Sales and Distribution Management of Bayer Crop Science Limited

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Abstract: Go-to-market systems, with multiple marketing channels that link suppliers with their customers, have radically evolved beyond simple advertising or salesperson marketing channels. The …

Abstract: Go-to-market systems, with multiple marketing channels that link suppliers with their customers, have radically evolved beyond simple advertising or salesperson marketing channels. The present report discusses on the sales and distribution management of Bayer Crop Science Limited, who has been producing various products in the filed of crop protection for more than a century. Data on sales and distribution of Bayer are collected through a face to face interview (shown in Appendix) with the Manager, Sales and Support of Bayer. The pros and cons of the system are discussed, critically analyzed and findings are listed in conclusions.

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  • 1. (Project of Sales and Distribution Management) ByManoharlal Bundhel (RB09020), Asokendu Samanta (RB09035) Shuchi Kumar (RB09050), Renu Shetty (RB09121) Arif Khan (RB09168) Group No. 20 Centre: Powai and Juhu, Mumbai August 16, 2009
  • 2. Sales and Distribution Management of Bayer Crop Science Limited Contents Contents 1 Abstract 2 1.0 Introduction 2 2.0 The Company 2 2.1 Product Category 3 3.0 Sales 5 3.1 Sales Organization 5 3.2 Sales Strategy 5 3.3 Sales Force 6 3.4 Recruitment and Induction Process 7 3.5 Territory Allocation Process and Strategy 8 3.6 Reporting Structure and Systems 8 3.7 Compensation Structure 8 3.8 System of Evaluation 9 3.9 Training and Development 9 4.0 Channel and Distribution Strategy 10 4.1 Channel Environment 11 4.2 Channel Strategy 11 4.3 Channel Design 11 4.4 Managing the Channel Members and Conflict 12 4.5 Appraisal and Evaluation of Channel Members 15 4.6 Analysis of marketing channel structures 15 5.0 Conclusions 17 References 17 Acknowledgement 17 Appendix: Interview With Manager (Sales) of Bayer Crop Science 18Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 1
  • 3. Sales and Distribution Management of Bayer Crop Science Limited (Project of Sales and Distribution Management) Manoharlal Bundhel (RB09020), Asokendu Samanta (RB09035) Shuchi Kumar (RB09050), Renu Shetty (RB09121) Arif Khan (RB09168) Group No. 20, PGCBM 15, XLRI, Center: Powai and Juhu, Mumbai August 16, 2009Abstract: Go-to-market systems, with multiple marketing channels that link suppliers with theircustomers, have radically evolved beyond simple advertising or salesperson marketing channels.The present report discusses on the sales and distribution management of Bayer Crop ScienceLimited, who has been producing various products in the filed of crop protection for more than acentury. Data on sales and distribution of Bayer are collected through a face to face interview(shown in Appendix) with the Manager, Sales and Support of Bayer. The pros and cons of thesystem are discussed, critically analyzed and findings are listed in conclusions.1. INTRODUCTIONThe tactical goal of the marketing is to get people to buy the company’s products or services andmake sure that they are available in the market. Here is where Sales and Distribution play asignificant role in a company. Sales represent a major investment for many companies with hugeamount of money are being spent on sales staff salaries, incentives, information systems, andother sales-related expenses. Improving the productivity of the sales will help companies increaseits financial performance. To support the products and services availability, go-to-market strategyshould be formulated and distribution channels should be managed carefully.2. THE COMPANYBayer, one of the world leaders in Healthcare, Crop Science and Material Science, was originallyestablished in Germany in 1863 by Friedrich Bayer and Johann Friedrich Weskott. The objectiveof the company was to manufacture and sale of synthetic dyestuffs.Subsequently ‘Farbenfabriken Bayer and Co. Ltd.’ was set-up in Mumbai in 1896 and heraldedthe beginning of the history of Bayer in India (Fig. 1). Bayer has mainly three divisions,i) Bayer Health Careii) Bayer Crop Science andiii) Bayer Material Science.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 2
  • 4. Sales and Distribution Management of Bayer Crop Science LimitedFig. 1 ‘Bayer House’ located at Powai, Mumbai is the head office of Bayer Crop Science in IndiaThe acquisition of Aventis CropScience has helped catapult Bayer CropScience to one of thepremier organizations in the world in the areas of crop protection, seeds biotechnology and non-agricultural pest control.Bayer plans to attain leadership position in these areas in the years to come. With a sizeableexistence in 122 countries and 22,000 dedicated employees, Bayer CropScience is never too farfrom its customers.Bayer Crop Science Limited constitutes the core cropscience company and has productionfacilities at the Bayer sites in Thane, Himatnagar and Ankleshwar. With the acquisition ofAventis Cropscience Limited worldwide, Bayer is the undisputed leader in the Crop Protectionbusiness in India.2.1 Product CategoryBayer Crop Science has three products (Fig. 2)Crop Protection: It has an impressively wide range of effective solutions at hand to tackle theproblems of farmers more (Fig. 3).Environmental Science: It offers solutions to control pests and weeds efficiently and to improvethe quality of life of professional users and consumers.Bioscience: It is a global player in the research, development and marketing of seeds andsolutions derived from modern plant technologyGroup No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 3
  • 5. Sales and Distribution Management of Bayer Crop Science Limited Bayer Crop Science Environmental Crop Bio Science Science Protection Products Insecticides Fungicides Herbicides TopStar WhipSuper Confidor Fame (Rice) (Soybean) (Cotton, Mango) (Rice, Cotton) Baycor Antracol (Fruits, Veg) (Fruits, Veg) Fig 2. Products of Bayer Crop Science Fig 3. Bayer’s products are used for crop protectionGroup No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 4
