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Sales and Distribution Management of Bayer Crop Science Limited

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Abstract: Go-to-market systems, with multiple marketing channels that link suppliers with their customers, have radically evolved beyond simple advertising or salesperson marketing channels. The present report discusses on the sales and distribution management of Bayer Crop Science Limited, who has been producing various products in the filed of crop protection for more than a century. Data on sales and distribution of Bayer are collected through a face to face interview (shown in Appendix) with the Manager, Sales and Support of Bayer. The pros and cons of the system are discussed, critically analyzed and findings are listed in conclusions.

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Sales and Distribution Management of Bayer Crop Science Limited

  1. 1. (Project of Sales and Distribution Management) By Manoharlal Bundhel (RB09020), Asokendu Samanta (RB09035) Shuchi Kumar (RB09050), Renu Shetty (RB09121) Arif Khan (RB09168) Group No. 20 Centre: Powai and Juhu, Mumbai August 16, 2009
  2. 2. Sales and Distribution Management of Bayer Crop Science Limited Contents Contents 1 Abstract 2 1.0 Introduction 2 2.0 The Company 2 2.1 Product Category 3 3.0 Sales 5 3.1 Sales Organization 5 3.2 Sales Strategy 5 3.3 Sales Force 6 3.4 Recruitment and Induction Process 7 3.5 Territory Allocation Process and Strategy 8 3.6 Reporting Structure and Systems 8 3.7 Compensation Structure 8 3.8 System of Evaluation 9 3.9 Training and Development 9 4.0 Channel and Distribution Strategy 10 4.1 Channel Environment 11 4.2 Channel Strategy 11 4.3 Channel Design 11 4.4 Managing the Channel Members and Conflict 12 4.5 Appraisal and Evaluation of Channel Members 15 4.6 Analysis of marketing channel structures 15 5.0 Conclusions 17 References 17 Acknowledgement 17 Appendix: Interview With Manager (Sales) of Bayer Crop Science 18 Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 1
  3. 3. Sales and Distribution Management of Bayer Crop Science Limited (Project of Sales and Distribution Management) Manoharlal Bundhel (RB09020), Asokendu Samanta (RB09035) Shuchi Kumar (RB09050), Renu Shetty (RB09121) Arif Khan (RB09168) Group No. 20, PGCBM 15, XLRI, Center: Powai and Juhu, Mumbai August 16, 2009 Abstract: Go-to-market systems, with multiple marketing channels that link suppliers with their customers, have radically evolved beyond simple advertising or salesperson marketing channels. The present report discusses on the sales and distribution management of Bayer Crop Science Limited, who has been producing various products in the filed of crop protection for more than a century. Data on sales and distribution of Bayer are collected through a face to face interview (shown in Appendix) with the Manager, Sales and Support of Bayer. The pros and cons of the system are discussed, critically analyzed and findings are listed in conclusions. 1. INTRODUCTION The tactical goal of the marketing is to get people to buy the company’s products or services and make sure that they are available in the market. Here is where Sales and Distribution play a significant role in a company. Sales represent a major investment for many companies with huge amount of money are being spent on sales staff salaries, incentives, information systems, and other sales-related expenses. Improving the productivity of the sales will help companies increase its financial performance. To support the products and services availability, go-to-market strategy should be formulated and distribution channels should be managed carefully. 2. THE COMPANY Bayer, one of the world leaders in Healthcare, Crop Science and Material Science, was originally established in Germany in 1863 by Friedrich Bayer and Johann Friedrich Weskott. The objective of the company was to manufacture and sale of synthetic dyestuffs. Subsequently ‘Farbenfabriken Bayer and Co. Ltd.’ was set-up in Mumbai in 1896 and heralded the beginning of the history of Bayer in India (Fig. 1). Bayer has mainly three divisions, i) Bayer Health Care ii) Bayer Crop Science and iii) Bayer Material Science. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 2
  4. 4. Sales and Distribution Management of Bayer Crop Science Limited Fig. 1 ‘Bayer House’ located at Powai, Mumbai is the head office of Bayer Crop Science in India The acquisition of Aventis CropScience has helped catapult Bayer CropScience to one of the premier organizations in the world in the areas of crop protection, seeds biotechnology and non- agricultural pest control. Bayer plans to attain leadership position in these areas in the years to come. With a sizeable existence in 122 countries and 22,000 dedicated employees, Bayer CropScience is never too far from its customers. Bayer Crop Science Limited constitutes the core cropscience company and has production facilities at the Bayer sites in Thane, Himatnagar and Ankleshwar. With the acquisition of Aventis Cropscience Limited worldwide, Bayer is the undisputed leader in the Crop Protection business in India. 2.1 Product Category Bayer Crop Science has three products (Fig. 2) Crop Protection: It has an impressively wide range of effective solutions at hand to tackle the problems of farmers more (Fig. 3). Environmental Science: It offers solutions to control pests and weeds efficiently and to improve the quality of life of professional users and consumers. Bioscience: It is a global player in the research, development and marketing of seeds and solutions derived from modern plant technology Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 3
  5. 5. Sales and Distribution Management of Bayer Crop Science Limited Bayer Crop Science Environmental Crop Bio Science Science Protection Products Insecticides Fungicides Herbicides TopStar WhipSuper Confidor Fame (Rice) (Soybean) (Cotton, Mango) (Rice, Cotton) Baycor Antracol (Fruits, Veg) (Fruits, Veg) Fig 2. Products of Bayer Crop Science Fig 3. Bayer’s products are used for crop protection Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 4
