Ohmeda’s current distribution system and sales organization is not well suited to implement Rountree’s new business strategy. The new corporate strategy calls for growth in high technology product lines and the current dealership channel is more suited to goods that require less education and information. In summary, the market trends combined with our changing corporate strategy will require Ohmeda to change the distribution channel and structure of the sales force. In the short run, this will require a transition period and an investment to reorganize Ohmeda’s sales force for long term growth. In the long run, we believe this consolidating market will be heavily specialist orientated. Due to these facts we recommend a dedicated …show more content…
This is where the money is and the growth is. Their consolidation will in essence allow us to lessen the breadth of our dealer coverage and allow us to focus our sales effort in this high growth area.
Restructuring Recommendation and Evaluation
In the short term we calculate that the change to a specialist model will likely result in upfront costs in the form of training and hiring new reps. This will be a transition period that will ultimately lead to our long term vision: Ohmeda’s sales specialist selling to medical specialist in the high technology segment.
We are not recommending that Ohmeda discontinue relationships with all dealers. We recommend that Ohmeda should keep some dealers to operate in the low technology suction market. This is a $24M market and we have a 60% market share. This $14.3M in sales represents 15% of our 1985 medical equipment sales. We project this to grow 3.27% per year. This market appears to be a cash cow segment where having dealer intensity is important. Over the past few years, a competing company focused on price has made some in-roads in this market and Ohmeda fears that terminating the dealers will harm this segment. Given that this is a price sensitive, low technology market we think the dealer network will be able to help fend off the competitor. History has proven this to be the case.
To compare
With the shift in the end customers demographics, it would be wise for Stihl to consider alternative strategies to supplement their current reliance on independent specialty dealers. A company must always address who the end customer is, when you forget or choose to ignore who the customer is, then you tend to not be able to reach them. The marketing mix (product, price, placement, and promotion) has to be in tune with who the end customer is and what their economic situation might be. The case breaks down the changes or shift in demographics in the form of predictables and unpredictibles.
Economies of scale: Timken has started consolidating operations into global business units to reduce costs. They have expected annual savings of $80 million by the end of 2007 after Torrington’s acquisition.(case) As large size is usually expected to yield production economies if manufacturing operations can be amalgamated, marketing economies if similar distribution channels can be utilised, and financial economies if size confers access of capital markets on more favourable terms.(book).Moreover, by reducing the combined sales forces, Timken expected to realize significant purchasing synergies by giving much large volume to a reduced list of suppliers in exchange for price reductions. One analyst estimated that those
By reducing total number of dealerships, it increases the reliance on the remaining dealers. Some independent dealers could get nervous that they will be cut next and some could execute their 90 day termination clause.
The firm also has several branches across different states. This offers a deliberate effort regarding location since the strategy behind this is placing and concentrating the outlets in populations where middle-income households reside. This concept helps to cut implicit transaction price regarding distance and time.
Selection of distribution locations that can give a suitable place for customers to purchase company products is a very important way to enhance the distribution advantage. Reliable delivery timing is another point that Siemens can build on to create the needed differentiation through distribution. As Siemens depend on partners in many locations all over the world to perform the task of distributing its products, providing the needed training and support for those partners can help to enhance the distribution differentiation over competitors.
Potential channels included: Heavy supply houses and heavy equipment distributors - provided access to a wide market but also absorbed additional profit margins. More importantly, they were unlikely to hold the enthusiasm needed to actively promote CMI’s pads and educate the market. Manufacturer’s reps – were commission-based transaction-driven salespeople. Reps held strong industry connections and offered access to a wide market without increasing labor costs. On the other hand they held low brand loyalty and could be discouraged by complex time consuming transactions requiring market education. CMI was also considering In-house direct sales force – they would have offered strong brand loyalty, product knowledge and professionalism but also take longer to gain market coverage and demand large expenditure on labor and training. CMI eventually decided to sign manufacturing reps who sold their pads to various distributors and supply houses.
activities. The industry is already vertically integrated to some extent. They also deal with similar suppliers
After several failed attempt of internal diversification, they realized the lack of knowledge of their management about businesses outside the automotive area. so acquisition brought them quick fix where it brought already knowledgeable people in respective areas in their payroll.
The company’s objective is to enable business and operational success through integrated world class solutions and development by utilizing the organizational restructure of the Engineering and R&D departments. Having a centralized organization with a decentralized engineering department makes meeting the company objective quite difficult. Also, if the company’s objective does not align with the department specific objectives Campbell Soup is setting their selves up for failure. Sales and Marketing are concerned with increasing market share and gaining profit, while the Plants are worried about operational performance, and Engineering is focused on individual parts of the system. In order to have a successful company
Hence, manufacturing department should not interfere in the distribution department, and the latter should be experienced in distribution of products like Omnivue to the end customers.
In order to execute successfully on his growth plan, Rountree would need to re-assess Ohmeda’s marketing channel strategy. In 1985, 43% of equipment sales ($41M out of $95M) were booked through dealers. Dealers provided increased coverage, but also carried significant
The company’s sales force is comprised of technically trained personnel that custom tailor solutions to fit a customer’s needs. By selling directly through formulators and distributors though, the company has made it difficult to develop their own identity. These outlets privately brand solutions derived from the Rohm and Haas products so the Rohm and Haas name is not as known in the industry as it could be. New products now packaged with the Rohm and Haas name appear no different to some
Toyota is one of the leading vehicle manufactures in the world and has faced some challenges throughout the years. This paper will discuss a key issue that Toyota has faced and how they can utilize communication software to improve the business relationship between supplier and Toyota.
Companies go across borders in search of new market opportunities and in turn, have to focus on increased productivity as competition intensifies. Organization structure and job design are carefully selected by managers to ensure that work are coordinated well with less hurdles to achieve the established goals in the planning process (Wren, 2001). In the Autodesk’s Sales department, the structure is similar to a family tree where the Sales Managers coordinates the works of the Resellers and report to the Sales Director who is in-charge of the department.
Kirkham’s strategy was to integrate the different systems of each division into an “all-inclusive” product and also to involve all the divisions together with regards to product development, instead of letting each division be responsible for just products within that division. Mr. Donaldson chose Kathleen Quinn, Vice-President of R&D, to be responsible for coordinating the development of new products. This proved to be quite a challenging task considering that each managing director (of each division) still retained responsibility for the turnover and profitability of their respective decisions and also for the strategies to achieve the goals of their divisions. In addition, regardless of the trend of their customers in purchasing integrated systems, the majority of each division’s turnover came from the sale of stand-alone products.