  • 6. Sales and Distribution Management of Bayer Crop Science Limited3. SALESSale is an important activity in an organization. Strategic sales management involves effectiveand efficient handling of systems and processes towards successful sales. An effective salesprocess is key for closing more sales and generating more repeat business. For this carefulmanagement, following is required.  Sales force - An efficient and effective salesforce is required for enhancing the sales productivity of an organization.  Sales territories – These are important to get good customer coverage, more sales, lower costs and performance evaluation.  Sales accounts - Key account management would involve nurturing and cultivation of strong customer relations in turn building customer loyalty with time.The mission statement for Bayer CropScience is concise: “Bayer: Science for a better life”Bayer wants to enable access to improved agricultural tools for farmers who cannot currentlyobtain them through commercial channels.3.1 Sales OrganizationTo support the sales strategy, a solid sales organization is vital. It helps in the smooth realizationof sales targets and ensures perennial sales productivity. The organization and structure of thesales force depends on several factors. Bayer has a geographical based sales organization and isstructured in a way that enhance their “go-to-market” effectiveness and efficiency, whichnormally involves the establishment of appropriate channel/distribution and sales managementpractice. Also, there is a clear defined authority at each level. Hierarchy in the sales activity ofBayer Crop Science Limited is shown in Fig. 4.3.2 Sales StrategySales strategy is nothing but selling products as solutions to the customers. Sales are aboutprospecting, sales process, and after sales service. The consumer forecasting team at BayerCropScience gathers Point of Sale (POS) and other consumer data from channel sales andcategory marketing to generate an 18 month unit forecast.The company offers an outstanding range of products and extensive service backup for modern,sustainable agriculture applications. To sustain its market share, the Company is focusing heavilyon post sales services and technical support to customers. The Company sponsored severalsymposium and conferences to actively interact with the scientific community.The sales process includes managing and directing the sales force, planning of sales activities,methods of reaching out to clients, competitive differences and resources available. This isdiscussed in details here.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 5
  • 7. Sales and Distribution Management of Bayer Crop Science Limited CEO at HO in Germany Europe North Asia Latin Africa America America India (Country Head) North South West Zone East Central Andhra Zone Zone (Zonal Manager) Zone Zone Zone North Western South Maharashrtra Maharashrtra Region Maharashtra Region (Regional Manager) Region Territory (Territory In-charge) CHANNEL NETWORK for territory comprising of distributors, dealers and retailers Fig 4. Hierarchy in the sales activity of Bayer Crop Science Limited3.3 Sales ForceThe primary function of professional sales is to generate and close leads, educate prospects, fillneeds and satisfy wants of consumers appropriately, and therefore turn prospective customers intoactual ones. They are the face of the company. Hence it becomes very crucial for the company tocarefully recruit and select their sales force, keep them motivated and retained, develop andnurture them.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 6
  • 8. Sales and Distribution Management of Bayer Crop Science LimitedBayer CropScience respects and values the ethnic and cultural diversity of their sales workforceand understands that success is founded on their skills and their commitment. They are supportedin both their professional and their personal development. Sales force blends their knowledge andexperience across ethnic and geographical boundaries and provide for a unique mixture ofapproaches and backgrounds. Bayer Crop Science places great value on their qualification, andalso commitment to company values.3.4 Recruitment And Induction ProcessSales force recruiting is where a company can really look to improve bottom line results. Byeffective sales force hiring, the path to more robust results becomes a straighter one. Building asales force of high-performing salespeople is a crucial strategy for long-term growth andprofitability. Recruitment is a process of searching of prospective employees and stimulatingthem to apply. In Bayer CropScience, the need of recruitment of sales personnel is captured fromi) Inputs from the country head, zonal and regional managersii) As a result of planned expansioniii) As per the need based on employee status available by the HR departmentThe job analysis of ‘sales position’ shows the following tasks and skills required by Bayer.i) To achieve sales as per target set by superiorii) Good teamwork and team spiritiii) Local language proficiencyiv) Good communication skillsBelow are the external sources of recruitment.i) Campus recruitments from agricultural colleges of Indiaii) Advertisement in the newspapersiii) Scanning from internet by HR departmentiv) Through company website (interested candidates apply directly through Bayer’s website)Bayer CropScience HR does the screening and filters are applied as per the recruitment companypolicy.The assessment is then based on 3 rounds of interview.First round is based on the subject matter.Second round is with the Country Head or Zonal Head or Regional Head depending on position.The third round is with the HR departmentThe sole purpose of evaluating job is to predict, or forecast, how they will perform on the jobbefore they are added to the payroll. In Bayer CropScience this is based on the technicalknowledge in Agricultural science, local language proficiency and communication skills.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 7
