Reaching the Bottom: UniGlobe’s Small Local Stores Dilemma

APO Group 4
Santoshkumar Sahu
Raunaq katyal
Manul Agrawal
Prasad Vagal
Nitin Tomar
Priyanka Sinha
Felix Denaiffe
Valentin Soitel

UniGlobe manufactures and markets a wide array of products in five regions and headquartered in
United States. UniGlobe’s sales operations was made up of four main decisions i.e.

- Small Wholesale (SW)

- International Supermarkets
- Wholesale
- Small Local Stores (SLS)

Dilemma at current state:

How to tackle the loss making division SLS in phillipines which seems to have huge potential in terms of
market share and sales volumes.

Solution:

Now let’s discuss each option different parameters such as

1. ROI
2. Channel Margins
3. Volume
4. Growth/Degrowth
Option 1: Redistributing SLS volume to other wholesalers

ROI decreases from 15 – 12%.

Company profit margin per unit manufactured – increases from 2.07 to 2.35
Volume of wholesale division increases from 56% to 88%
Growth – 13.52 % increase in profit margins

Option 2: Shift volume from other trade channels to SLS

Company profit margin per unit manufactured – increases from 1.10 to 1.55
Volume of SLS division increases from 22% to 100%
Growth - 25.6% decrease in profit margins

Option 3: Distribute only lower margin SKU through SLS

Company profit margin per unit manufactured – further decrease from 1.10
Volume of SLS division decreses from 22% to 20.75% and wholesale volume increases from 56%
to 73%
Growth - Decrease in profit margins

Option 4: Incorporating the SLS operations in-house

ROI decreases from 15 – 12%.

Company profit margin per unit manufactured – increases from 2.07 to 2.31
Volume of wholesale division stays at 22%
Growth – 11.59 % increase in profit margins
More control on operations and on channel

Option 5: Spin off

ROI stays at 15% but will decrease with time

Company profit margin per unit manufactured – decrease below 2% with time
Volume of wholesale division stays at 22% initially
Growth – decrease with time due to lack of transparency

After going through the above analysis, it can be said that UniGlobe should go ahead with Option 4 out
of all the 5 solutions available on the table i.e. Incorporating the SLS operations in-house.

In this case UniGlobe has to do following activities:

- Move all personnel and investments to UniGlobe from SLS distributors and manage them
internally

The effect of these on UniGlobe would be as follows:

- More control on the channel and increase UniGlobe’s capital investment and its fixed costs
- Increase in Gross Profit margins adhering to UniGlobe’s corporate strategy
- Impact on ROI would decrease it from 15% to 12%
- Increase in profits through trade channels by 2.5% as it will be exempted from paying 8%
commission to distributors and rest 5.5% would be used to cover variable expenses
- Overall Growth increases by 11.59%
- Volume remains constant at 22% initially