CASE STUDY

Scenario: Mr. Gulu has recently joined IBM, Bangalore. During his tenure of 6 months, Mr. Gulu covered various warehouses and retail outlets of IBM. He has presented the following findings to his boss:

CASE STUDY
*50,000 laptops X Rs. 0.50 lakh Less (wholesaler and retailer margins @ 30%) Company s own stock Less (company margins @ 20%) Own cost (capital blocked) Borrowed @ 10% interest Interest burden paid per month Interest burden per day Interest loss per day = annual salary 250 cr (-) 75 cr 175 cr 50 cr 125 cr 12.5 cr per annum 1.04 cr per annum 3.46 lakh

THE UNDERLYING PROBLEM

To sell of the existing dead stock by ensuring:

Company margins are not hit Price point is reduced Interest burden is taken care of

SOLUTION

B2B institutional sales

ASSUMPTIONS
Stock found out in first few months Been in the warehouse for 1-2 months Technology has increased over the past 7-8 months

SOLUTION
Salesman salary + incentive; own sales force Salary Rs. 10,000 Incentives 5% on company block Per order 15 laptops 22 days available days 3 meets per week fewer buyers, geographically separated markets 12 companies targeted per month

SOLUTION
Success ratio of 20% Per Salesman per month 2 (2.4)companies will buy Per order 15 laptops Hence we need a workforce to sell the product in:
1 to 6 months

SOLUTION
To sell of entire stock in 1 month 2 months 3 months 4 months 5 months 6 months Per salesman oders per month 2 2 2 2 2 2 Per salesman Per salesman number of number of laptops sold laptops sold per order per month 15 15 15 15 15 15 30 30 30 30 30 30 No. of salesman needed to sell 50,000 laptops 1,667 834 556 417 334 278 Total interest burden

1,04,00,000 2,08,00,000 3,12,00,000 4,16,00,000 5,20,00,000 6,24,00,000

SOLUTION
Current laptop market in India lakh units (January 20--) Growth rate Assuming current market size lakh units Existing players - HP, Dell, Lenovo, HCL, Sony, Acer, LG Average number of laptops sold per company:
1 1.5 lakh units(guess ..)

Time taken to sell of 50,000 (institutional):

5-6 months

SOLUTION
To sell of entire stock in 5 months 6 months Orders per salesman per month 2 2 Per salesman Per salesman number of number of laptops sold laptops sold per order per month 15 15 30 30 No. of salesman needed to sell 50,000 laptops 334 278

Total interest burden

5,20,00,000 6,24,00,000

6 MONTHS
OVERHEAD
50,000 laptops X Rs. 0.50 lakh Less salaries (278 x Rs.10,000*6) Less (salesman margin @ 5%) Company s own stock Less (company margins @ 20%) Own cost (capital blocked) Borrowed @ 10% interest Interest burden paid per month Interest burden per day Interest burden for 6 months

TOTAL COST PER UNIT

2,50,00,00,000 1,66,80,000 12,50,00,000 1,75,00,00,000 50,00,00,000 1,25,00,00,000 12.5 cr per annum 1.04 cr per annum 3.46 lakh 6,24,00,000 37,834 334 2,500 35,000 10,000 25,000

5 MONTHS
OVERHEAD
50,000 laptops X Rs. 0.50 lakh Less salaries (334 x Rs.10,000) Less (salesman margin @ 5%) Company s own stock Less (company margins @ 20%) Own cost (capital blocked) Borrowed @ 10% interest Interest burden paid per month Interest burden per day Interest burden for 5 months

TOTAL COST PER UNIT

2,50,00,00,000 1,67,00,000 12,50,00,000 1,75,00,00,000 50,00,00,000 125,00,00,000 12.5 cr per annum 1.04 cr per annum 3.46 lakh 5,20,00,000 37,834 334.00 2,500 35,000 10,000 25,000

CONDUCT A MARKET RESEARCH

Preferable geographic markets for institutional sales:
B2B
Government Agencies Educational Institutes Companies with large sales forces (pitching, presenting) POS solutions

PROMOTIONAL STRATEGY
Push strategy Sell directly to the consumer Bypass other distribution channels Promotional tools - Business product seminars and advertising All marketing communications must convey business features Collaborating with retailers and suppliers using IT for smarter management of inventory

TARGET BUYERS
Government Agencies Educational Institutes Sales force of businesses (pitching, presenting)

THANK YOU