  • 9. Sales and Distribution Management of Bayer Crop Science Limited3.5 Territory Allocation Process And StrategyA sales territory is geographically defined area for a particular product and for potentialcustomers. Dividing the entire sales region into a number of smaller sales territories facilitates insmoothing the sales management operations. The territory is assigned to a salesperson who isresponsible for the sales management activity in the region.Bayer CropScience has one territory having a couple of districts which is based on market. TheAgricultural survey conducted by a team and expert forecasts contributes in designing of aterritory.Based on agricultural economy of the country, a country is subdivided into zones which maycomprise of one or more states. Zones are further subdivided into regions comprising of manydistricts. Regions are further subdivided into territories comprising of a few districts as perconvenience. Territory boundaries are defined by grouping small geographic units together intolarger areas called sales territories. For this workload method is used. A workload model definesthe amount of selling time that should be optimally allocated to an account (no more, no less) toachieve a targeted sales goal. Historical call data, sales data, and field sales managementjudgment is normally used to support the quantification of the work load model. Once totalworkload has been determined, the process of creating sales territories involves the assignment ofboth accounts and prospects to salespeople.Territory Planning is the process a sales team uses to analyze and plan around key accounts andopportunities within their assigned sales territory. One of the important tasks of salesmanagement is allocation and to ascertain the sales force size to be deployed in a particular salesterritory. The sales territories are allocated in Bayer on the basis of infrastructure and ease ofaccess to reduce travel time. Availability of distributors, dealers and retailers is also taken intoconsideration while ascertaining the size of sales force.Bayer CropScience has identified Andhra Pradesh as a huge market and hence considered it as aseparate Zone. Territory mapping in Bayer CropScience is based on the bottom-up forecasting.3.6 Reporting Structure And SystemThe reporting structure defines how power and control is cascaded throughout the organization;who reports to whom or, who supervises whom. One could report to someone administratively,functionally or both. Also, organizations may be like tall pyramids in which there are many levelswith a person at each level controlling as few as three people, while flatter organizations willhave fewer levels, but with as many as 30 people reporting to one person.Bayer CropScience follows a hierarchical, flat reporting style.3.7 Compensation StructureThe compensation of the sales force is an important tool to boost the motivation-level of the salespersonnel. The sales force incentive compensation plan influences sales force behavior. This canaffect the productivity. Designing an efficient compensation program for the sales force is,therefore, an essential requirement. A good sales compensation plan should be economical yetcompetitive and should attract and sustain deserving sales personnel.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 8
  • 10. Sales and Distribution Management of Bayer Crop Science LimitedBayer CropScience gives a large fixed salary with less variable pay (fixed: variable = 70:30ratio). Also, it does not believe in giving any bonus or sales incentives. However to motivate itssales force rewards are given in form of promotions and sponsored foreign trip.3.8 System Of EvaluationAssessments of the sales force are crucial to the company as the sales force productivity affect theentire selling organization. Targets are set for the sales force and evaluation is done against it. InBayer Crop Science, the targets are set based on the following points.i) Territory potentialii) Past market performance and growth trendsiii) Introduction of new product brands in same channelTo measure, both qualitatively and quantitatively, Bayer Crop Science has set certain criteria.These are:i) Sales performanceii) Assigned targets achievementOne very unique strategy of Bayer CropScience for evaluation is that it sees common values andleadership principles to be essential for every employee’s daily work. The values include a will tosucceed; a passion for the company’s stakeholders; integrity, openness and honesty; respect forpeople and nature; and the sustainability of the business’s actions. The Assessment ofperformance on the basis of defined leadership principles helps to ensure adherence to thesevalues throughout the enterprise. Bayer CropScience has a yearly appraisal cycle. The appraisal isdone by the supervisor and does not follow a 360 degree appraisal.3.9 Training And DevelopmentTo have a productive sales force, firms must provide their salespeople with sales training.Trainings are crucial for building a sales force for growth of the organization. Conducting regularsales training programs help impart crucial skills in salespeople and define new roles andresponsibilities for them. Bayer CropScience gives training to its sales force on productknowledge which is given by product managers. Following trainings are also given.i) Extensive on the job trainingii) Training by product managersiii) Training by expert faculty from reputed agricultural collegesiv) Training on soft skills, product knowledgeTraining is a continual process. The need of training is captured by senior and throughevaluations in Bayer CropScience. Sales training helps socialize the new hires. It makes a salestrainee feel competent and accepted as a working partner. Bayer Cropscience has an inductiontraining session for 3-4 days at regional or zonal level. Also, there are familiarization sessionswith product manager and development teams where the new joinee works with a senior forsometime before being assigned task solely.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 9
