SDM Project Overview_Group 2_Havells Housewires

Project  Report Title

Sales and Distribution Management - Project Report  – Group 2

Saurabh Agarwal (PGP03.050) Prem Dehariya (PGP03.042) Pallav Mowke (PGP03.038) Gautam Karni (PGP03.027) Amit Kumar (PGP03.008) Mridul Dhiman (PGP03.034) Dinesh Kumar (PGP03.080)

Table of Contents Objective ....................................................................................................................................................... 2 About Havells ................................................................................................................................................ 2 SWOT Analysis............................................................................................................................................... 4 Calculating Company’s Responsiveness on a 4 point Scale .......................................................................... 8 Channel Structure ....................................................................................................................................... 10 Channel Structure of Havells and RR .......................................................................................................... 10 Channel Structure of Anchor (Competitors of Havells) ...................... ............................... ................... ................... .................. .................. ................. ........ 11 Suggested future expansion plan for Havells ............................................................................................. 12 Challenges ................................................................................................................................................... 14 Other Learnings ........................................................................................................................................... 16 ATL/ BTL ...................................................................................................................................................... 17 Promotion Suggestions ............................................................................................................................... 18

Objective To do the rigorous market survey, identify the current scenario and then formulate the marketing strategies for the company (our main focus would be towards the distribution channel only but we would also try to cover the other marketing aspects as both are inter-related).

About Havells Havells India Ltd is a billion dollar electrical equipment company founded in 1958. It produces variety of electrical products. Its products ranges from industrial & domestic circuit protection switchgear, cables & wires, motors, fans, power capacitors, compact fluorescent lamps (CFL), commercial & industrial, luminaries for domestic, applications, modular switches covering household, commercial and industrial electrical needs, water heater to domestic appliances. Havells owns global brands like Concord, Crabtree, Sylvania, and Luminance and has 94 branches / representative offices with over 8000 professionals in over 50 countries. 40% of the total income comes from the Cable division. Investments in building the manufacturing capacities in this segment have led to Havells emerging as one of the largest producers of cables in the country. The state-of-the-art facilities, equipped with fully automated machines using best quality raw material, ensure a uniformly superior quality of cables. Havells flexible copper cables, which are fire proof, have found a good response from both industrial consumers and other consumers, enabling a marked shift in demand from the unorganized to the organized sector.

The division produces two types of cables:



Industrial underground cables- which find usage in commercial and industrial ventures



Domestic cables- which are used in buildings and residential apartments.

Both products have found good acceptability in the country. Better awareness on the safety aspect has seen consumers shift to branded products in electrical wires. Havells focus in building awareness through media education campaigns and advertisements on the safety front has helped significantly. Income in this category has increased from previous year; income from the Cable division was ` 1,692.5 crores during this f inancial year 2012-13 as compared to ` 1,593.0 during financial year 2011-12. This division accounts for 40% of the total income. Contribution margins were also better at 9.1% of net revenue up from 7.9% in the financial year 2011-12. Cables segment is captured in Primary business segment of Havells. The cable segment comprises of domestic cables and industrial underground cables. In 2012 Havells launched Copper Flexible Cables under the Standard brand Havells is 2nd largest manufacturer of Cables and Modular Switches Havells was also judged as the best Cables Company by the renowned Zee Business in its First Edition of ‘Good Home Awards’.

Based on the surveys of the various dealers and distributors and retailers in the Rohtak and nearby areas, the internal and external analysis of the 3 major brands

of the Housewires were done (90 metres)- Havells, Anchor and RR. The market of  the branded wires is around 70 percent in the areas of Rohtak and surrounding areas.

Share of Havells, Anchor and RR in the branded wires in Rohtak : 90 percent Other branded wires are Fenolix and Plaza (general perception of Plaza is till a nonbranded one though)

Monthly sale of housewires in Rohtak and surrounding areas : Rupees 2.75-3 crores

Unbranded housewires : PVC, DeeGee, Arkaylite, Sona, etc.