  6. 6. Sales and Distribution Management of Bayer Crop Science Limited 3. SALES Sale is an important activity in an organization. Strategic sales management involves effective and efficient handling of systems and processes towards successful sales. An effective sales process is key for closing more sales and generating more repeat business. For this careful management, following is required.  Sales force - An efficient and effective salesforce is required for enhancing the sales productivity of an organization.  Sales territories – These are important to get good customer coverage, more sales, lower costs and performance evaluation.  Sales accounts - Key account management would involve nurturing and cultivation of strong customer relations in turn building customer loyalty with time. The mission statement for Bayer CropScience is concise: “Bayer: Science for a better life” Bayer wants to enable access to improved agricultural tools for farmers who cannot currently obtain them through commercial channels. 3.1 Sales Organization To support the sales strategy, a solid sales organization is vital. It helps in the smooth realization of sales targets and ensures perennial sales productivity. The organization and structure of the sales force depends on several factors. Bayer has a geographical based sales organization and is structured in a way that enhance their “go-to-market” effectiveness and efficiency, which normally involves the establishment of appropriate channel/distribution and sales management practice. Also, there is a clear defined authority at each level. Hierarchy in the sales activity of Bayer Crop Science Limited is shown in Fig. 4. 3.2 Sales Strategy Sales strategy is nothing but selling products as solutions to the customers. Sales are about prospecting, sales process, and after sales service. The consumer forecasting team at Bayer CropScience gathers Point of Sale (POS) and other consumer data from channel sales and category marketing to generate an 18 month unit forecast. The company offers an outstanding range of products and extensive service backup for modern, sustainable agriculture applications. To sustain its market share, the Company is focusing heavily on post sales services and technical support to customers. The Company sponsored several symposium and conferences to actively interact with the scientific community. The sales process includes managing and directing the sales force, planning of sales activities, methods of reaching out to clients, competitive differences and resources available. This is discussed in details here. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 5
  7. 7. Sales and Distribution Management of Bayer Crop Science Limited CEO at HO in Germany Europe North Asia Latin Africa America America India (Country Head) North South West Zone East Central Andhra Zone Zone (Zonal Manager) Zone Zone Zone North Western South Maharashrtra Maharashrtra Region Maharashtra Region (Regional Manager) Region Territory (Territory In-charge) CHANNEL NETWORK for territory comprising of distributors, dealers and retailers Fig 4. Hierarchy in the sales activity of Bayer Crop Science Limited 3.3 Sales Force The primary function of professional sales is to generate and close leads, educate prospects, fill needs and satisfy wants of consumers appropriately, and therefore turn prospective customers into actual ones. They are the face of the company. Hence it becomes very crucial for the company to carefully recruit and select their sales force, keep them motivated and retained, develop and nurture them. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 6
  8. 8. Sales and Distribution Management of Bayer Crop Science Limited Bayer CropScience respects and values the ethnic and cultural diversity of their sales workforce and understands that success is founded on their skills and their commitment. They are supported in both their professional and their personal development. Sales force blends their knowledge and experience across ethnic and geographical boundaries and provide for a unique mixture of approaches and backgrounds. Bayer Crop Science places great value on their qualification, and also commitment to company values. 3.4 Recruitment And Induction Process Sales force recruiting is where a company can really look to improve bottom line results. By effective sales force hiring, the path to more robust results becomes a straighter one. Building a sales force of high-performing salespeople is a crucial strategy for long-term growth and profitability. Recruitment is a process of searching of prospective employees and stimulating them to apply. In Bayer CropScience, the need of recruitment of sales personnel is captured from i) Inputs from the country head, zonal and regional managers ii) As a result of planned expansion iii) As per the need based on employee status available by the HR department The job analysis of ‘sales position’ shows the following tasks and skills required by Bayer. i) To achieve sales as per target set by superior ii) Good teamwork and team spirit iii) Local language proficiency iv) Good communication skills Below are the external sources of recruitment. i) Campus recruitments from agricultural colleges of India ii) Advertisement in the newspapers iii) Scanning from internet by HR department iv) Through company website (interested candidates apply directly through Bayer’s website) Bayer CropScience HR does the screening and filters are applied as per the recruitment company policy. The assessment is then based on 3 rounds of interview. First round is based on the subject matter. Second round is with the Country Head or Zonal Head or Regional Head depending on position. The third round is with the HR department The sole purpose of evaluating job is to predict, or forecast, how they will perform on the job before they are added to the payroll. In Bayer CropScience this is based on the technical knowledge in Agricultural science, local language proficiency and communication skills. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 7
