Rev. February 9, 1998.
WESCO Distribution, Inc.
Late in June 1997, Jim Piraino, VP marketing for WESCO Distribution, Inc. (see Exhibit 1), was preparing for a yearly review meeting with his CEO Roy Haley. At the top of the agenda was the performance of the National Accounts (NA) program during the first half of 1997 (see Exhibit 2). Haley had ambitious plans for WESCO over the next five years. He had charted out a course that called for an annual growth rate of 6% to 8% in sales, and more important, an annual increase of 12% to 16% in profitability. "In 1996, we were a $2.2 billion company with an EBIT of around 3%. I want us to be a $3 billion company with an EBIT of over 5% by the year 2000. This target is very much achievable. In the last few years, our customers have made significant changes to their business processes. These changes provide us a unique opportunity to provide greater value to our customers while improving our market position and profitability. I want WESCO to be recognized as a leader in learning, adapting, and responding to changes in customer needs," said Haley. Although acquisitions of other companies were expected to contribute over half the revenue growth, most of this business was not expected to exceed current profitability levels. WESCO’s current NA program, which had been initiated in 1994 as a response to the changing market dynamics, was expected to deliver the additional revenue growth and obtain the desired increases in profitability. Yet, as of mid-1997, the NA program had not delivered the expected increases in sales and profitability. Haley had now asked Piraino to examine the NA program and present recommendations for improvements. “We need to get more out of our NA effort. This is our best growth avenue with existing customers and new prospects. We have to generate significantly better results with this program," Haley had told Piraino.
Preparing for the NA Review Meeting
In early May, Piraino had spoken with WESCO national account manager (NAM) Mike McKinley about one of his NA customers, who had signed an agreement in late 1996. During the first five months of 1997, the account had generated only 40% of its target sales volume, with gross margins falling a full 2% from the prior year. Piraino reflected on the meeting: From our account analysis prior to signing the agreement, this was a very promising NA customer offering immediate, exclusive access to their 28 U.S. plants. We thought we could increase their existing $1.5 million annual purchases from us Professor Das Narayandas prepared this case with the assistance of Research Associate Sara Frug as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Copyright © 1997 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permi ssion of Harvard Business School.
WESCO Distribution, Inc.
by a factor of ten. However, ever since implementation began in January, we have discovered an unexpectedly poor alignment between the customer’s local and corporate interests. This was their first national purchasing agreement, and it turns out that despite corporate enthusiasm, some of their plants were reluctant to abandon local distributors with whom they had developed very strong relationships. We are now being charged with the responsibility of developing the program up from the local level. Managing headquarters has turned out to be only half the task. The second conversation that came to mind was with John Whitney, a WESCO sales representative at a...