  • 11. Sales and Distribution Management of Bayer Crop Science Limited Summary: An effective sale teams can be built that pays its own way, enhances the company sales and increases the value of any business. Bayer CropScience has an effective hiring method, evaluation technique and training program for the sales people to motivate and retain them. However, in terms of incentives as a way of motivation is lacking. Also, the appraisal is only once a year and only through the supervisor. This probably needs to be modified into a bi-yearly appraisal or an in-formal appraisal during the year.4. CHANNEL AND DISTRIBUTION STRATEGYChannel partnerships are frequently considered an essential part of an organization’s productsales and distribution strategy, which makes this a challenge for many sales organizations.Recognizing that a successful channel is critical to continued corporate growth, many suppliershave tried to sell through channels without fully realizing that it requires a management model – amodel involving structured selling processes, a common language, and an approach to managingrelationships. In this section, Channel strategy (Fig. 5) of Bayer is studied. CHANNEL NETWORK Company’s Territory In-charge Distributor Distributor Number: 3,000 Dealer 1 Dealer 2 Dealer number: 18,000 to 20,000 Retailer number: One Lakhs Consumer Retailer 1 Retailer 2 Consumer Consumer Consumer Consumer Consumer Fig 5. Bayer’s Channel StructureGroup No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 10
  • 12. Sales and Distribution Management of Bayer Crop Science Limited4.1 Channel EnvironmentThe customers are mainly farmers and workers related to agriculture industry as the particularrange of products are for pesticides, fungicide and herbiside. They are not so well educated hencethe company has to take various initiatives to educate them, promote their product, and explainthe usage and benefits of the products and builder mutually beneficial and lasting relationship.The farmers will prefer to use the products if they prove to be cost effective in the specificcountry context and beneficial. The product is also promoted through word of mouth and theterritory manager and the channel partners have to be very customer friendly.There is competition from Rallis, Syngenta and other players. The market is well defined andmature. If Bayer has to launch a new product it has to provide availability, education and support.As the products are related to agriculture, hence the demand is seasonal. The company is in thebusiness for a long time and based on previous years sales, the demand can be near accuratelyforecasted. Since the company has divided to the lowest unit a territory, it will be easy for thecompany to predict the right forecast.4.2 Channel StrategyChannel strategy is a process that can allow an organization to concentrate its limited resourceson the greatest opportunities to increase sales and achieve a sustainable competitive advantage.The company has divided the entire country into zones, regions and territories for effective andefficient coverage for sales. Channel partners are assigned at the territory level. The distributor isat the top. Under the distributors are dealers and under them the retailers.Products are to be sold under license. Hence for any customer needs, they are directed to thenearest dealer or the retailer.The territory in charge interfaces with channel partners at all levels of product promotion, sales,appraisal, rewards and incentives. In Bayer, channel strategy is that the distributors have toachieve a pre defined target.4.3 Channel DesignThe channel design is nothing but the decisions associated with forming new channel or alteringan existing one. These design decisions are critical as it influences the marketing strategy. Alsochannel is the means through which the organisation can venture into business, communicate tothe customers and physically deliver the product.4.3.1 StrategyThe three main strategies on which Bayer’s Channel design are based on are  Relationship with channel members  How should the marketing mix be used  Evaluation and Motivation of the Channel members.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 11
  • 13. Sales and Distribution Management of Bayer Crop Science Limited4.3.2 Framework to Design the Channel StructureBayer CropScience has based its channel structure (Fig. 5) on  Customer Segmentation – The market has been split into the end-user. The relevance of this to channel structure is in the way the company relates to the development and service of their products. The end-users are poor farmers, farm owners etc. Based on the segmentation, Bayer CropScience has various channels to target the consumer.  Sales Distribution4.3.3 Channel SelectionChannel selection and deployment are one of the most critical issues the companies are facing today.Consumers are in the drivers’ seats, as they should be, when it comes to the buying relationship. Powerfulproducts and great brands no longer provide sustainable differentiation to consumers. Increasingly, thesales channel creates the most powerful and sustainable differentiation in delivering superior value toconsumers.The consumer for Bayer CropScience are mainly uneducated and poor farmers of India living in villageswhere there is a monopoly and an unwritten law. Here it becomes very difficult to break into for thecompany and hence is heavily dependant on the channel. This it becomes very important to have a verystrong policy and criteria’s for selecting the channel. Bayer CropScience takes the following three factorsinto consideration for channel selection.  