  9. 9. Sales and Distribution Management of Bayer Crop Science Limited 3.5 Territory Allocation Process And Strategy A sales territory is geographically defined area for a particular product and for potential customers. Dividing the entire sales region into a number of smaller sales territories facilitates in smoothing the sales management operations. The territory is assigned to a salesperson who is responsible for the sales management activity in the region. Bayer CropScience has one territory having a couple of districts which is based on market. The Agricultural survey conducted by a team and expert forecasts contributes in designing of a territory. Based on agricultural economy of the country, a country is subdivided into zones which may comprise of one or more states. Zones are further subdivided into regions comprising of many districts. Regions are further subdivided into territories comprising of a few districts as per convenience. Territory boundaries are defined by grouping small geographic units together into larger areas called sales territories. For this workload method is used. A workload model defines the amount of selling time that should be optimally allocated to an account (no more, no less) to achieve a targeted sales goal. Historical call data, sales data, and field sales management judgment is normally used to support the quantification of the work load model. Once total workload has been determined, the process of creating sales territories involves the assignment of both accounts and prospects to salespeople. Territory Planning is the process a sales team uses to analyze and plan around key accounts and opportunities within their assigned sales territory. One of the important tasks of sales management is allocation and to ascertain the sales force size to be deployed in a particular sales territory. The sales territories are allocated in Bayer on the basis of infrastructure and ease of access to reduce travel time. Availability of distributors, dealers and retailers is also taken into consideration while ascertaining the size of sales force. Bayer CropScience has identified Andhra Pradesh as a huge market and hence considered it as a separate Zone. Territory mapping in Bayer CropScience is based on the bottom-up forecasting. 3.6 Reporting Structure And System The reporting structure defines how power and control is cascaded throughout the organization; who reports to whom or, who supervises whom. One could report to someone administratively, functionally or both. Also, organizations may be like tall pyramids in which there are many levels with a person at each level controlling as few as three people, while flatter organizations will have fewer levels, but with as many as 30 people reporting to one person. Bayer CropScience follows a hierarchical, flat reporting style. 3.7 Compensation Structure The compensation of the sales force is an important tool to boost the motivation-level of the sales personnel. The sales force incentive compensation plan influences sales force behavior. This can affect the productivity. Designing an efficient compensation program for the sales force is, therefore, an essential requirement. A good sales compensation plan should be economical yet competitive and should attract and sustain deserving sales personnel. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 8
  10. 10. Sales and Distribution Management of Bayer Crop Science Limited Bayer CropScience gives a large fixed salary with less variable pay (fixed: variable = 70:30 ratio). Also, it does not believe in giving any bonus or sales incentives. However to motivate its sales force rewards are given in form of promotions and sponsored foreign trip. 3.8 System Of Evaluation Assessments of the sales force are crucial to the company as the sales force productivity affect the entire selling organization. Targets are set for the sales force and evaluation is done against it. In Bayer Crop Science, the targets are set based on the following points. i) Territory potential ii) Past market performance and growth trends iii) Introduction of new product brands in same channel To measure, both qualitatively and quantitatively, Bayer Crop Science has set certain criteria. These are: i) Sales performance ii) Assigned targets achievement One very unique strategy of Bayer CropScience for evaluation is that it sees common values and leadership principles to be essential for every employee’s daily work. The values include a will to succeed; a passion for the company’s stakeholders; integrity, openness and honesty; respect for people and nature; and the sustainability of the business’s actions. The Assessment of performance on the basis of defined leadership principles helps to ensure adherence to these values throughout the enterprise. Bayer CropScience has a yearly appraisal cycle. The appraisal is done by the supervisor and does not follow a 360 degree appraisal. 3.9 Training And Development To have a productive sales force, firms must provide their salespeople with sales training. Trainings are crucial for building a sales force for growth of the organization. Conducting regular sales training programs help impart crucial skills in salespeople and define new roles and responsibilities for them. Bayer CropScience gives training to its sales force on product knowledge which is given by product managers. Following trainings are also given. i) Extensive on the job training ii) Training by product managers iii) Training by expert faculty from reputed agricultural colleges iv) Training on soft skills, product knowledge Training is a continual process. The need of training is captured by senior and through evaluations in Bayer CropScience. Sales training helps socialize the new hires. It makes a sales trainee feel competent and accepted as a working partner. Bayer Cropscience has an induction training session for 3-4 days at regional or zonal level. Also, there are familiarization sessions with product manager and development teams where the new joinee works with a senior for sometime before being assigned task solely. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 9