SWOT Analysis SWOT: Internal Analysis

Prioritization of Strengths & Weaknesses with respective weights

Rank

Strengths

Wt. (%)

Weakness

1

Margins for the retailers/dealers

0.07 (7%)

2

Brand Recognition

0.07 (7%)

Visibility in stores : On time 0.07 (7%) Product availability Trust in the current structure from the dealer’s / retailer’s side e.g. 0.07 (7%) due to keeping of commitments , etc.

3

Certifications/ Approvals

0.07 (7%)

4

No internal market competition

0.07 (7%)

Focus on timely delivery

Wt. (%)

0.06 (6%)

Efficient marketing : continuous 0.06 (6%) push through salesman/ infrequent

between different dealers/retailers

visits

5

Good Quality

0.05 (5%)

6

Wide Distribution Network

0.05 (5%)

7

Standard policies

0.05 (5%)

8

Affordable Pricing for customers

0.03 (3%)

9

Option of credit time

0.03 (3%)

10

Wide Product Range

0.01 (1%)

Total

Promotions for the influencersdealers/ retailers

0.04 (4%)

Promotions for the influencerselectricians

0.04 (4%)

Fast responsiveness to market dynamics e.g. change in prices

0.04 (4%)

Unattractive Packing

0.04 (4%)

Inefficient advertisements : TV, posters, etc. Providing on-time rewards and recognitions

0.50 (50%)

0.04 (4%) 0.04 (4%) 0.50 (50%)

Calculating Company’s Responsiveness on a 4 point Scale

After prioritizing strengths and weaknesses, the responsiveness of the Individual brands is checked and the responsiveness is then rated on a scale of 4: 1. Very Poor Response 2. Poor Response 3. Strong Response 4. Very Strong Response The average response is therefore should be (1+4)/2 i.e. 2.5. Below this score, the company is underperforming and susceptible to its internal attributes and above this score of 2.5, the company is operating better than the average and thus utilizing its resources and hence, strong internally.

Attributes

Weight

Havells

Anchor

RR

0.07

3

2.5

3.5

Brand Recognition

0.07

4

3

3

Certifications/ Approvals

0.07

4

4

4

0.07

2

3

3

0.05

4

3

3

0.04

2.5

3

2

0.04

3

3

2.5

0.04

1

3.5

3

0.04

3.5

3

4

0.01

4

4

2.5

0.07

4

4

3

0.07

4

3

0.06

4

3

0.06

4

4

Margins for the retailers/dealers

No internal market competition between

   s     h    t    g    n    e    r    t    S

different dealers/retailers Good Quality Wide Distribution Network Standard policies Affordable Pricing for customers Option of Credit Time/Target Flexibility Wide Product Range

   s    s    e    n     k    a    e    W

Visibility in stores : On time Product unavailability Weak trust in the current structure from the dealer’s / retailer’s side e.g. due to wrong/false commitments , etc. No focus on timely delivery No marketing : no continuous push through salesman/ infrequent visits

2

3

2

Promotions schemes / ways for the influencersdealers/ retailers

0.04

3

3

0.04

2.5

2.5

0.04

3.5

4

0.04

4

3

0.04

4

3

0.04

3

2.5

1 (100%)

3.37

3.285

3.5

Promotions schemes for the influencerselectricians

3

Slow responsiveness to market dynamics e.g. change in prices

Unattractive Packing Inefficient advertisements : TV, posters, etc. Providing on-time rewards and recognitions

Total (Weighted Sum of Product)

1

3 2

3.5

2.87

VERDICT: Havells has a good standing w.r.t the market but good amount of work in needed in the respective fields to establish Havells as an attractive brand in the market as there are attributes on which Havells housewire is not doing great.

