STRATEGIC SELLING TO LARGE ACCOUNTS
CASE: ALLOY RODS CORPORATION
Date of Submission:
21 – 11 -2008
Prof. Ramesh Venkateswaran
Kaushik Gopal Bhattacharya (7082)
Marimuthu P (7088)
Ramanujan A.S (7098)
Sonika Sharma (7106)
Sumit Kumar Jangid (7113)
SDM INSTITUTE FOR MANAGEMENT DEVELOPMENT
ALLOY RODS CORPORATION
In July of 1985 the managers of Alloy Rods find that their competitor has introduced a new product clearly aimed at Alloy's most profitable market segment – the Flux cored product. Alloy Rods competed in the three major welding processes and five major product groups.
In 1985, welding equipment & supplies was a $1.6 billion industry in the United States. In 1984, Alloy domestic operations had sales of approximately $65 million with an after-tax profit of between $1 to $2 million. Flux-cored wire accounted for nearly 40% of sales & low-hydrogen coated for 15%. Alloy was ranked first among electrodes suppliers in product quality, technical capabilities, & product innovativeness.
In 1984, Alloy spent about $ 500,000 on advertising, product literature and sales promotions which was quite less than its competitors. It also paid advertising and promotional allowances to its distributors which were not offered by its competitors. In 1985, Alloy rods used about 500 independent distributors & their top 50 distributors accounted for 80% of the company’s sales. They employed 21 field salespeople responsible for distributor relations, direct accounts, and account development. It was estimated that it requires 6 to 18 months to convert an account from a competitor to Alloy rods. Typically, a salesperson only delivered three or four major new accounts per year.
The case has been analyzed at the macro level (welding industry, market behavior and potential) and at the micro level (Alloy rod corporation with respect to the move done by Lincoln Electric) and recommendations have been made accordingly.
U.S. WELDING INDUSTRY, MARKET TRENDS, CUSTOMER DEMOGRAPHICS AND BUYING PROCESSES
Welding equipments and supplies was $1.6 bn industry in 1985 and 70% of sales was made through distributors which is $1.12 bn.
In 1984, Alloy rods sales were $65 mn (from domestic operations), of which 75% was through distributors which accounts to $48.75 mn which is very huge. This means the distributors are the driving force to achieve the sales targets.
Of this $48.75 mn, 40% is accounted by sales of flux cored wire which is $19.5 mn.
Considering only Alloy rods and Lincoln, their market share in the Flux cored market (since the competitor is only exploiting this market) in 1984 –
From Exhibit 5 and Exhibit 2:
Alloy rods – 23% of $100 mn – $23 lacs (gas shielded type + self shielded type) – 126,146 thousands of pound
Lincoln Electric – 28 % of $100 mn - $28 lacs (self shielded type)
This market is expected to increase by 2% from $100 mn to $102 mn of which 2/3rd was from gas shielded type.
Buying cycle and people involved:
The buying cycle varied from 6 to 18 months and to name a few people involved in buying process includes owner, plant manager (initiators), welder (users) and welding engineer (technical people, influencers) and purchasing department (approvers, deciders).
Important factors influencing the product buying:
The influencing factors are product quality, delivery/availability, brand preference and price.
DIRECT SALES FORCE, WHOLESALERS, AND DISTRIBUTORS IN ALLOY’S CHANNEL NETWORK IN COMPARISON WITH LINCOLN ELECTRIC’S CHANNEL NETWORK
|Company Name |Factors have motivated each firm to market its products in the manner it does | |Lincoln Electric...