This case discusses the dilemma faced by Weikang Pharmaceuticals regarding a distributor, Li Zhong, violating their agreement by engaging in cross-boundary sales. Li Zhong sold products in Nanning, outside his territory, undercutting the standard price. Opinions on how to address the issue varied. Some recommended punishing Li Zhong to uphold the system, while others felt he increased sales and motived other distributors. Ultimately, the company collected opinions to make a decision that balanced growth and management challenges.

1. Weikang Pharmaceuticals Co.
Ltd.: CHANNEL MANAGEMENT
DILEMMA
Presented By- GROUP 5
Roma Kumari (19040)
Saina Anand (19041)
Sakshi Lohia (19042)
Sandeep Kr. Singh (19043)
Sanidul Islam (19044)
Shubham Kishor Singh (19048)

2. Introduction
• This case is about the Weikang Pharmaceuticals co. ltd. and the issues
related to the trans-boundary sale.
• It was established in 2005.
• Their Products are sold all over China and exported as well.
• Their products include high technology biomaterials used for medical
application like TISTAT.
• In the field of surgical haemostatic materials in China, TISTAT occupied
80% of the market.
• Target customers are hospitals who use Weikang products in
surgeries.

3. Distribution Channel
Company operated
according to the principles
of direct supply to
distributors i.e. first level
distributor mode.
They allocate distributor in
different location with
monopoly.
Principles of unified bidding
and tendering and no trade
credit
Sales region Territory
Number of
Distributor
Northern China
Beijing, Tianjin, Hebei, Shanxi, Inner
Mongolia
6
Eastern China
Shanghai, Shandong, Anhui, Jiangsu,
Zhejiang, Fujian, Jiangxi
10
Southern China Guangdong, Guangxi, Hainan 10
North-western
China
Shaanxi, Ningxia, Xinjiang, Qinghai,
Gansu, Tibet
20
North-eastern
China
Liaoning, Jilin, Heilongjiang 10
South-western
China
Chongqing, Yunnan, Guizhou, Sichuan 25
Central China Hunan, Hubei, Henan 10

4. About distributors
• Product sales and promotion both were done by the regional
distributors.
• Distributors were incentivized depending upon the sales
performance.
• Distributors were under an agreement with the organisation and they
were supposed to abide by the contract made.
• Distributors were not allowed to enter another region.

5. Issues with this Company
• Issue arises in the Cross-Boundary Sales.
• Liuzhou’s one of the distributor Violated the company agreement.
• He also disturbed the market-price system.
• Issues raised between distributor Li Zhong (Liuzhou) Southern
China and Sun Qiang (Nanning), Guangxi Zhuang, South China

6. About Li Zohng and Sun Qiang
Li Zohng Sun Qiang
Sales Volume (million/year) 13 8
Number of Clients 44 41
Medical Institution in their region 1165 2631
Customers in their region Full penetration in his territory.
Many potential customers still
exists.
This shows the inefficieny of Sun Qiang that even after getting monopoly of such potential market he had
less clients and sales volume.

7. How Li Zong Violated the agreement.
• In Nanning, there was a large polyclinic hospital named as Second
People’s Hospital.
• Zhong saw this hospital as the best prospect for gaining sales.
• Earlier, Qiang has already pitched their product, but rejected several
times.
• Now, Zhong offered Weikang’s products for Y330, which is lower than
the standard that Weikang had set for its distributors.
• After sometime, this news reached to Qiang who is the the official
distributor of Nanning, then he complained about this in the
company.

8. Dilemma in taking Decision:
• There were 7 regional managers and 4 representatives from the sales
department there. The following were given their opinion in this case.
• Ma Jie, the sales manager supervisor for Guangxi.
• Kun, the manager of south China region.
• Tao Ran, manager of East China.
• Su Jia, manager of the sales department, Guangdong
• Yang Rui, sales department manager, Sichuan
• Huang Xing, manager of Northwest China
• Li yang, sales manager of Hunan
• Liu Xing, a manger of the North China
• Liu Cheng, sales director of Weikang

9. • According to Jie, Liuzhou’s violated the agreement and disturbed the
market price.
• Liuzhou put distributors in Nanning at risk of losing other clients.
• This will tatters the company’s present price system.
• It also lead to negative influence on sales in other areas of Guangxi.
• He decided that Zhong forfeit his gains to compensate for losses and
withdraw themselves from the Nanning’s Market.

10. • According to Kun, Zhong increased the market share in Nanning and
overall company total sales were rising, ultimately profit would rise.
• He said, it would encourage distributors in other places to cultivate
this kind of opportunity to improve sales.
• Punishment would discourage other enthusiasts to improve sales.
• According to Tao Ran, if Liuzhu’s distributor left unpunished, it would
create conflict between Liuzhou and Nanning and ultimately sales
would be impacted.
• By giving control of many markets, bargaining power increased which
results in great loss.