  11. 11. Sales and Distribution Management of Bayer Crop Science Limited Summary: An effective sale teams can be built that pays its own way, enhances the company sales and increases the value of any business. Bayer CropScience has an effective hiring method, evaluation technique and training program for the sales people to motivate and retain them. However, in terms of incentives as a way of motivation is lacking. Also, the appraisal is only once a year and only through the supervisor. This probably needs to be modified into a bi-yearly appraisal or an in-formal appraisal during the year. 4. CHANNEL AND DISTRIBUTION STRATEGY Channel partnerships are frequently considered an essential part of an organization’s product sales and distribution strategy, which makes this a challenge for many sales organizations. Recognizing that a successful channel is critical to continued corporate growth, many suppliers have tried to sell through channels without fully realizing that it requires a management model – a model involving structured selling processes, a common language, and an approach to managing relationships. In this section, Channel strategy (Fig. 5) of Bayer is studied. CHANNEL NETWORK Company’s Territory In-charge Distributor Distributor Number: 3,000 Dealer 1 Dealer 2 Dealer number: 18,000 to 20,000 Retailer number: One Lakhs Consumer Retailer 1 Retailer 2 Consumer Consumer Consumer Consumer Consumer Fig 5. Bayer’s Channel Structure Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 10
  12. 12. Sales and Distribution Management of Bayer Crop Science Limited 4.1 Channel Environment The customers are mainly farmers and workers related to agriculture industry as the particular range of products are for pesticides, fungicide and herbiside. They are not so well educated hence the company has to take various initiatives to educate them, promote their product, and explain the usage and benefits of the products and builder mutually beneficial and lasting relationship. The farmers will prefer to use the products if they prove to be cost effective in the specific country context and beneficial. The product is also promoted through word of mouth and the territory manager and the channel partners have to be very customer friendly. There is competition from Rallis, Syngenta and other players. The market is well defined and mature. If Bayer has to launch a new product it has to provide availability, education and support. As the products are related to agriculture, hence the demand is seasonal. The company is in the business for a long time and based on previous years sales, the demand can be near accurately forecasted. Since the company has divided to the lowest unit a territory, it will be easy for the company to predict the right forecast. 4.2 Channel Strategy Channel strategy is a process that can allow an organization to concentrate its limited resources on the greatest opportunities to increase sales and achieve a sustainable competitive advantage. The company has divided the entire country into zones, regions and territories for effective and efficient coverage for sales. Channel partners are assigned at the territory level. The distributor is at the top. Under the distributors are dealers and under them the retailers. Products are to be sold under license. Hence for any customer needs, they are directed to the nearest dealer or the retailer. The territory in charge interfaces with channel partners at all levels of product promotion, sales, appraisal, rewards and incentives. In Bayer, channel strategy is that the distributors have to achieve a pre defined target. 4.3 Channel Design The channel design is nothing but the decisions associated with forming new channel or altering an existing one. These design decisions are critical as it influences the marketing strategy. Also channel is the means through which the organisation can venture into business, communicate to the customers and physically deliver the product. 4.3.1 Strategy The three main strategies on which Bayer’s Channel design are based on are  Relationship with channel members  How should the marketing mix be used  Evaluation and Motivation of the Channel members. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 11
  13. 13. Sales and Distribution Management of Bayer Crop Science Limited 4.3.2 Framework to Design the Channel Structure Bayer CropScience has based its channel structure (Fig. 5) on  Customer Segmentation – The market has been split into the end-user. The relevance of this to channel structure is in the way the company relates to the development and service of their products. The end-users are poor farmers, farm owners etc. Based on the segmentation, Bayer CropScience has various channels to target the consumer.  Sales Distribution 4.3.3 Channel Selection Channel selection and deployment are one of the most critical issues the companies are facing today. Consumers are in the drivers’ seats, as they should be, when it comes to the buying relationship. Powerful products and great brands no longer provide sustainable differentiation to consumers. Increasingly, the sales channel creates the most powerful and sustainable differentiation in delivering superior value to consumers. The consumer for Bayer CropScience are mainly uneducated and poor farmers of India living in villages where there is a monopoly and an unwritten law. Here it becomes very difficult to break into for the company and hence is heavily dependant on the channel. This it becomes very important to have a very strong policy and criteria’s for selecting the channel. Bayer CropScience takes the following three factors into consideration for channel selection.  Demand from consumers  Variable cost involved  Competitors 4.3.4 Design of Distribution Channel Buyer CropScience has multiple distribution channels. These multiple channel models focuses on providing information, purchase/ fulfillment orders, educating the farmers, after sale servicing, and technical support. As a proactive strategic move, the Company has entered into agreements with key corporate retailers. Multi-Channel An initial step in building a successful multi-channel strategy involves segmenting customers which Bayer Crop Science does as part of their Channel design framework. In the multi-channel framework the customer segmentation scheme is developed based on how customers use various channel offerings and how Bayer Cropscience can manage their relationships with them. The multi-channel distribution channel is vertically integrated to allow for firm’s control over the distribution. Multiple products through the same channel Bayer Cropscience distributes multiple products through the same channel also. As the company distributes multiple products through the same channel, Bayer Cropscience maintains stock balance for all products by Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 12
