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Ingersoll rand
Ingersoll rand
Ingersoll rand
Ingersoll rand
Ingersoll rand
Ingersoll rand
Ingersoll rand
Ingersoll rand
Ingersoll rand
Ingersoll rand
Ingersoll rand
Ingersoll rand
Ingersoll rand
Ingersoll rand
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Ingersoll rand

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  • 1. Ingersoll-Rand Managing Multiple Channels Group - 1
  • 2. Stationary Air Compressor Market Market Classification by Product Segments Total Market Small (below 25 hp) Medium (25-300 hp) Large (above 300 hp) Products Parts & Accessories $ 175 Million $ 175 Million $ 110 Million $ 460 Million $ 200 Million Total Stationary Air Compressor Market = $ 660 Million Market Leaders by Segment, 1984 Market Leaders in each category Category Small (below 25 hp) Medium (25-300 hp) Large (above 300 hp) Reciprocating Campbell-Hausfeld Ingersoll-Rand Ingersoll-Rand Rotary Screw Sullair Ingersoll-Rand Ingersoll-Rand Centrifugal X X Ingersoll-Rand
  • 3. Stationary Air Compressor Market  Market situation:  Air compressor sales declined from $500 Million in 1980 to $460 Million in 1985  The no. of units sold rose from 600,000 to 900,000  Intense price competition in lower horsepower range (< 25 hp)
  • 4. Ingersoll-Rand  3 Business Groups  Stationary Air Compressor Division : a business unit of Standard Machinery Group  Performance and Operations:  Company level sales, 1985: $2.6 Billion  Manufacturing: 16 Countries  Sales offices: 40 Countries selling in total to 120 countries  Share of I-R’s Stationary Air Compressor Market: 30%
  • 5. The Distribution System  Direct sales force  26 territories  Responsible for sales of Recips > 250 hp, Rotaries > 450 hp and all centrifugals  Manufacturer’s Representatives (for retails)  Responsible for selling Do-It-Yourself products  5 MRs catering to retail chain stores and catalogue houses  Paid 3% commissions on sales
  • 6. The Distribution System  Independent Distributors  Responsible for sales of Recips < 250 hp and Rotaries < 450 hp  Responsible for technical and service support as well  Distributed Ingersoll-Rand as well as competitor’s products  >50% of revenues and profits derived from Ingersand-Roll products  Air Centers  Responsible for sales of Recips < 250 hp and Rotaries < 450 hp  Distributed Ingersoll-Rand products only
  • 7. Independent Distributors vs. Air Center  Differences  Independent distributors’ network covered same amount of geography as the air centers but amounted to 70% of the sales potential  Combined channel performance  Combined sales to end users and OEMs accounted for 55% of SACD sales revenues, 1985.  Invoiced at 20% of the list price  Gross margin of 10-15% on compressors; 30-35% on spare parts and services  Sales reps paid 20% of Gross Margin on bookings
  • 8. Why multiple sales channels?  Uneconomical to sell machines worth below $5,000 through a direct sales force  Complexity due to the differences between compression technologies (more spare parts for Recips vs Rotaries)  Buying behaviour  Large compressors  Medium and Small compressors  Small compressors (< 5 hp)
  • 9. Why multiple sales channels?  Buying behaviour  Large compressors  Detailed specs, high technical expertise, co-ordinated sales effort  Complex service requirements; Machine failures are costly  Medium and Small compressors  Less demanding specifications, less complex behaviour  Off-the shelf availability a priority to meet tight delivery deadlines  Locally available spare parts and service for customers without maintenance teams  Small compressors (< 5 hp)  Used for small jobs  Reached through retail outlets
  • 10. Managing multiple channels  Challenges:  Channels competing with each other at times to complete a sale  Solution implemented: Full partner program (too early to judge effectiveness)  Independent distributors and Air centers perceived the other as receiving favoured treatment  Distributers contended air centers got better prices, information and service since owned by the company  Air centers contended that the sales territories were exclusive and air centers had territories with poor potential
  • 11. New product: Centac-200  Product Specifications:  200 hp centrifugal machine (Medium range)  Operated at high speeds (50,000 rpm)  Provides “oil-free” air unlike recips and rotaries Direct Sales Force Independent Distributors Air Centers Product Type Recips > 250 hp, rotaries > 450 hp & all centrifugals Recips < 250 hp & rotaries < 450 hp Recips < 250 hp & rotaries <450 hp Sales revenue generated (%) 35% 30% 20% Cost to company 11% 21% 19% Experience with Centrifugals Highly competent technical selling No prior experience with centrifugals No prior experience with centrifugals Channel Options
  • 12. Comparison of Channels for Centac-200 Direct Sales Force Independent Distributors Air Centers Advantages 1.Minimal sales cost 2.Better service capability 3.No training required 4.Addition to shrinking product line 1.Increase in revenue and profits of distributor 2.Established network 3.Attention to Centac-200 4.Easy accessibility and serviceability 1.Increased revenues and profits 2.Higher profit margins for I-R compared to independent dist. 3.Attention to Centac-200 Disadvantages 1.Partial attention to Centac-200 2.Loss of rotary sales 3.More time to deliver and service 1.Low profit margins for I- R 2.Intensive technical training required 3. Lack of attention to other compressors 4.Less I-R control over distribution 1.Only 19 air centers 2. Less penetration in market compared to independent dist. 3.Intensive technical training required
  • 13. Product Comparison Costs Rotaries Centrifugal Unit / % Cost Cost for 200 hp Unit / % Cost Cost for 200 hp Cost of compressor per HP 200 40,000 225 45,000 Estimated Life 5-7 years 10-12 years Maximum Estimated Life (in years) 7 12 Installation cost as a % of initial cost 10% 4,000 12% 5,400 Spare parts and maintenance cost per year 2.5% 1,000 2% 900 Energy costs at 7 cents/KWH and 300 days operation in a year per hp 460 644,000 435 1,044,000 Total Cost of ownership 689,000 1,095,300 Avg. Cost of ownership per year 98,429 91,275
  • 14. Recommendations  Distributed through the distributor network and air centers.  Better penetration in market considering that ATLAS has already captured 30% market share  Better ROI for independent distributors  The distribution would be consistent with the hp assignment  Advantageous when range is expanded in lower hp segment as distributors and air centers can serve low and mid hp range products better.  One time training costs which will also cater in serviceability for future product line expansion

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