2. OVERVIEW
STRATEGIC INTENT
Investigation into under performing Sales Operations for Autotron
STEP A:
Suboptimal Performance – FY15
Shortcoming Of Current
Strategy
Gap Review
PROBLEM ANALYSIS AND SOLUTION
STEP B:
Analysis Of Factors For Decline In
Profitability
STEP C:
Roadmap To Get Sales
Operations Back On Profitability
Track
3. Profit & Loss STUDY
From the P&L we can highlight the major factors contributing to the decrease in Profits
S NO. DESCRIPTION FY 13-14 FY 14-15 DIFFERENCE % CHANGE
TOTAL SALES 3275 3450 175 5%
1 SALES TURNOVER 11007 11898 891 8%
2 DEALER MARGIN+ 640 692 52 8%
3 DISCOUNT- 569 656 87 15%
4 OEMINCENTIVE+ 564 612 48 9%
5 NET MARGIN 635 648 13 2%
6 NET HANDLING CHARGES+ 5 2 -3 -60%
7 FINANCE INCOME+ 41 36 -5 -12%
8 INSURANCE INCOME+ 24 21 -3 -13%
9 OTHER INCOME+ 3 1 -2 -67%
10 NET RETAINED INCOME 708 708 0 0%
11 TOTAL OVERHEADS- 490 544 54 11%
a FIXED SALARY 246 285 39 16%
b INCENTIVES 21 24 3 14%
c FIXED COST 112 115 3 3%
d VARIABLE COST 68 71 3 4%
e MARKETING COST 43 49 6 14%
12 EBITDA 218 164 -54 -25%
13 INTEREST COST- 112 154 42 38%
14 PROFIT BEFORE DEPRECIATION 106 10 -96 -91%
4. Decreasing Profits
Revenue
Price/ Unit No. of Units
Costs
Fixed Costs Variable costs
PROFITABILTY ANALYSIS
Discounts Salaries
Marketing
Incentives
Interests
5. DISCOUNTING
• Discount given has drastically increased by 15%
compared to FY13-14 (sales growth for same period
being just 8%) due to the new discount structure
• Sales team has the authority to give discounts of
Rs.2000/4000 and greater subject to approval
• Non-discounted sales volume was reduced to zero
• As discounting strategy has not directly helped in the
desired volume growth, dependency on discounts to
increase the volume needs to be reduced
• Major discounting to be given to bulk orders and
hot leads attracted/ poached from competitors
• Incentive structure to be revised and to be
dependent on the non-discounted sales
Strategy Ahead
Current Situation
6. REMUNERATION – SALARY &
INCENTIVES
• Increase in team size by 24% compared to FY14
• Cost incurred on fixed salaries increased by 16%
• Resources under utilized as efforts channelled over
non-yielding lead generation activities
• Incentives increased from Rs.641/vehicle to Rs.695/
vehicle
• Increase in team size will help in the long term vision
of increasing volume and sales
• Effective training focused on quality selling &
product features imperative for the team
• Incentive structure for sales team to be dependent
on sales of non-discounted vehicle
Strategy Ahead
Current Situation
7. MARKETING COST
• Increase in Marketing cost observed by 14%
compared to FY14
• Marketing budget majorly deployed for enquiry
generation through employee and customer
referrals as well as for web enquiries, yielding 40%
increased enquiries over previous year
• Low conversion rate from marketing channels with
additional spends
• Major sales conversion from walk-ins & referrals
• Liaise with stakeholders like financing institutions for
better lead generation
• Efficient and rigorous follow up with potential leads
• Team to focus on customer satisfaction &
relationship building as major leads are achieved
through referrals
• Benchmarking against competitors 'prices for
discounts and better lead conversions
• New campaigns such a leasing vehicle for trial days
to customers for better conversion rate of hot leads
can be rolled out
Strategy Ahead
Current Situation
8. INTEREST COST DUE TO INVENTORY
• Interest cost rose up by 38% from previous year
• Monthly off-take from OEM was increased for
incentive of Rs.2000 resulting in increased inventory
• Average Inventory level has increased to 59 days
from 35 days
• Off-take parameter from OEM to be strictly in line
with the retail sales for a particular quarter
• Decrease the current inventory by phasing reduction
in Off-take over next quarter
• FIFO clearance of vehicle to be followed for
decreasing the aging stock of inventory
• Seek support from OEM for additional discounts for
inventory age > 90, 180 and 360 days respectively
• Finance TAT and order cancellations to be reduced by
checking the relevant parameters & customer
eligibility for processing before invoicing
Strategy Ahead
Current Situation
9. SUMMARY
Despite a clear cut strategy through increased marketing and discount, Suresh was not able to
improve the performance of sales operations. Do you agree with the strategy? If yes, please
comment identify the strategic, process, performance tracking and review gaps that led to dismal
performance during FY15. If no, please provide your alternate strategy.
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Analyse and highlight the prime factors for close to 91% drop in profitability
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What are the corrective actions recommended for Suresh to get back the sales operations on
profitability track?
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