  14. 14. Sales and Distribution Management of Bayer Crop Science Limited  Low distribution cost  Inter branch transfers – whenever one branch has excess products than required.  Stock replenishment - The Company is well integrated through one of the best IT solutions and SAP ERP. Bayer Cropscience’s crop protection products are marketed either via wholesalers or directly through retailers by means of a two- or three-step distribution system, depending on local market conditions. The products of the Environmental Science Business Group are addressed to both professional users and consumers in the non-agricultural segment and are distributed through different channels. Bayer Cropscience green industry, pest control and vector control products are marketed directly to professional users, while home and garden products are sold to consumers through specialized retailers. Duplicate safety stock at branch locations Company calculates the demand (which is seasonal based) in advance based on past experience and accordingly distributes the product to the regions. They do not keep any safety stock at branch location. However, if there is an additional demand of a particular product in a particular region and the same is available in excess in nearby region, product may be redistributed from the nearby region. 4.3.5 Marketing mix Price For Bayer CropScience, the Price and the Product are the relevant Marketing Mix areas. Demand for agricultural chemicals depends mainly on demand for various crops, which in turn depends on crop prices. Price realization is one of the key molecules of Bayer Cropscience as there is intense competition from low cost manufacturers and from importers at substantially low prices. Product Bayer Cropscience realizes that distribution of seeds along with crop protection products is going to make the Company a stronger player in the market with a much broader portfolio of agricultural solutions. The success of Bayer Cropscience depends on its ability to offer new and effective solutions to the farming industry. To add true value for the customers newly evolving pest problems have to be solved and older products need to be replaced by more modern crop protection products. It is Bayer’s goal to introduce two to three new compounds to the market every year, The successful integration of Bayer CropScience, which was formalized before the main crop season in India, resulted in a complimentary range of products for the company, as well as a wider distribution network. In 2003, four new products were introduced into the market. The company offers an outstanding range of products and extensive service backup for modern, sustainable agriculture and for non-agricultural applications. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 13
  15. 15. Sales and Distribution Management of Bayer Crop Science Limited 4.3.6 Channel Partners Bayer in India has a network of distributors, dealers and retails. Bayer selects it channel partners based on  Product knowledge  Willingness  Financial capability Channel partners must be experts in sales representation in terms of product knowledge. They must have good financial strength and probably related to the industry. Credit limit is based on financial strength. Candidates with good financial strength would be given all range of products if desirable or it can be restricted as per evaluation and need. However if a person is not so solvent financially, but has knowledge in product and willingness, Bayer may still choose him/her a channel partner with limited product stock. In some places, the dealer and the retailer are the same. Each retailer ought to have a separate license to stock the Bayer products. Queries are generally resolved through the internet. A prospective consumer is directed to the nearest retailer or office based on the need. Sales are not done through the internet medium. 4.4 Managing Channel Members And Conflict 4.4.1 Managing The Channel Members Partnership is the foundation of Bayer CropScience customer philosophy. Bayer’s customers are more than simply clients who buy products. They are partners with whom Bayer CropScience strive to build a durable relationship based on trust and a positive, mutual return. The channel members are managed by the territory incharge. Managing the channel members consists of assigning distributors, dealers and retailers. There should have proper licenses for selling the products as per government regulations. The channel members should stock only items for which the company has given permission to stock. They should give a higher priority to sales for the company and recommend to clients and customers. The company promotes a spirit of cooperation among channel members in the same territory in the sense that if a particular retailer does not have a particular product then the other nearest retailer should cooperate to make it available subject to sufficient stock levels. The territory incharge is the designated single point of contact. It collects the feedback and grievances from the channel members. It is also the spokesperson for the company who communicates company product policies, schemes, incentives and rewards. 4.4.2 Managing The Channel Members Conflict There can conflicts between the channel members when there are differences between the objectives of the channel and the company. At Bayers the most common conflict would be between two or more channels which compete against each other to sell to the same market. Channel member perceives another channel member(s) as preventing or impeding it from achieving its goals. Conflict arises also from incompatible desires and needs. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 14
