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Ingersoll-Rand Managing Multiple Channels

SUBMITTED BY-
CHINTAN AMEET MEHTA PGP16005
ZOYA KHAN PGP16019
CHANDAN SAXENA PGP16022
S LIANBIAKLAL PGP16023
RAIKOTI ANAND SRINIVAS PRASAD PGP16024
RAHUL PRAKASH GHIMIRAY PGP16027
HITESH RAWAT- PGP16032
ABOUT INGERSOLL RAND
Leading firm in the stationary air compressor industry
Market share of 30 % of an approximately $660 million market in 1985
Sold three types of compressors reciprocating, rotary screw and
centrifugal
Launched a new 200 hp centrifugal compressor called Centac- 200
Multiple Channel Distribution System followed consisting of-
Direct Sales Force
Independent Distributor
Company-Owned Air Centres
Manufacturers Representatives
Rationale for multiple channel- Economical and based on the
buying behavior
Different Types of Distribution Channels
Direct Sales Force
Large compressors were sold by them due to need for coordination and
heavy engineering component
Within territory responsible for complete compressors above 250 hp recips,
450 hp rotaries, and all centrifugal
Independent Distributors
Sold below 250 hp recips and below 450 hp rotaries
Majority of medium and all small compressors were sold by them
Carried products of Other competitors
Company- Owned Air Centres
Was setup in those territories where Independent distributors were not successful
Sold only companies products
Manufacturing Representatives
5 representatives were appointed to sell directly to retail chains
Sold less than 5 hp compressors
Dilemma- Which Channel to
choose for Centac- 200
Distributors/Air Centre
Have well established network
Low spare part requirement will not attract them
Direct sales force will provide better technical support
Will be consistent with the hp assignment
New product may take their attention away from smaller compressors
Intense distributor training will be required
Risk of being dependent on a channel they cannot control
Competitor Atlas-Copco sold its product through distributor
Cost of 19% for air centre and 21% for distributor network
Direct Sales
Have well established service capabilities
Will be good addition to shrinking line of Direct Sale Products
Centac 200 will be a lower end product and Sales Representatives
will ignore them
Least cost of 11% of sales
Cost Analysis
Direct Sales Air Centres Distributors
Cost to company 11% 19% 21%
Cost 45,000 45,000 45,000
Margin on compressor 6,750 6,750 6,750
Installation Cost 5,400 5,400 5,400
Cost of Spare parts 900 900 900
Margin on Spare parts 270 270 270
Gross Margin per Unit =6,750+270- =6,750+270- =6,750-5400= 1,350
5400= 1,620 5400= 1,620
Recommendation
The company should go with the Distributor Network
They have well established distribution network. This will help in the future
when the market size will grow from $9 million to $35 million
Distributors earn higher profits than other channels
They will push the product better than direct sales people who can
ignore the product as it will be low end product
Competitor having major market share is using this network
High cost of 21% of sales is of no concern as this channel will provide
better market coverage and penetration
Relationship between different channels will not be affected adversely as
it will be consistent with the hp assignment
THANK YOU!