11. • According to Huang Xing, if company cannot control this type of
action, it became common practice and damage to the company.
• If the distributor cheat the company commission or obtained lower
prices for products, the company reputation would suffer.
• He also stated that cross-boundary sales also made it difficult to
create sales plan. And create imbalances in regional development and
lead more vacancies.
• According to Li yang, he is against punishing Liuzhou distributor.
• Liuzhou contributed a large sales volume and profit to the company
each year.
• If we loose such distributor, it would be a great loss for the company.
• Cross-boundary sales would not affect the Weikang’s because its
market were mainly hospitals where communication among them
was minimal.

12. • According to Su Jia, Liuzhou distributor was not wrong, infact he blamed
Nanning distributor for his poor sales skills.
• Also, Nanning's distributor was selling competitor’s products.
• Liuzhou’s helps in extending market. Where as Nanning distributor was not
able to carry out his job, so he would not blame those who replace him.
• Liuzhou only taken vacancies, not the current clients.
• He suggest to re-divide distributors sales scopes to enhance company sales
volume.
• According to Yang Rui, Liuzhou is not affected the current client of Nanning.
Some hospitals supposedly begun to bargain for lower price.
• It would lead to conflict between distributors and the manufacturer.
• Sales manager have to choose 2 alternatives: Explore new market or
choose new distributor.

13. • According to Liu Xing, cross boundary sales strengthen the
distributor’s sense of crisis and motivate them to explore vacancies.
• But also dangerous distributor would damage company’s price system
and sale system.
• He suggest that some staff members could send to supervise and
offer guidance to regions where vacancies existed. He believed that
neither severe punishment nor ignoring the management would help
the company’s development.
Although a definite answer had not yet been found. And instructed all
relevant staff to submit detailed survey repot within one week.

14. Name Cross-Boundary sales Suggestion Effect on Company
Ma Jie Not supported
He urges to forfeit Zhong gains from cross-
boundary and withdraw from Nanning
Market.
Lower price offerings could hamper the company’s price
system.
Kun Supported
He said, severe punishment would
discourage other distributor about
improving sales.
This had increased the Market share and sales volume.
Tao Ran Not supported
According to him, if this behaviour left
unpunished It leads to conflict between
Liuzhou and Nanning.
This would Harm company’s management of
distribution and result great loss
Su Jia Supported
He suggests that company should re-divide
distributors sales scopes.
He taken away vacancies in Nanning’s market.
Yang Rui Not supported
If this action not addressed, then sales manager torn
between : Explore new market or choose new
distributor.
Huang Xing Not supported
Cross-boundary sales made difficult to create sales plan
and leads more vacancies.
Li Yang Supported
He suggests severe punishment was
unnecessary.
He supported because Liuzhou distributor contribute
higher sales. Losing such people would be a great loss.
Liu Xing Not Supported
He suggest that company should send staff
to supervise and offer guidance to regions
where many vacancies existed.
It would strengthens and motivate distributor to
explore vacancies in the market but it would create
competition among distributor, would damage
company’s price system.
Conclusion based on the opinion given by representatives.

15. Opinion of Distributor
regarding how to deal
with Cross-boundary
sales:
 In this, distributor hoped to
resolve the quarrel and reconcile
the parties concerned, with
more than 50% of them
preferring a friendly negotiation
or peaceful settlement.
2
10
8
13
8
Discharge Contract
Economic Punishment
Ecourage Active Distributor
Peaceful Settelment
Friendly Negotiation
Opinion of Distributors
Series1

16. Opinion of Sales Staff
 In this, sales employees tend to
favour punishing the distributor
concerned.
 Among these 50% chose
economic punishment or a
discharge of contract.
4
18
6
10
2
Discharge Contract
Economic Punishment
Ecourage Active Distributor
Peaceful Settelment
Friendly Negotiation
Opinion of Sales Staff
Series1

17. Support For Peaceful Settlement Support For Severe Punishment
Increase market share and sales volume Cross boundary sales breach of contract
Driven and enthusiastic- Weikang
development
Severe action would discourage other
distributor who were enthusiastic about
improving sales.
Would motivate other distributor to cultivate
vacancies in the market.
Can start a price war and negative effect on
sales.
Cannot lose the dedicated high performing
distributors like Zhang
Degrade a company market share and
reputation
Make distributor network difficult to
manage
Outcome to choose any one of the settlement.

18. Case Analysis
• In this case, the main issue is the cross-boundary sales. But this was
happened because of Vacancies in other region.
• The Management of the company should keep eye on those
vacancies and try to fulfil them, so that this was not happened.
• The reason for cross boundary sales was also because of Distributor
had reached full penetration in their territory and now they are
looking for new opportunity.
• The management should focus on good sales man who contributed
large part of sales to the company and also provide other region to
increase their sales and company’s market share.

19. Recommendations:
• Incentive plans
• Management
• Converting sales