Demand from consumers  Variable cost involved  Competitors4.3.4 Design of Distribution ChannelBuyer CropScience has multiple distribution channels. These multiple channel models focuses onproviding information, purchase/ fulfillment orders, educating the farmers, after sale servicing,and technical support. As a proactive strategic move, the Company has entered into agreementswith key corporate retailers.Multi-ChannelAn initial step in building a successful multi-channel strategy involves segmenting customerswhich Bayer Crop Science does as part of their Channel design framework. In the multi-channelframework the customer segmentation scheme is developed based on how customers use variouschannel offerings and how Bayer Cropscience can manage their relationships with them. Themulti-channel distribution channel is vertically integrated to allow for firm’s control over thedistribution.Multiple products through the same channelBayer Cropscience distributes multiple products through the same channel also. As the companydistributes multiple products through the same channel, Bayer Cropscience maintains stockbalance for all products byGroup No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 12
  • 14. Sales and Distribution Management of Bayer Crop Science Limited  Low distribution cost  Inter branch transfers – whenever one branch has excess products than required.  Stock replenishment - The Company is well integrated through one of the best IT solutions and SAP ERP.Bayer Cropscience’s crop protection products are marketed either via wholesalers or directlythrough retailers by means of a two- or three-step distribution system, depending on local marketconditions.The products of the Environmental Science Business Group are addressed to both professionalusers and consumers in the non-agricultural segment and are distributed through differentchannels. Bayer Cropscience green industry, pest control and vector control products aremarketed directly to professional users, while home and garden products are sold to consumersthrough specialized retailers.Duplicate safety stock at branch locationsCompany calculates the demand (which is seasonal based) in advance based on past experienceand accordingly distributes the product to the regions. They do not keep any safety stock atbranch location. However, if there is an additional demand of a particular product in a particularregion and the same is available in excess in nearby region, product may be redistributed from thenearby region.4.3.5 Marketing mixPriceFor Bayer CropScience, the Price and the Product are the relevant Marketing Mix areas. Demandfor agricultural chemicals depends mainly on demand for various crops, which in turn depends oncrop prices. Price realization is one of the key molecules of Bayer Cropscience as there is intensecompetition from low cost manufacturers and from importers at substantially low prices.ProductBayer Cropscience realizes that distribution of seeds along with crop protection products is goingto make the Company a stronger player in the market with a much broader portfolio ofagricultural solutions. The success of Bayer Cropscience depends on its ability to offer new andeffective solutions to the farming industry. To add true value for the customers newly evolvingpest problems have to be solved and older products need to be replaced by more modern cropprotection products. It is Bayer’s goal to introduce two to three new compounds to the marketevery year,The successful integration of Bayer CropScience, which was formalized before the main cropseason in India, resulted in a complimentary range of products for the company, as well as awider distribution network. In 2003, four new products were introduced into the market.The company offers an outstanding range of products and extensive service backup for modern,sustainable agriculture and for non-agricultural applications.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 13
  • 15. Sales and Distribution Management of Bayer Crop Science Limited4.3.6 Channel PartnersBayer in India has a network of distributors, dealers and retails.Bayer selects it channel partners based on  Product knowledge  Willingness  Financial capabilityChannel partners must be experts in sales representation in terms of product knowledge. Theymust have good financial strength and probably related to the industry. Credit limit is based onfinancial strength. Candidates with good financial strength would be given all range of products ifdesirable or it can be restricted as per evaluation and need. However if a person is not so solventfinancially, but has knowledge in product and willingness, Bayer may still choose him/her achannel partner with limited product stock.In some places, the dealer and the retailer are the same. Each retailer ought to have a separatelicense to stock the Bayer products. Queries are generally resolved through the internet. Aprospective consumer is directed to the nearest retailer or office based on the need. Sales are notdone through the internet medium.4.4 Managing Channel Members And Conflict4.4.1 Managing The Channel MembersPartnership is the foundation of Bayer CropScience customer philosophy. Bayer’s customers aremore than simply clients who buy products. They are partners with whom Bayer CropSciencestrive to build a durable relationship based on trust and a positive, mutual return.The channel members are managed by the territory incharge. Managing the channel membersconsists of assigning distributors, dealers and retailers. There should have proper licenses forselling the products as per government regulations. The channel members should stock only itemsfor which the company has given permission to stock. They should give a higher priority to salesfor the company and recommend to clients and customers.The company promotes a spirit of cooperation among channel members in the same territory inthe sense that if a particular retailer does not have a particular product then the other nearestretailer should cooperate to make it available subject to sufficient stock levels. The territoryincharge is the designated single point of contact. It collects the feedback and grievances from thechannel members. It is also the spokesperson for the company who communicates companyproduct policies, schemes, incentives and rewards.4.4.2 Managing The Channel Members ConflictThere can conflicts between the channel members when there are differences between theobjectives of the channel and the company. At Bayers the most common conflict would bebetween two or more channels which compete against each other to sell to the same market.Channel member perceives another channel member(s) as preventing or impeding it fromachieving its goals. Conflict arises also from incompatible desires and needs.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 14