SWOT: External Analysis

Prioritization of Opportunities and Threats with respective weights

Rank Opportunities 1 2

Untapped local markets Untapped industrial markets

Wt. (%)

Threats

0.11 (11%) Competition 0.11 (11%) Economic Slowdown

Wt. (%) 0.20 (20%) 0.05 (5%)

3

Untapped global markets

0.06 (6%)

4

Hedging of copper

0.05 (5%)

5

Mergers and Acquisitions

0.04 (4%)

6 7 8 9

Tie ups with the banks, third party logistics, local transport e.g. Newspaper distribution vendors, etc. Technological Advancements Utilization of resources e.g. orders from outside when machines are idle Global alliances Total

Fluctuation of Copper Prices Government Policies ((Taxes , Security Regulation) Fake brands : similar packing, similar names

0.05 (5%) 0.05 (5%) 0.05 (5%)

0.04 (4%)

Fake brands : same packing, same names

0.05 (5%)

0.03 (3%)

Rumors about the brands

0.05 (5%)

0.03 (3%) 0.03 (3%) 0.50 (50%)

0.50 (50%)

Calculating Company’s Responsiveness on a 4 point Scale The responsiveness of the various companies is rated on a 4 point scale with 1. Very Poor Response 2. Poor Response 3. Strong Response 4. Very Strong Response The average response is therefore should be (1+4)/2 i.e. 2.5. Below this score the company is underperforming and not utilizing its resources and above this score of 2.5, the company is operating better than the average and thus utilizing its resource and having a quick response towards the external environment. Attributes

   t    i    n    u    t    r

Untapped local markets Untapped industrial markets

Wt.

Havells

Anchor

0.11

2

2

0.11

2.54

2.5

RR 3 2

Untapped global markets Hedging of copper Mergers and Acquisitions Tie ups with banks, third party logistics, local transport e.g. Newspaper distribution vendors Technological Advancements Utilization of  resources e.g. orders from outside when machines are idle Global alliances Competition

   s    t    a    e    r     h    T

Economic Slowdown (considering less purchasing power, decreasing of infra building) Fluctuation of  Copper Prices Government Policies (Taxes , Security Regulation) Fake brands : similar packing, similar names Fake brands : same packing, same names Rumors about the brands

Total (Weighted Sum of  Product)

1.5

0.06

2.5

2.5

0.05

2.5

2.5

2.5

0.04

3.5

3.5

2.5 2.5

0.04

2.5

2.5

0.03

2.5

2.5

2.5 2.5

0.03

2.5

2.5

0.03

3

3

0.20

3

3.5

2 3.5 2

0.05

2.5

3.5

0.05

3

3

2 2

0.05

2.5

2.5

2

0.05

4

4 3

0.05

1

1

0.05

2

2

1

2.6044

2

2.75

2.325

Note: Weightages of attributes in Red color need to be verified by an industry connoisseur as exact details not explored yet.

VERDICT: Havells has to do a good amount of work to improve its standings in these areas if it wants to increase its market shares in Rohtak and its surrounding areas. .

Channel Structure

Channel Structure of Havells and RR

Key points : Havells has only one major distributor in Rohtak i.e Ganesh Electricals , Old bus stand and he supplies to the following dealers and retailers. There are dealers and retailers who are taking material from the distributors of Delhi too. Havells is not concerned about the dealers and retailers. Only one salesperson is deployed by Havells for marketing purposes. He makes a trip in every 3-4 days to look into the issues and see whether any projects are coming up in the area so that he can sell the wire. The wholesole responsibility to provide material to choose the dealers and retailers and supply lies with the distributor only. Havells tried to go for direct delaers i.e to provide them material from the company directly but the distributor was against it. Watching the power of the current distributor, the company had to withdraw the plan. There are dealers/retailers who buy from Delhi directly because of more margins.

Challenges  Strong bargaining power of big distributers in the long term  Loose details about the dealers and retailers available  Improper mapping of the whole chain makes forecasting tough  Inconsistent prices in the market (Prices offered to the dealers/ retailers by the big

distributors may be lower than what company offers to the distributors too)  ‘Kachcha system’ encouraged - unethical  No proper demarcation of regional boundaries for the distribution  Risky situation: More business in hands of less people (big distributors). In case a

distributor decides to switch, he would definitely take a big chunk of business with himself (plus his network)

Channel Structure of Anchor (Competitors of Havells)

Key points : Anchor has not made any distributor in these areas. They make dealers which directly get the material from the company from the CFA in Delhi. Hence, dealers are those counters in Haryana for Anchor which directly get material from the company and provide to small retailers based

on their own discretion and networks. There are dealers who get the material from their own sources (e.g distributor in Delhi too). The salesperson makes a trip once in a week. The marketing efforts seem to be very weak. Dealers interviews tell that the salesperson does no hard work to look into the projects. The name of the brand is the only driving force behind the sale of Anchor housewires. Some dealers of Anchor also told that although they are delaers of  the company, they at times take the material from the distributors from Delhi.

