Parkin Laboratories - Sales Target Dilemma

 

PARKIN LABORATORIES: SALES TARGET DILEMMA  

 

Indian Pharma Industry

CASE OVERVIEW Parkin Laboratories

CAGR of more than 15% over the past 5 years.

Current sells of $11 billion.

Launched in 1987 with a capital of $1 million and a team of 10 employees. Third largest across world by volume and fourteenth largest by value. An innovative generic-pharmaceutical company that provided combination of drugs to medical community.

Expected to reach $15.5 billion in 2014 and $74 billions of sales by 2020.

Major product- Antibiotic Cefocin, Dicoron, and Diclofenac. Ranked among the top 50 fastest growing pharmaceutical companies in Indian market. Aiming at $500 million revenue target in 2012, employee base increased to 800 from 10.

Driving Factors - low drug penetration, rising middle class, increased spending on health care infra, increasing acceptance of medical insurance, changing demographic patterns, and rise in chronic lifestyle related disease.

Business model - selling large volume of lower priced medicines, to take advantage of both affordability and popularity.

Major competitors- Ranbaxy, Ranbaxy, Cipla, Novartis, Mankind, and Lupin. Comprehensive network of 35 carrying and forwarding agents, and 2500 stockiest.

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Parkin’s Management (in 2012) - CEO was Mr. B.P Chaudhary who believed that strong sales process produced solid sales growth and accurate sales forecasting. According to him, Mr. Manoj Kumar who was general manager needed to work effectively with his team to discover successful sales strategies in their respective zones. Sales Organization - Key reasons behind the model was to provide better customer focus and targeting, enhance call efficiencies, develop and increase responsibilities for newer business areas. The company had 600MRs. New MRs had to train for 1 month twice a year, and were exposed to one-week refresher course. DSMs were responsible for MRs M Rs on field training, three days a month.

Hierarchy of sales organization -

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Sales process - Pharmace Pharmaceutical utical selling requires sound product knowledge and good selling skills. Missionary selling style was the main style used. MR’ MR’ss role was to convince the doctors about the effectiveness of the drug. Parkin used sales force automation (SFA), developed by Oracle CRM, to monitor sales activities. MR’s worked independently independently and preferred to self-manage their territories. Their sales result was monitored by “sales audit” system.

Sales Target - Sales forecast. targetast. were decided in everyfollowed November for following year. Factor consideredsales, trend,  product, and market forec Parkin Laboratory follow ed Quality-Target-Quantity Quality-T arget-Quantity technique. technique. Sales previous team was wasyear needed to market dedicate 50%launch of timeoftonew “A” class, 30% time to “B” class, and 20% time to “C” class. MRs target for a month- minimum of 220 calls to doctors and 88 calls to retailers.

Distribution Structure - Parkin Laboratories had network of 35 CFAs, and 2500 stockists. A typical structure for Pharma Company in India -

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The Dilemma: The company has shown good growth of 16% in 2012, competition is intensifying. The company is planning to launch l aunch a new productanti-diabetic drug in the time when sales team is striving hard to meet sales target. The dilemma in front of company’s management management is whether to re-evaluate the existing target for the last quarter,, or to support quarter s upport their sales team with marketing  blitz and promotions to help them to achieve target. target. Company is also wondering whether this is the right time to launch new product. 5

 

1. The Sales Performance Review The Sales team adopted innovative models from time to time

The table below shows a glimpse of the sales performance Zone

2012 T Taarget in US $ Million

% Target Growth over 2011

All the sales processes were aligned with company’s policies MRs were provided extensive training under DSMs

Achievement in First three Quarters (US $ Million)

% Achievement Growth in First three Quarters

Their performances were reviewed Use of a dedicated CRM software (Sales Force Automation) to monitor field activities The growth from previous year (2011) was only of 10.6% (target was 20%)

North

118

24.2

77

11.6

East

102

21.4

69

7.8

South

114

16.3

83

9.2

West

98

25.6

65

14.0

High targets set for East and West region whereas the central region could perform better than the target

Lack of strategic support to MRs from different geographies in helping them achieve targets Main competitors were aiming at 28 to 30% growth whilst Parkin was still struggling to achieve 20% AGR.

Central   Team

72   504

10.8   20.0

50   344

11.1   10.6

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Have appropriate targets been set for different zones? •

•

Sales targets were decided each November for the following year. Targets were usually based on industry growth, segment growth Targets and the previous year’s sales.

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2. Factors Parkin laboratories need to consider when deciding on its sales targets

Factors that company should consider 

Industry growth Segment growth

Forecasted demand

The previous year’s sales

Human resource performance and skills innovation

Additional sales force Launch of new products

Incentive plan linked to target achievements

Promotional plans

Target and uneven growth Technology and Change resistance

Competition

Factors already considered by the company 8

 

3. No, we don’t think it is appropriate to revise the sales target in the last quarter

Factors

The sales Target for each year is fixed only after doing intensive research and discussions. Also the process invoices discussion with regional managers on forecast for next year. It will send across a wrong message in among the district manager and sales representative who are close to achieving their targets. Competition is intense and competitors are targeting 28 % to 30 % growth which is greater then Parkin's 20 % growth rate.

So, changing the sales target in last quarter even after so much research and discussion is not feasible. Rather than changing the sales Target Target for last quarter they must focus on reviewing the  performance of their sales sales team in the previous quarters quarters and help the sales team team to deliver the expected results and even even exceed them in last last quarter as in case of previous year where where they achieved 101% of their Target Target with 23.5 % growth over previous year year.. 9

 

4. Sales promotion strategies to achieve targets

Currently, the company has to focus on the 2 things: Currently, Rapid Increase in Sales. Achieve a sustainable growth. Initially,, the company was doing well and surviving off its revenue earned through premium Initially  priced products. Damages started with the introduction of drug price control order order policy. policy. Since, it is still recommended r ecommended to the company, company, to not to revise the sales target, the company is left with the following options to achieve the already set sales target: •

•

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Sales force effective program

Business Realignment

Here, the company must focus on increasing the sales force and reaching the optimum level of sales force that is needed to achieve the current sales target.

Since the company faced turbulence in its operations due to an  External Factor  of  of business environment, the company is required to realign

This will also increase the effectiveness of the Sales force as the target set to be achieved will no longer be prolonged.

its business business operations with the changes in the environment.

Company will be benefited by this in achieving economies of scale.

During the realignment of its business operations, company must:  Not change its Business strategies. Change its sales strategy. Allow its sales personnel more freedom. Decentralize (the ones which are utmost required) its authorities and responsibilities amongst the sales team. Reduce operational costs.

Ultimately, the company will start increasing its market share and soon will be efficient enough to produce more, effectively, and set new sales target. 11

 

5. Launching a new product: the advantages and disadvantages Yes, it’s a right time to launch the product. Overcoming the challenges by revising the sales targets and business realignment. As profits is increasing on year-on- year business its viable option to launch the product. Anti-diabetic drug is the largest selling drug in the Indian market. Launching it will give an edge over competitors and will help in gaining market share in highly competitive market.

Advantages

Disadvantages

Increase market share Increase margins

Very high territory development costs High training and re-training costs of sales personnel

Increase in Product Portfolio Increase in sales Edge over competitors

Busy doctors giving less time for sales calls Unclear value of prescription from each doctor in the list of each sales person

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