  • 16. Sales and Distribution Management of Bayer Crop Science LimitedSuch a competition can lead to decline in the performance of both the channel members. Theindicators of channel conflict would be  Low channel productivity  Deterioration of channel relationships  Poor customer relationships  Competition for sale in the same geographical area.To avoid such situations Bayer follows two basic principles  Territory in charge looks after any issue  By maintaining clear boundaries for authority and operation4.5 Appraisal And Evaluation Of Channel MembersGetting the right channel partners is an essential component of effective channel management.Effective partner recruitment is a critical component to the channel strategy so that one canensure a strong market penetration and a healthy pipelineLike most companies Bayer evaluation criteria is base on qualitative and quantitative measures.  Meeting the sales targets  Customer Relationship  Financial Discipline  Inventory Management  Selling AbilitiesChannels can be divided according to their efficiency as  Level 1 (Novice)  Level 2 (Competent)  Level 3 (Proficient)  Level 4 (Expert)They also have channel motivation schemes such as, ‘Provide Training and counseling if needed’and ‘Schemes during peak season’. Bayer CropScience has launched ‘elitia’ a very exclusivedistributor loyalty program which offers an exciting array of benefits to its customer/channelmembers..4.6 Analysis Of Marketing Channel StructureThere are approximately 3,000 distributors based in big towns and cities. Under the distributorsare the dealers.There are 18,000 – 20,000 dealers. Each distributor has around 1,000 dealers covering 30-40villages.Each dealer has 15-20 retailers. The number of retailers is very large and in lakhs.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 15
  • 17. Sales and Distribution Management of Bayer Crop Science LimitedThe channel structure is managed by the territory incharge of the company. The territory is thelowest subdivision of sales and distribution organization. The framework behind the design of theChannel Structure is based on Customer Segmentation and Sales Distribution. Demand fromcustomers plays a very vital role on channel selection. Bayers follows a multiple verticalintegrated distribution channel for it product distribution. 11% 9% BAYER Syngenta 7% Rallis Others 73% Fig 6. Market share of BayerThe company has only 11 % market share (Fig 6) and there is a scope of vast improvement andgrowth of the channel structure to command a larger market share. This can be achieved throughinitiatives channel participation in organizing the gathering, educating the farmers and studentseven in the agricultural colleges. The company should reach out to zones and regions which donot perform well as compared to other to break the barriers of traditional thinking, educate thosefarmers of the benefits of using the company products, quantifying the losses incurred due toavoidance of pest control, the need for quality products in the market and opportunity to availbetter prices and export destinations for quality crop. Summary: Many companies drive their channel strategies based solely on financial criteria, namely cost of selling, not treating their sales channels as investments which are expected to produce a reasonable return. However, Bayer CropScience realizes the ability of the channel to reach the right customers at the right time with the right solutions. It has also realized that channel partnership and maintaining relationships with channel partners are key to growing and sustenance. Bayer CropScience has also invested in two main areas to provide the value proposition to the consumers/customers. One is launch of new innovative products every year and second is educating the consumer and providing after sales service. Bayer CropScience is a customer oriented company, committed to a partnership approach, through products and services that provide clear benefits to the customers. However, Bayer Cropscience needs to bring out a process for Channel conflict management. Although they have not faced any major problems yet, however since they have a multi-channel and multi-product-same distribution channel, they are at a high risk of channel conflicts.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 16
  • 18. Sales and Distribution Management of Bayer Crop Science Limited5. CONCLUSIONSi) Market Leader - Bayer Crop Science is the market leader and one of world’s major suppliersof crop protection products, seeds and plant technology. To maintain its position, Bayerconstantly innovates new products through its research.ii) Well-defined Sales and Distribution Channel - Bayer has a well defined sales anddistribution department for each of the 120 countries the company operates in. For each countrythey have a country head, zonal head, regional head and the territory in charge. They have a richchannel network comprising of distributors, dealers and the retailers being mainly looked after bythe territory in-charge at the lowest level.iii) Sales-force - The salesforces are mainly procured from the agricultural colleges and throughthe job portals and the consultancies. The product manager and the research team provide productbased training to the sales force. Training is also imparted in soft skill and IT systems. Thecompany arranges trainings from experienced faculty of agricultural colleges on need basis.iv) Compensation - The company provides a high fixed salary