Advantages of direct dealers  More control over the Distribution Chain- Enhance the Knowledge base of the company  Synchronous prices - More control  Easier forecasting  Easier allocation of regions to the dealers  Less bargaining options for the dealers

Challenges  Formation of right dealers  Promotional schemes for the dealers  More Management of Channel Partners needed(as more i n numbers)  Internal channel conflicts between the dealers of the in a particular area

Suggested future expansion plan for Havells

Approach 1 - Increase the number of distributors in the various districts:



Not much feasible (big players would be difficult to find plus demotivation for the current distributor)

 Price wars between distributors might again harm the market. Internal price wars might

reduce the margin of the distributors and hence, they might reduce interest after some time.  In most of the districts visited, huge clashes of ego are noticed between the various

retailers. 90 percent of the dealers/ retailers are reluctant to buy from a distributor locally (if there) and hence, they buy from Delhi. Hence, brands like Anchor, RR, etc. are only focusing on making dealers in the Tier 2 areas like Rohtak or Jhajjar. Verdict: REJECTED (idea of making new distributors in the various districts)

Approach 2 - Increase the number of Dealers in the same region plus in nearby new markets Dealers/ Retailers in the visited districts are very much inclined towards making relationships with the companies directly (rather than selling a brand via distributor). The ones who are selling through the distributors are only taking the order of Havells majorly because of any specific demands from someone in the market. Making only the dealers seems to be a good option but with some changes as suggested below:  Restrict the distributors of Delhi on certain terms so as to control the market prices

(Prices should be in sync across the market) else the dealers would again buy from Delhi and not via the company.  The current distributors should not be immediately replaced by the dealers seeking the

strength and reach of the current distributor. The current distributor cannot / should not be removed. Their work may get distributed a bit though by formation of dealers.  Area expansion – areas neighboring the areas like Rohtak/ Jhajjar can be visited and

possibilities of any opportunities can be found out. Hence, new market can be found and then approached. The current distributor can be given the authority to provide the material to those areas. It would be a kind of motivation for the distributor as the morale of the current distributor is already down.

Verdict: ACCEPTED (make new dealers in the various districts plus area expansion). Route via a distributor supplying to the dealers should also be assisted with the direct supply to the dealers as the distributor way is proving to be ineffective.

Challenges  Apart from the issues of distributors as discussed above, the key issue in this case is

Price War between our dealers and the big distributors (Prices offered by the big distributors may still be lower than what company offers to the dealers)  Proper demarcation of regional areas of the current distributors and the dealers.  Threat and De-motivation of the dealers as both they and the distributors are taking the

material from the company and different offer prices/schemes might be there because of the non-standardized approach.  In case of more than one dealer in one area , Internal wars between the dealers in that

particular area- it has been observed that different dealers might offer various prices depending on the competitor dealer in the area.

Sizes and the respective MRPs of the wires: Size

Havells

Anchor

Plaza

RR

Finolex

.75 mm

970

792

1130

940

745

1 mm

1300

1053

1400

1250

1050

1.5 mm

1925

1548

2080

1870

1545

2.5 mm

3085

2493

3360

3060

2495

4 mm

4555

3645

4950

4660

3655

6mm

6855

5490

7580

6630

5520

10 mm

13500

NA

13140

10860

NA

16 mm

21330

NA

NA

NA

NA

*NA = Not Available

Average Cost Price and Selling Price of 1.5 mm FR (maximum sale) :

Brand

Average Cost Price for a counter

MRP

Average Selling Price at a counter

Havells Anchor RR Plaza

955 815 905 800

1925 1548 1870 2080

980 830 928 850

Average Discount Structure of the wires:

Discount structure for

Havells

Anchor

RR

Plaza

General dealers/ retailers

47% + VAT

46.5 % inclusive of VAT

48 % + VAT

56% + VAT

Direct dealers/ distributors (Cash Discount included)

