Gem Soaps Case Study Analysis

 

A Case Study Analysis On

Gem Soaps and Detergents Ltd.

Submitted to Prof. R.Gadgil

By Md Shahnawaz Akhtar (2010117 (2010117)) Kushal Dugar (2010285) Neha Agarwal (2010131) Karan Ratti kapoor (2010091) Garvit Bhardwaj (2010275 (2010275))

 

 

Introduction  Gem Soaps and Detergents Ltd is a 30 year old major player in the industry. Some of the soap and detergent brands are market leaders in specific geographies. It has got two detergent brands and six soap brands. A major channel conflict has to be dealt with at the time when the company is planning to foray into shampoos with a very good and promising product. In a particular city, where the company is doing good business, a conflict in the sales channel has cropped up between two major distributors A and B. Both of them are valuable distributors for the company for the business volume they handle for the company. They have almost equal sales revenues every month. The distributors are hampering each others’ profitability by their actions and proper solution rom company’s side is required now due to the destructive nature of the conflict.  f rom

The ASM, Murli is getting complaints from both the sides. Now he has to take a concrete step to minimize the conflict and make the launch of the new product range from the company successful. Following are some proposed steps by the company to minimize the conflict: Most stakeholders in the GSDL were of the view that GSDL should carve out a new sales territory out of the existing one and adding the new missed out and untapped localities. This would achieve two objectives; firstly, GSDL would get a better market coverage; secondly, this would teach A & B a lesson and also would reduce dependence on these two distributors. GSDL did implement the above mentioned strategy, strategy, when it launched it new shampoo. It appointed a new distributor C exclusively for distribution of shampoo. This was fiercely opposed by A and B and they wanted wanted to distribute shampoo shampoo as well. Their argument was based based on the fact that they were the only two distributors that build the GSDL, entirely undermining the fact that GSDL’s marketing team had put efforts in marketing the products. 

GSDL wanted to appoint C as shampoo distributor for entire city but C was not big enough to handle the operations. Also, C wanted to distribute GSDL’s other products as well. So taking into consideration all the facts, GSDL carved out a new territory for C out of A & B’s territories

along with new market and gave the shampoo distribution rights to A and B along with C. C also got the right to distribute GSDL’s other products. A & B has given their word that they will not sell in each other territories.

 

 

Perceived Risks:  

The new shampoo brands may not get the desired width and depth of distribution from any of the distributors.

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Selling in each others’ territory may not stop. A and B may work together to discourage C

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A,B or C could start a distribution company in some other name to distribute competitors’ products. 

Major issues 1.Both the distributors, A and B are located in the main mandi area of the town. The area comes under the beat plan of A. The area being a central market area, retailers and wholesalers from B’s territory also come there. So A started giving them extra discounts.  This meant B’s loss of business volumes and henc e less overall margin. B started doing the same by calling A’s customers and offering additional discounts.

This resulted in a Horizontal level channel conflict over border issues. This problem will prevail even after the introduction of C. 2.Both of them started offering less credit to the weaker markets in their own beat plans and extending more to the other distributor’s customers. It was creating problem for both. 

This scenario definitely benefitted the retailers and wholesalers but resulted in depletion of  profit margins for A and B. Also it started weakening their long term market hold due to neglected distribution norms. 3.As there was less focus on the width of distribution now, the other players pl ayers in the market started taking advantage of it by increasing their market share by catering to the badly serviced beats of A and B. ROI, which was supposed to be as high as 50% as per GSDL records, was going down. 4. Both A and B are established distributors in the town. to wn. They have links with the retailers and wholesalers. They might still use them to discourage C.

 

 

Future of GSDL in town First of all, we need to understand that some conflict will always be there. It cannot be completely eliminated. We have to make sure that the conflict doesn’t become destructive.

Lack of any channel conflict indicates gap in market coverage. We can only work towards minimizing the conflict. Possible ways to minimize the channel conflict in the future:

CASE-1 One major way of dealing with the situation can be dividing the product portfolio into three divisions. It can be

  Soaps   Detergents and   Shampoos

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This has to be checked for the feasibility in the following ways:

  GSDL has to see if the newly made divisions for A and B are almost same in terms of 

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revenue as their old turnover so as to minimize the resistance to change from their side. They have been loyal distributors of the company. So they should not suffer loss.

  The geographical expanse of the town has to be covered by all of the three distributors

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now. So the feasibility has to be checked in terms of infrastructure, distribution distribution expenses, reshuffled beat plans etc If the company manages to apply the solution as per case1, it will have following benefits:  

A and B will not have conflicts for acquiring customers. customers. Both can cater to same set of  customers, but for different products altogether.

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The internal war of price will come to an end.

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Both will have sufficient business volumes to operate with, assuming that the divisions are made in such a way.

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They won’t have much problem with C. The reason being, C will have to work from

scratch to develop the market for shampoos. If a new area is carved out for C with the old products, old distributors will feel bad because they have worked to make these products cash cows for the company.

 

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As C’s only focus product will be shampoos, it will put all its efforts to establish the same

for future. It will help the company in the long l ong run for shampoo business.

Case 2 If operating in three product divisions is not found to be feasible, we can take following steps to minimize the conflict in the future:

For the Distribu Distributors tors Market development programs: There should be quarterly or half yearly assessment of  distribution practices, market penetration in terms of width and depth of distribution, customer service and feedback, and ethical distribution. There should be monetary rewards linked to these programs to motivate them to stick to campany’s norms of distribution and service levels in the market. These programs can act as Super Ordinate Goals for all the distributors. If the channel members can be motivated to perceive customer satisfaction satisfaction as the ultimate ulti mate goal of all members in the channel and this in turn leading to profit maximization of all concerned, then much of the conflict can be resolved.  resolved.  

Expenses reimbursements: The companies generally reimburse the expenses incurred in schemes and discount offered in the market in two ways- in the invoicing itself or post sales. To monitor the use of schemes, the company should go for post sales reimbursements. reimbursements. In this case the executives first examine the pattern of discounts offered. This will act as a control mechanism.

This will keep a check on practices like giving heavy discounts to a few wholesalers and passing no benefits to the small retailers, hence compromising on the retail distribution. Moreover, if the company uses some advanced billing and stock control software like Unify(HUL)) or Sify Forum(ITC), it is easy for Unify(HUL f or the company personnel to generate reports on the same.

For Retailers and wholesalers Relationship building programs: The company should run relationship building programs with major retailers and wholesalers to get assured business over a period of time. This can be done, for example, if there are rewards for taking a certain quantity of products over a period of say, three months. These rewards can be monetary or non monetary like consumer durables. This

 

will automatically do one thing for the company, the rewards will be passed on to the customers only through the distributors who are supposed supposed to cater them. If they take it from another distributor, off the record, they will not get the long term rewards. Moreover, dealers’

performance will also be judged on the basis of success of these plans. Defecting will be a loss for them.

For salesmen Incentives attached to goals: The incentives should be properly linked to  Regularity of billing at a particular outlet in their respective beats.   Proper placement of products in the outlets   Inclusion of new accounts in the assigned area

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No incentives should be given if a salesman is found to be selling to other retailers or wholesalers.