manipulated to satisfy departmental or individual requirement. In other worth managements, as a matter of policy may not identify distribution costs. In a recent investigation into distribution cost in the U.K. the finding was that most firms contracted were unable to produce a composite breakdown of their distribution costs. In the final analysis the identified distribution costs varied from 3% to 42% of sales.
In some industries especially perishable goods and fashion goods industries distribution costs are critical and may represent the major trading cost.
Major Stumbling
blocks is distribution cost analysis
1. Problems is the attempt to break down total distribution costs into specific components of cost.
2. Difficulties in apportioning these costs to different cost centres of cost units. The common bases adopted are product groups, market segments, geographic location, etc or a combination of these.
3. Problems in the measurement of actual cost associated with a particular distribution activity and in the estimation of future cost in the light of a distribution changing environment.
It is generally agreed that the functions of production or manufacturing have been terminated when a product has been placed in a saleable state and that the distribution function has begun.
Distribution costs can broadly classified and accounted for it terms of sales departments, territories, salesmen, lines of products, sales and production orders and customers, or a combination of these.
1. Problems is the attempt to break down total distribution costs into specific components of cost.
2. Difficulties in apportioning these costs to different cost centres of cost units. The common bases adopted are product groups, market segments, geographic location, etc or a combination of these.
3. Problems in the measurement of actual cost associated with a particular distribution activity and in the estimation of future cost in the light of a distribution changing environment.
It is generally agreed that the functions of production or manufacturing have been terminated when a product has been placed in a saleable state and that the distribution function has begun.
Distribution costs can broadly classified and accounted for it terms of sales departments, territories, salesmen, lines of products, sales and production orders and customers, or a combination of these.
To provide adequate
detail the accounting system provides the following records
1. Controlling accounts in the general Ledger to reflect the total cost of sales division and administrative division.
2. A subsidiary ledger supporting each of the divisional controlling accounts or recording the objects of selling and administrative expenses such as salaries, supplies, taxes, insurance, deprecation etc.
3. Proper procedure for allocating the items of distribution costs among territories products salesman or other desired breakdowns.
4. Budgets and standards for distribution costs.
1. Controlling accounts in the general Ledger to reflect the total cost of sales division and administrative division.
2. A subsidiary ledger supporting each of the divisional controlling accounts or recording the objects of selling and administrative expenses such as salaries, supplies, taxes, insurance, deprecation etc.
3. Proper procedure for allocating the items of distribution costs among territories products salesman or other desired breakdowns.
4. Budgets and standards for distribution costs.
The Objectives of the
accounting system described above are as follows
1. Classification and accounting for distribution costs by channels of distribution, departments, territories, salesman, orders, lines of products and customers comparative statements being submitted to management periodically.
2. Preparation and user of standards for distribution functions to control costs by delegating responsibility, establishing measures of efficiency providing incentives to personnel and supplying predetermined costs as an aid in budget preparation and formulation of pricing policies.
3. Analysis of distribution costs as a guide to management in making current business decisions and setting future policies.
1. Classification and accounting for distribution costs by channels of distribution, departments, territories, salesman, orders, lines of products and customers comparative statements being submitted to management periodically.
2. Preparation and user of standards for distribution functions to control costs by delegating responsibility, establishing measures of efficiency providing incentives to personnel and supplying predetermined costs as an aid in budget preparation and formulation of pricing policies.
3. Analysis of distribution costs as a guide to management in making current business decisions and setting future policies.
Q.2 What are the various types of distribution
channels?
Q.3 Describe the various types of retailers.
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