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The document discusses Johnson & Johnson's sales and distribution structure in India. It provides details on their sales force hierarchy, distribution channels, and processes for selecting distributors. Key points include:
- J&J's sales force structure has representatives reporting up to territory sales managers, area sales managers, and regional sales managers.
- They use an intensive distribution channel to widely availability their broad product portfolio across categories like baby care, skin care, and medicines.
- When selecting distributors, J&J evaluates their financial capacity and investment ability to ensure distributors can properly stock products and extend necessary credit to retailers.
The document discusses Johnson & Johnson's sales and distribution structure in India. It provides details on their sales force hierarchy, distribution channels, and processes for selecting distributors. Key points include:
- J&J's sales force structure has representatives reporting up to territory sales managers, area sales managers, and regional sales managers.
- They use an intensive distribution channel to widely availability their broad product portfolio across categories like baby care, skin care, and medicines.
- When selecting distributors, J&J evaluates their financial capacity and investment ability to ensure distributors can properly stock products and extend necessary credit to retailers.
The document discusses Johnson & Johnson's sales and distribution structure in India. It provides details on their sales force hierarchy, distribution channels, and processes for selecting distributors. Key points include:
- J&J's sales force structure has representatives reporting up to territory sales managers, area sales managers, and regional sales managers.
- They use an intensive distribution channel to widely availability their broad product portfolio across categories like baby care, skin care, and medicines.
- When selecting distributors, J&J evaluates their financial capacity and investment ability to ensure distributors can properly stock products and extend necessary credit to retailers.
To know sales and distribution structure of the company
To know the sales force structure of the Company To know the major challenges of the sales people To know the compensation plans of the company
METHODOLOGY: DATA COLLECTION Primary Data: We visited the distributors in the city Rohtak and interviewed them Also interviewed some of the Sales Executives through telephone from the corporate office, Mumbai Secondary Data: Analysed the Annual reports of the company Collected the data of product portfolio/diversification of the business from the company web site.
ABOUT JOHNSON & JOHNSON:
Johnson & Johnson is an American multinational medical devices, pharmaceutical and consumer packaged goods manufacturer founded in 1886. Johnson & Johnson is headquartered in New Brunswick, New Jersey. The corporation includes some 250 subsidiary companies with operations in over 57 countries and products sold in over 175 countries. Johnson & Johnson had worldwide sales of $65 billion for the calendar year of 2011.
Johnson & Johnson spread its roots into India in 1947 with the arrival of Mr. Patrick Whaley and in 1948, started marketing Johnsons Baby Powder which was manufactured by a local company, British Drug House, in Mumbai. In September 1957, a new company - Johnson & Johnson Limited was created and registered with 12 employees on its roll. The company was licensed to manufacture a broad range of consumer and hospital products. Production began in 1959 from the earliest Johnson & Johnson plant in Mulund in Mumbai.
In over 65 years of operating in India, Johnson & Johnson Limited has gained a reputation for delivering high-quality products. Today, it employ more than 2000 people in India. All the products are organized around three groups Pharmaceuticals Consumer & Personal Care Medical Devices & Diagnostics
And Sales results by these segments are:
Segments Percentage of Sales Pharmaceutical 47 Medical devices and diagnostics 35 Consumer 17
Sales by region: Regions Sales in percentage USA 61 Europe 21 Asia Pacific 12 Latin America & Canada 6
Name of awards received: Six Sigma Industrial safety Image award Process excellence award Best employers 2003 rank 4
ORGANIZATION STRUCTURE:
SALES FORCE STRUCTURE:
Pharmaceutical Representatives and Medical Device representatives report to TSI TSI reports to ASI and ASI reports to SLM Similarly SLM reports to RSM There is one RSM for 5 to 6 states RSM reports to VP Sales and VP Sales reports to MD
MD VP Sales RSM
RSM RSM
RSM
RSM
SLM SLM
SLM
SLM
SLM
ASI ASI
ASI
ASI
ASI
TSI TSI I TSI TSI TSI Pharmaceutical Rep Medical Device Rep Decentralization at JNJ:
Each company focuses on a specific areas of health care. Each company has its own management board and is self-directed. The decentralized and global structure drives us to value diversity throughout the organization.
Assessment:
SELLING PROCESS: With reference to the Selling process at Johnson and Johnson, there are 2 teams Johnson & Johnson owned team Distributor owned Team
The J&J team is mainly a Marketing team that is focussed on servicing the end Customer-the retailers. The approach used here is Pull based Strategy The company owned team also interacts with the Doctors, as they are the Key Influencers in prescribing the products of J&J to the consumer
As shown in the diagram, the from the Manufacturing plant the goods are transferred to the CFA. From the CFA the goods are trickled down to the Main distributor. Here the main distributor has a team of his own based on which the goods are now transferred and sold to the Dealer. This is a Private Sales Force, and there is disparity in the payment made to the Sales force of both teams. The company headquarters maintains a record of the goods transferred by getting data on the Invoice.