  16. 16. Sales and Distribution Management of Bayer Crop Science Limited Such a competition can lead to decline in the performance of both the channel members. The indicators of channel conflict would be  Low channel productivity  Deterioration of channel relationships  Poor customer relationships  Competition for sale in the same geographical area. To avoid such situations Bayer follows two basic principles  Territory in charge looks after any issue  By maintaining clear boundaries for authority and operation 4.5 Appraisal And Evaluation Of Channel Members Getting the right channel partners is an essential component of effective channel management. Effective partner recruitment is a critical component to the channel strategy so that one can ensure a strong market penetration and a healthy pipeline Like most companies Bayer evaluation criteria is base on qualitative and quantitative measures.  Meeting the sales targets  Customer Relationship  Financial Discipline  Inventory Management  Selling Abilities Channels can be divided according to their efficiency as  Level 1 (Novice)  Level 2 (Competent)  Level 3 (Proficient)  Level 4 (Expert) They also have channel motivation schemes such as, ‘Provide Training and counseling if needed’ and ‘Schemes during peak season’. Bayer CropScience has launched ‘elitia’ a very exclusive distributor loyalty program which offers an exciting array of benefits to its customer/channel members.. 4.6 Analysis Of Marketing Channel Structure There are approximately 3,000 distributors based in big towns and cities. Under the distributors are the dealers. There are 18,000 – 20,000 dealers. Each distributor has around 1,000 dealers covering 30-40 villages. Each dealer has 15-20 retailers. The number of retailers is very large and in lakhs. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 15
  17. 17. Sales and Distribution Management of Bayer Crop Science Limited The channel structure is managed by the territory incharge of the company. The territory is the lowest subdivision of sales and distribution organization. The framework behind the design of the Channel Structure is based on Customer Segmentation and Sales Distribution. Demand from customers plays a very vital role on channel selection. Bayers follows a multiple vertical integrated distribution channel for it product distribution. 11% 9% BAYER Syngenta 7% Rallis Others 73% Fig 6. Market share of Bayer The company has only 11 % market share (Fig 6) and there is a scope of vast improvement and growth of the channel structure to command a larger market share. This can be achieved through initiatives channel participation in organizing the gathering, educating the farmers and students even in the agricultural colleges. The company should reach out to zones and regions which do not perform well as compared to other to break the barriers of traditional thinking, educate those farmers of the benefits of using the company products, quantifying the losses incurred due to avoidance of pest control, the need for quality products in the market and opportunity to avail better prices and export destinations for quality crop. Summary: Many companies drive their channel strategies based solely on financial criteria, namely cost of selling, not treating their sales channels as investments which are expected to produce a reasonable return. However, Bayer CropScience realizes the ability of the channel to reach the right customers at the right time with the right solutions. It has also realized that channel partnership and maintaining relationships with channel partners are key to growing and sustenance. Bayer CropScience has also invested in two main areas to provide the value proposition to the consumers/customers. One is launch of new innovative products every year and second is educating the consumer and providing after sales service. Bayer CropScience is a customer oriented company, committed to a partnership approach, through products and services that provide clear benefits to the customers. However, Bayer Cropscience needs to bring out a process for Channel conflict management. Although they have not faced any major problems yet, however since they have a multi-channel and multi-product-same distribution channel, they are at a high risk of channel conflicts. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 16
  18. 18. Sales and Distribution Management of Bayer Crop Science Limited 5. CONCLUSIONS i) Market Leader - Bayer Crop Science is the market leader and one of world’s major suppliers of crop protection products, seeds and plant technology. To maintain its position, Bayer constantly innovates new products through its research. ii) Well-defined Sales and Distribution Channel - Bayer has a well defined sales and distribution department for each of the 120 countries the company operates in. For each country they have a country head, zonal head, regional head and the territory in charge. They have a rich channel network comprising of distributors, dealers and the retailers being mainly looked after by the territory in-charge at the lowest level. iii) Sales-force - The salesforces are mainly procured from the agricultural colleges and through the job portals and the consultancies. The product manager and the research team provide product based training to the sales force. Training is also imparted in soft skill and IT systems. The company arranges trainings from experienced faculty of agricultural colleges on need basis. iv) Compensation - The company provides a high fixed salary component comprising 70% of emoluments and low variable components (30%). Bonuses and rewards are given in