component comprising 70% ofemoluments and low variable components (30%). Bonuses and rewards are given in the form ofpromotion and sponsored foreign trips. However, in terms of incentives in order to motivatesalesforce is lacking.v) Appraisal System - The appraisal system is only once in a year and only through thesupervisor. This probably needs to be modified into a bi-yearly appraisal or an in-formalappraisal during the year.v) Product Awareness - The company arranges product awareness programs among poorlyeducated farmers who do not use modern methods and techniques of crop protection and seeds byorganizing gatherings and demonstrations. The company creates a repeat experience for thefarmers through keeping in touch with them, collecting their feedback and reusing it in researchto server the customer better and to satisfaction.vi) Managing Channel Conflicts - Bayer Cropscience needs to bring out a process for Channelconflict management. Although they have not faced any major problems yet, however since theyhave a multi-channel and multi-product-same distribution channel, they are at a high risk ofchannel conflicts.References[1] Class Note on Sales and Distribution Management, by Prof. Sanjeev Varshney, XLRI, Jamshedpur, 2009.[2] Venugopal P., Sales and Distribution Management, Response, New Delhi, 2008.[3] Official website of Bayer [http://www.bayer.co.in, http://www.bayercropscience.com]Acknowledgement: The authors would like to acknowledge Mr. Sourav Banerjee, Manager,Sales Support of Bayer Crop Science Limited, Powai, Mumbai, for his help in giving suggestionand providing information on sales and distribution.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 17
  • 19. Sales and Distribution Management of Bayer Crop Science Limited Appendix Interview with Manager (Sales) of Bayer Crop Science[These information on sales and distribution of Bayer Crop Science Limited are collected throughface to face personal interview with the Manager - Sales Support of Bayer, Mr. Sourav Banerjeeon 4 August 2009 (10:45 a.m. to 12:00 noon) at Bayer head office, Hiranandani Garden, Powai,Mumbai.]A. Introductory Information1. Name of the Organization: Bayer Crop Science2. Year of Inception: 18633. Ownership of the Organization (Please tick the appropriate):i) Public Sector ii) Private Sectoriii) Joint Venture (public & private) iv) Joint venture (private & private)v) Public Limited Company4. Locations of Business: i) Single location ii) Multi location5. Nature of Business (tick the appropriate): i) Automobiles ix) Hospitality ii) Banking x) IT iii) Cement xi) ITES iv) Chemicals & Fertilizers xii) Petrochemicals v) Electronics & Telecommunications xiii) Power vi) Engineering xiv) Processing vii) Pharmaceutical xv) Retail viii) FMCG xvi) Textiles xvii) Others (Pesticides)6. Main Product Category:i) Insecticides (Confidor®/ Admire®, Calypso®, Decis®, Temik®, Oberon®)ii) Fungicides (Antracol®, Baycor®, Folicur®, Monceren®)iii) Herbicides (Atlantis®, Basta®, Topstar®, Whip Super®)Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 18
  • 20. Sales and Distribution Management of Bayer Crop Science LimitedB. Sales Management1. Sales OrganizationPlease give the hierarchy of the sales organizationi) CEO at Head Office in Germanyii) Whole world is divided into five Segments (Europe, North America, Latin America, Asia,and Africa)iii) Each segment comprises of a few countries.iii) Every country is headed by a Country Headiv) Each country is divided into Zone and is headed by Zonal Manager (i.e., India is dividedinto six zones, East, West, North, South, Central and Andhra zone)v) Each zone is subdivided into Region and is headed by Regional Manager (i.e.,Maharashtra is divided into three region, North Maharashtra, South Maharashtra andWestern Maharashtra).vi) Each region is sub divided into Territory and is headed by Territory in-charge.2. Recruitment and Induction Processa) How is the requirement for new sales person captured?i) Inputs from the country head, zonal and regional managersii) As a result of planned expansioniii) As per the need based on employee status available by the HR departmentb) What is expected from the Sales Person who wants to join the company?i) To achieve sales as per target set by superiorii) Good teamwork and team spiritiii) Local language proficiencyiv) Good communication skillsc) What are the sources for recruitment?i) Campus recruitments from agricultural colleges of Indiaii) Advertisement in the newspapersiii) Scanning from internet by HR departmentiv) Through company website (interested candidates apply directly through Bayer’swebsite)d) Is the selection just based on only interview, or are there any other set of evaluations?The candidates are filtered by HR as per company policy of recruiting for particularposition and selections are bases on interviews organized by the HR department.e) How many rounds of interview happen?Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 19
  • 21. Sales and Distribution Management of Bayer Crop Science LimitedThree rounds.i) One with subject matter expertii) Next with Country Head or Zonal Head or Regional Head depending on position.iii) The last one with the HR departmentf) What is he judged on? What qualities? (Ex. Past experience, communication skills, educationetc). Please give the order.i) Candidate should have technical knowledge in agricultural scienceii) Local language proficiencyiii) Must possess good communication skillsg) After joining, what is the procedure of induction? Any training imparted to new joinee?Company arranges the following training sessionsi) Induction training (3-4 days) at regional or zonal levelii) Familiarization sessions with product manager and development teams3. Territory Allocation Process and Strategya) How is a territory designed (population size, area wise, ability to serve market etc)?One territory consists of a few districts (1-2 districts). This depends oni) Agricultural market survey conducted by the teamii) Expert forecastb) What method is used for deciding sales territories (i.e., Breakdown method, Geographical,Workload etc.)Sales territories are divided using the workload method. Based on agricultural economy ofthe country, a country is subdivided into zones which may comprise of one or more states.Zones are further subdivided into regions comprising of many districts. Regions are furthersubdivided into territories comprising of a few districts as per convenience.c) How are these territories allocated?Territories are allocated based on infrastructure and ease of access, availability ofdistributors, dealers and retailers.d) What territory mapping process do they follow?Company maintains Bottom-up process.4. Reporting Structure and SystemsHierarchical, with a flat style of working.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 20