Invoice plays an important role here, as the entire credibility and processing, Understanding of the amount of goods sold, depends on the invoice that is generated and passed along the Chain.
PRODUCT PORTFOLIO AND DISTRIBUTION CHAINS: The following table shows the list of products that at available at Rohtak:
CATEGORY PRODUCT NAME DISTRIBUTION PROCESS Baby Care Johnsons Johnsons bedtime Johnsonshead-to- toe fragrance free baby lotion Extensive distribution at retails stores. Depending upon the city- Tier 2 3, availability of some products and the frequency of delivery is reduced RETAILER DEALER RETAILER CFA DEALER DISTRIBUTOR JOHNSON & JOHNSON SALES REPRESENTATIVE PRIVATE SALES FORCE
With reference to list of products available in Rohtak, the distribution chains have also been mapped. On interaction with the Sales personnel, we found that the process remains the same almost for all products. The issue here being that- some products are Premium and making them available at all stores wouldnt augur well for the organisation. Products in the Visi Care Category are made available at select outlets only. Same is the case with Nutritionals as it has to be made available at Multi Brand retails, because that is where the Demand is generated. As far as OTCs are concerned, it depends on the product as some very popular Generic products like Benandryl are to be available across all pharmacies, whereas some are made available only at stores near the Physicians. The type of city and the kind of demand generated by it are important parameters in the distribution channel and this affects the Skin and Hair Care Products distribution chain. Same is the case with Oral Care too, as it is available at Leading pharmacies only As far as the Baby Care products are concerned, it being the main product category the basic products are made available at retailers, and the others depending on Demand and the Premiumness. Skin & Hair Care Bebe Clean&Clear ROC Vendome Neutrogena Clean&Clear distributed exclusively Neutrogena being premium is made available only at premium stores Wound Care & Topicals Band Aid Savlon No exclusive distribution, available at most stores Oral Health Care Listerine Listerine Whitening Available only at select stores OTC Medicines Benadryl Motrin Tylenol Benandryl- available at all pharmacies Motrin, Tylenol- Only to some shops Nutritionals Benecol Lactaid Splenda Available at Multi Brand Retail stores and leading Pharmacies Vision Care Acuvue Visine Very limited distribution. Limited to Tier 1 Pharmacies, Eye Care Hospitals and Opticals Channel Structure: A distribution channel consists of individuals and firms involved in the process of making a product or service available for use or consumption by consumers or industrial users. In J&J channel structure is more or less like traditional channel considering the need to increase reach of the product to different types of people. These are factors on the basis J&J decides its channel design: Product Cost Capital requirements Control Coverage These are channel alternatives: Exclusive Channel Selective Channel Intensive Channel Considering product portfolio of J&J Intensive Channel is obvious option to go for.
Distribution Channel Structure J&J:
Steps of downward distribution:
Issue Faced in Day to Day distribution Sales Variation Start and End of month witness more sales. Seasonal variation in demand. Infiltration Entire country is divided into 20 equal parts in terms of market potential and equal resources are allocated avoid infiltration Area Business Incharge/Manager has to raise voice against it. Channel Conflict Big retail are directly catered by company that creates conflict with dealers. 15 days advance payment policy force dealers to do business on their capital. Other Issues Stiff competition for self space Scattered market in rural area makes supply chain very long and difficult to control.
Process and criteria for selecting a distributor:
A distributor comes to play a major role in the whole of FMCG distribution channel, therefore, careful steps must be taken before appointing a distributor. Appointment of distributor is done basically, with a long term vision in a product range, segment, territory etc. To be able to achieve market leadership in a specified territory, right selection of the distributor is very much important. Selection and appointing a distributor is an objective and rigorous project. Figure below shows the general flow of distributor appointment process.
Distribution selection process Each step specified in the figure above requires extensive detailing and filed work to support it. Also, it requires an experienced person to evaluate alternative parties, taking the following broad criteria into consideration: Criteria Financial capacity A distributor is evaluated based on the investment he would be ready to do. The financial strength he shows is further varied depending on the product range or market potential. Financial capabilities of the distributor becomes important because of the following reasons: Bulk stocking of products is required which requires the distributor to shell large amounts of money to the manufacturer. The credit a distributor provides with credit days varying based on the requirement to the retailer or institutions require stronger financials. Distributor should also be able to invest in new products, mew initiatives of the company, technology and infrastructure without expecting immediate returns.
Prior Experience
Prior experience a distributor has would help in the following: Time taken to understand the functioning of various members in the channel would be minimal. Time taken to build rapport with institutions/retailers is less.
Infrastructure
Infrastructure required like godown space, redistribution vehicle, manpower should be readily available of required quantity and quality.