the form of promotion and sponsored foreign trips. However, in terms of incentives in order to motivate salesforce is lacking. v) Appraisal System - The appraisal system is only once in a year and only through the supervisor. This probably needs to be modified into a bi-yearly appraisal or an in-formal appraisal during the year. v) Product Awareness - The company arranges product awareness programs among poorly educated farmers who do not use modern methods and techniques of crop protection and seeds by organizing gatherings and demonstrations. The company creates a repeat experience for the farmers through keeping in touch with them, collecting their feedback and reusing it in research to server the customer better and to satisfaction. vi) Managing Channel Conflicts - Bayer Cropscience needs to bring out a process for Channel conflict management. Although they have not faced any major problems yet, however since they have a multi-channel and multi-product-same distribution channel, they are at a high risk of channel conflicts. References [1] Class Note on Sales and Distribution Management, by Prof. Sanjeev Varshney, XLRI, Jamshedpur, 2009. [2] Venugopal P., Sales and Distribution Management, Response, New Delhi, 2008. [3] Official website of Bayer [http://www.bayer.co.in, http://www.bayercropscience.com] Acknowledgement: The authors would like to acknowledge Mr. Sourav Banerjee, Manager, Sales Support of Bayer Crop Science Limited, Powai, Mumbai, for his help in giving suggestion and providing information on sales and distribution. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 17
  19. 19. Sales and Distribution Management of Bayer Crop Science Limited Appendix Interview with Manager (Sales) of Bayer Crop Science [These information on sales and distribution of Bayer Crop Science Limited are collected through face to face personal interview with the Manager - Sales Support of Bayer, Mr. Sourav Banerjee on 4 August 2009 (10:45 a.m. to 12:00 noon) at Bayer head office, Hiranandani Garden, Powai, Mumbai.] A. Introductory Information 1. Name of the Organization: Bayer Crop Science 2. Year of Inception: 1863 3. Ownership of the Organization (Please tick the appropriate): i) Public Sector ii) Private Sector iii) Joint Venture (public & private) iv) Joint venture (private & private) v) Public Limited Company 4. Locations of Business: i) Single location ii) Multi location 5. Nature of Business (tick the appropriate): i) Automobiles ix) Hospitality ii) Banking x) IT iii) Cement xi) ITES iv) Chemicals & Fertilizers xii) Petrochemicals v) Electronics & Telecommunications xiii) Power vi) Engineering xiv) Processing vii) Pharmaceutical xv) Retail viii) FMCG xvi) Textiles xvii) Others (Pesticides) 6. Main Product Category: i) Insecticides (Confidor®/ Admire®, Calypso®, Decis®, Temik®, Oberon®) ii) Fungicides (Antracol®, Baycor®, Folicur®, Monceren®) iii) Herbicides (Atlantis®, Basta®, Topstar®, Whip Super®) Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 18
  20. 20. Sales and Distribution Management of Bayer Crop Science Limited B. Sales Management 1. Sales Organization Please give the hierarchy of the sales organization i) CEO at Head Office in Germany ii) Whole world is divided into five Segments (Europe, North America, Latin America, Asia, and Africa) iii) Each segment comprises of a few countries. iii) Every country is headed by a Country Head iv) Each country is divided into Zone and is headed by Zonal Manager (i.e., India is divided into six zones, East, West, North, South, Central and Andhra zone) v) Each zone is subdivided into Region and is headed by Regional Manager (i.e., Maharashtra is divided into three region, North Maharashtra, South Maharashtra and Western Maharashtra). vi) Each region is sub divided into Territory and is headed by Territory in-charge. 2. Recruitment and Induction Process a) How is the requirement for new sales person captured? i) Inputs from the country head, zonal and regional managers ii) As a result of planned expansion iii) As per the need based on employee status available by the HR department b) What is expected from the Sales Person who wants to join the company? i) To achieve sales as per target set by superior ii) Good teamwork and team spirit iii) Local language proficiency iv) Good communication skills c) What are the sources for recruitment? i) Campus recruitments from agricultural colleges of India ii) Advertisement in the newspapers iii) Scanning from internet by HR department iv) Through company website (interested candidates apply directly through Bayer’s website) d) Is the selection just based on only interview, or are there any other set of evaluations? The candidates are filtered by HR as per company policy of recruiting for particular position and selections are bases on interviews organized by the HR department. e) How many rounds of interview happen? Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 19
  21. 21. Sales and Distribution Management of Bayer Crop Science Limited Three rounds. i) One with subject matter expert ii) Next with Country Head or Zonal Head or Regional Head depending on position. iii) The last one with the HR department f) What is he judged on? What qualities? (Ex. Past experience, communication skills, education etc). Please give the order. i) Candidate should have technical knowledge in agricultural science ii) Local language proficiency iii) Must possess good communication skills g) After joining, what is the procedure of induction? Any training imparted to new joinee? Company arranges the following training sessions i) Induction training (3-4 days) at regional or zonal level ii) Familiarization sessions with product manager and development teams 3. Territory Allocation Process and Strategy a) How is a territory designed (population size, area wise, ability to serve market etc)? One territory consists of a few districts (1-2 districts). This depends on i) Agricultural market survey conducted by the team ii) Expert forecast b) What method is used for deciding sales territories (i.e., Breakdown method, Geographical, Workload etc.) Sales territories are divided using the workload method. Based on agricultural economy of the country, a country is subdivided into zones which may comprise of one or more states. Zones are further subdivided into regions comprising of many districts. Regions are further subdivided into territories comprising of a few districts as per convenience. c) How are these territories allocated? Territories are allocated based on infrastructure and ease of access, availability of distributors, dealers and retailers. d) What territory mapping process do they follow? Company maintains Bottom-up process. 4. Reporting Structure and Systems Hierarchical, with a flat style of working. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 20