50% inclusive of  VAT

48% + VAT

52% + VAT

62% + VAT

Cases of emergency:

Apart from the self-network, the sales person of Havells also helps the Channel Partner to arrange the material from the nearby Channel Partner available. To see all the demands and supplies, the salesperson of Havells plays an active role (visiting the distributors and dealers once in every 3 days)

Other Learnings

 For any brand to set up, there is no use of analyzing all the counters in a particular

geographical area. The wire market seems to be on line with Perito Law: 80 percent of  the market is run by only 20 percent of the Counters or even less. Focus should only be towards those counters rather than wasting energy looking for every counter.  Housewire market should not be compared to the FMCG market. Number of counters

should not be the concern anyways. The main things a company should keep in mind to set up our targets should be :  number of important counters in a region  their shares in the market  “Credit system” is important for this industry. Hence, Havells and Anchor themselves

are giving more credit time : Havells= 30 days credit period, Anchor = 25 days

 Representatives of Anchor and Havells visit all their dealers in every area in every 3-4

days to ensure any help needed/ feedback/ take order, etc.

 Push Factor: Havells has the best PUSH force in the Rohtak region. The salesperson tries

to find the big projects in the area and tries to convert them. Banners , posters, etc of  Havells are much more than of any other company.  As per the retailers, the support of brands other than Havells in communicating the

Price List and other concerns has been weak. It has to be improved to an extent that Dealers are aware of the current prices and product range. There seems to be a huge communication gap from Anchor’s side till date. The visits from RR and Anchor’s representatives should be more frequent.

ATL/ BTL

Promotion for the distributors Havells and RR give the targets (quarterly and yearly) to all the distributors and whomsoever completes the targets, it gives TOD and other promotions e.g trip to places like Dubai, Switzerland (the place is decided on the sales/ target). Anchor has limited itself to small promotions (giving TOD/ discounts) to the dealers which are signed up with the company.

Promotion for the electricians

Coupon System for the electricians Havells Coupons

Yes(SMS & point addition system)

Anchor

RR

Plaza

No

Yes : on the spot – Rs 10 coupon in the box

Yes : on the spotRs 10 coupon in the box

Findings: As per our survey with the electricians, “coupons” act as good driving factor for them to buy a particular brand. Moreover, the SMS system seems to be de- motivating as electricians find it difficult and boring. 28 out of 37 electricians (75.67 %) surveyed feel that on-the-spot exchange of Coupons with money (Rs 10/20) with the retailer is the best choice. SMS / addition of point system don’t seem to be much interesting to them.

Electrician’s Meet

Only Havells and RR hold the the Electrician’s meet in the areas visited (once in an average 2-3 months). Anchor and other brands are very weak in the same.

Promotion Suggestions

 Hoardings/ Visiting Cards/ Pamphlets : Havells have given big Hoardings with the

counter name at major counters in “every” good distributor and dealer. No hoarding of  Anchor was found anywhere. RR had small hoardings in many shops.  Advertisement in other ways : In districts like Rohtak, Jhajjar and Hisar, dealers seem

to be very much excited by the fact that some company is making hoarding/ wallpainted advertisement with their names mentioned on the district highway or at

famous points. These companies can exploit the same to attract the dealers. Moreover, it would increase the visibility of our brands too. So, advertisement methods like painting on the walls should not be ignored. As per our movements, we could not locate any of the wall paintings anywhere on any of the highways.  Pamphlets can be made for the big distributors and which they can forward to the local

newspapers or in-hand distribution.  Attractive visiting cards can be made for the big distributors and dealers.  Timely delivery of rewards (gold/ silver coins/ any other schemes) is very important for

dealers. They respect things on time. Respect need to be given to dealers and hence, companies should have strict process for the same.  Counters in the visited areas feel honored to have a relation with a brand. They do

respect Certificates and display it with proud.  Posters/ Advertisement on TV/ FM : Only Havells has advertisements on TV. Anchor’s

frequency is quite low. RR has no TV ads these days being shown on the TV/FM. Havells is mainly concentrating towards the brand building , the housewires and cable products are not being shown in the advertisements.