Market reputation The relationship of distributor with retailers explains the market reputation of the particular distributor, which talks about the efficiency of his work.
Market Knowledge
Distributor should be well knowledgeable about retailers attitudes, marketing conditions, competitors products etc. which would help get a good hold on the market. Also, to know the distributors interest with respect to day-to-day information and happenings of the market will surely help.
Synergy
If a distributor distributes more than one product in relevant industry, that would be an advantage to the company since it can push for more retail space for its product due to the existing good relationship of the distributor with the retailers, which brings out synergy in retail penetration.
Technology
Integrating technologies like computing, internet, SMS in various aspects of distribution will increase efficiency in operations, communications etc.
Attitude
Positive attitude and basic set of managerial skills are required. Should be willing to take risks and to work with new products.
Social profile
Education level and age becomes relevant in many cases, like for instance a young distributor is preferred when a long term stability in the territory is the major concern. Well educated distributor is preferred because of the easier adaptability towards technology or environment he/she possesses.
The criteria specified above are some of the important factors one should consider for judging. Each criterion is evaluated and judged based on detail work that is done and the requirements specified.
Also, while selecting a distributor, it is to be noted that this person is appointed with a long term vision in a territory, in a segment and/or in a product range. Therefore he/she needs to know the specific market segment and target customer
Factors to consider: o Create product value that others cannot or are not willing to provide o Channel the product to its desired market o Have a pricing and promotion strategy compatible with the products needs o Offer customer service compatible with the products needs o Be willing and able to work cooperatively with other members within the products channel Selecting intermediates that are retail stores that want exclusive or selective distribution involves evaluating stores customers, followed by store location and growth potential. Selecting intermediaries that are sales agents involves evaluating number or characters of another lines carried and size & quality of sales force.
MAJOR CHALLENGES FACED BY THE SALES PEOPLE:
Seasonal variation in product demand This is one of the tough challenges faced by the salespeople. This happens due to the nature of the products. During periods of scarce demand it is very tough for the sales people to make the required sales Fight for shelf space This is another challenge for sales people and retailers want to stock products from lesser known brands whereby they get better margins. They have to negotiate hard with customers to gain more shelf space Sales fluctuations during start of the month and month end Lastly, sales people have to cope with this problem also. Their problem is compounded by the unrealistic targets set by their area managers sometimes
OBJECTIONS RAISED BY THE CUSTOMERS:
Johnson and Johnsons customers have to make advance payments for any products bought. They are required to deposit a certain number of cheques to the Johnson & Johnson account payee. This business policy of realizing early payments poses a serious challenge to its salespeople. Retailers doesnt want to make advance payment; on the contrary, they like to make the payment only after the products are sold to their customers. Product related objections from customers is a very rare issue. Johnson & Johnson maintains stringent quality standards for their products so that customers dont get any opportunity to complain. For other issues like taking product orders, fulfilling the orders or any other problems faced by the customers, Johnson & Johnson maintains a team of dedicated employees to address those issues. Some customers complain about the lack of transparency between the channel members as they want the processes to be more transparent and want access to more information related to the business.
MAJOR HURDLES FACED BY THE SALES PEOPLE IN ACHIEVING SALES TARGETS:
Seasonal variation in demand due to the nature of the product This is a major problem bothering many sales people during the months when there is a slump in demand for the products. There are periods where selling become very difficult due to lack of demand from consumers due to the scarcity of demand for that product among the consumers.
Territory infiltration It is one of the major issues hampering the performance of salespeople. They get demotivated as they feel that their performance drops due to the problem of infiltration. This becomes a major hurdle in target fulfilment. The management need to take concrete steps and assign the respective territories to salespeople in such a manner so as to minimize infiltration
Competition from distributors sales people This parallel working of sales people of Johnson & Johnson and distributors sales representatives poses a big problems for Johnson & Johnson sales people for realizing their targets. This competition hampers their performance and ultimately their morale in a huge way.
Communicating value A huge percentage of the Johnson and Johnsons sales people claim that communicating their value and differentiating their solution were a challenge. Customers ask questions, What are your definable and defendable differences? For similar kinds of products, the retailers always have a tendency to push lesser known brands products whereby they can earn better profits. This is a major problem for salespeople and they can do very little about it.
Buyer inertia Another obstacle for sales people are buyers who do not want to change. Buyer inertia is nothing new. It is a common phenomenon that humans resist change at times. This is especially the case when no one has given the person a compelling reason to change.
Unrealistic sales targets given by the area business in charges Lastly, this is also a major hurdle for sales people in achieving targets because often the sales targets given by the area in charges are unrealistic. These targets are given without taking into account the current market scenario and demand for the companys products, rather they are based on past sales data. Targets should be set more rationally by the area in charges or managers keeping in mind the market forces and trends as improbable targets will only result in frustration among the sales people and the result a dip in their productivity.