  22. 22. Sales and Distribution Management of Bayer Crop Science Limited 5. Compensation Structure a) What is the framework for designing the compensation package? (i.e., Fixed salary, incentive based or territory, variable salary etc.) Large fixed salary with less variable component (70% fixed salary + 30% variable). b) Are any monetary benefits given outside salary? Bonuses and rewards are given in the form of promotion and sponsored foreign trips. 6. System of Evaluation a) How does the appraisal of the sales force happen? Appraisal is done once in a year by the supervisor. Bayer does not follow 360 degree appraisal. b) Are any targets set for the sales force each year/month/half year/quarterly etc? Yes, targets are set for individual sales force. c) What are the criteria for setting the targets? i) Territory potential ii) Past market performance and growth trends iii) Introduction of new product brands in same channel d) What are the evaluation criteria? Is it result oriented completely or product wise or territory wise etc? Or is it based on where the product is in as per Product lifecycle? i) Sales performance (both quantitative and qualitative) ii) Assigned targets achievement 7. Training and Development a) What trainings are given to sales force? i) Training on product knowledge ii) On job training by senior sales persons to enhance selling skills, communication skill and to build confidence level. b) Are the trainings based on evaluation? Yes they are based on evaluation too. c) What motivational activities are taken by the department for motivating the sales force? Promotion and sponsored foreign trips. Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 21
  23. 23. Sales and Distribution Management of Bayer Crop Science Limited d) How is the exceptional sales force personnel further developed? i) Extensive on the job training ii) Training by product managers iii) Training by expert faculty from reputed agricultural colleges iv) Training on soft skills, product knowledge C. Channel Management 1. Channel Environment a) What are the channels for this product category? Distributors - Dealers - Retailer 2. Channel Strategy a) What is the strategy? Distributors have some target to achieve. 3. Channel Design and Structure a) What is the process of designing/deciding a new channel? Channel partner is selected mainly based on i) Product knowledge ii) Willingness iii) Financial capability However if a person is not so solvent financially, but has knowledge in product and willingness, Bayer may still choose him/her a channel partner with limited product stock. b) What is the channel structure and how many for each level? Bayer’s channel structure is three tiers i) Distributors (approximate number: 3000) ii) Dealers (approximate number: 18,000-20,000) and iii) Retailer (approximate number: more than lakh) c) What is the framework to design the Channel Structure? (Buyer need, Customer segmentation, distribution etc) Customer Segmentation and Sales Distribution Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 22
  24. 24. Sales and Distribution Management of Bayer Crop Science Limited 4. What Is The Basis Of Channel Selection? i) Demand from customers ii) Variable cost involved iii) Competitors 5. What Is The Design Of Distribution Channel? i) Single ii) Multiple 6. If Multiple Distribution Channel Exits, Which Of The Below Does The Company Follow? i) Vertical Integrated ii) Horizontal Integrated 7. Are There Multiple Products Distributed Through The Same Channel? i) Yes ii) No 8. Which Of The Marketing Mix Is More Relevant To Them? i) Price ii) Place iii) Product iv) Package 9. Does The Company Believe In Maintaining Duplicate Safety Stock At Branch Locations? Company calculates the demand (which is seasonal based) in advance based on past experience and accordingly distributes the product to the regions. They do not keep any safety stock at branch location. However, if there is an additional demand of a particular product in a particular region and the same is available in excess in nearby region, product may be redistributed from the nearby region. 10. Incase Of Multiple Product Distributed Through Same Channel, How Does The Company Maintain Stock Balance For All Products? i) Low distribution cost ii) Inter branch transfers - This is possible if one branch has excess products than required. iii) Stock replenishment - The Company is well integrated through one of the best IT solutions and SAP ERP. 11. Managing The Channel Members And Conflict How are channel members conflicts resolved? i) Territory in charge looks after any issue ii) By maintaining clear boundaries for authority and operation Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 23
  25. 25. Sales and Distribution Management of Bayer Crop Science Limited 12. Appraisal And Evaluation Of Channel Members. a) What are evaluation criteria of channel members? i) Based on qualitative and quantitative ii) Sales and target achievement iii) Distribution reach iv) Cooperative nature v) Whether helpful and supportive b) Are there any channel motivation schemes? (Customer oriented, goodwill, margins, alliance based, trainings etc) i) Schemes made available especially in peak season, ii) Provide training and counseling if needed Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 24

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