  • 22. Sales and Distribution Management of Bayer Crop Science Limited5. Compensation Structurea) What is the framework for designing the compensation package? (i.e., Fixed salary, incentivebased or territory, variable salary etc.)Large fixed salary with less variable component (70% fixed salary + 30% variable).b) Are any monetary benefits given outside salary?Bonuses and rewards are given in the form of promotion and sponsored foreign trips.6. System of Evaluationa) How does the appraisal of the sales force happen?Appraisal is done once in a year by the supervisor. Bayer does not follow 360 degreeappraisal.b) Are any targets set for the sales force each year/month/half year/quarterly etc?Yes, targets are set for individual sales force.c) What are the criteria for setting the targets?i) Territory potentialii) Past market performance and growth trendsiii) Introduction of new product brands in same channeld) What are the evaluation criteria? Is it result oriented completely or product wise or territorywise etc? Or is it based on where the product is in as per Product lifecycle?i) Sales performance (both quantitative and qualitative)ii) Assigned targets achievement7. Training and Developmenta) What trainings are given to sales force?i) Training on product knowledgeii) On job training by senior sales persons to enhance selling skills, communication skill andto build confidence level.b) Are the trainings based on evaluation?Yes they are based on evaluation too.c) What motivational activities are taken by the department for motivating the sales force?Promotion and sponsored foreign trips.Group No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 21
  • 23. Sales and Distribution Management of Bayer Crop Science Limitedd) How is the exceptional sales force personnel further developed?i) Extensive on the job trainingii) Training by product managersiii) Training by expert faculty from reputed agricultural collegesiv) Training on soft skills, product knowledgeC. Channel Management1. Channel Environmenta) What are the channels for this product category?Distributors - Dealers - Retailer2. Channel Strategya) What is the strategy?Distributors have some target to achieve.3. Channel Design and Structurea) What is the process of designing/deciding a new channel?Channel partner is selected mainly based oni) Product knowledgeii) Willingnessiii) Financial capabilityHowever if a person is not so solvent financially, but has knowledge in product andwillingness, Bayer may still choose him/her a channel partner with limited product stock.b) What is the channel structure and how many for each level?Bayer’s channel structure is three tiersi) Distributors (approximate number: 3000)ii) Dealers (approximate number: 18,000-20,000) andiii) Retailer (approximate number: more than lakh)c) What is the framework to design the Channel Structure? (Buyer need, Customer segmentation,distribution etc)Customer Segmentation and Sales DistributionGroup No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 22
  • 24. Sales and Distribution Management of Bayer Crop Science Limited4. What Is The Basis Of Channel Selection?i) Demand from customersii) Variable cost involvediii) Competitors5. What Is The Design Of Distribution Channel?i) Singleii) Multiple6. If Multiple Distribution Channel Exits, Which Of The Below Does The Company Follow?i) Vertical Integratedii) Horizontal Integrated7. Are There Multiple Products Distributed Through The Same Channel?i) Yesii) No8. Which Of The Marketing Mix Is More Relevant To Them?i) Priceii) Placeiii) Productiv) Package9. Does The Company Believe In Maintaining Duplicate Safety Stock At Branch Locations?Company calculates the demand (which is seasonal based) in advance based on pastexperience and accordingly distributes the product to the regions. They do not keep anysafety stock at branch location. However, if there is an additional demand of a particularproduct in a particular region and the same is available in excess in nearby region, productmay be redistributed from the nearby region.10. Incase Of Multiple Product Distributed Through Same Channel, How Does TheCompany Maintain Stock Balance For All Products?i) Low distribution costii) Inter branch transfers - This is possible if one branch has excess products than required.iii) Stock replenishment - The Company is well integrated through one of the best ITsolutions and SAP ERP.11. Managing The Channel Members And ConflictHow are channel members conflicts resolved?i) Territory in charge looks after any issueii) By maintaining clear boundaries for authority and operationGroup No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 23
  • 25. Sales and Distribution Management of Bayer Crop Science Limited12. Appraisal And Evaluation Of Channel Members.a) What are evaluation criteria of channel members?i) Based on qualitative and quantitativeii) Sales and target achievementiii) Distribution reachiv) Cooperative naturev) Whether helpful and supportiveb) Are there any channel motivation schemes? (Customer oriented, goodwill, margins, alliancebased, trainings etc)i) Schemes made available especially in peak season,ii) Provide training and counseling if neededGroup No. 20, PGCBM 15, XLRI, Jamshedpur, Centre: Powai and Juhu, Mumbai 24