Distribution Management – Decline of an Industry

Background:

XML Pvt. Ltd (name changed as the company still exists in a different sector) entered the market with a vision of being the market leaders in home appliances. They entered the market with Television as their only product in the market. When they entered the market, there were not many major players in that segment in India. Soon they became very famous and every household had its name associated with the company. The company had a wide network of local dealers and supplies. XML had very powerful sales forces who were locals from the various states in India and the market penetration was easy for XML. Slowly, XML expanded its product line from beyond TV and started manufacturing Washing machines, refrigerators and other electronic home appliances.

XML was an innovative organization with the R&D department consisting of engineers from the top engineering colleges of India who were working with the future technologies. Hence it always took its customers by surprise and quality was never a problem for XML as its products usually persisted for more than 10 years without a single complaint.

Supplier problem:

The main supplies XML had was of ICs, the manufacturing parts and cartons. It had tied up with various local vendors for supply of manufacturing parts and cartons. For sophisticated parts like high-end LCD and other ICs, it had tie-ups with international vendors.

The initial problems with the suppliers started when after monopolizing the television market, XML started demanding from the suppliers. The suppliers were given a credit period as high as 6 months. The suppliers also did not have much of a choice because XML being the major market player, if they are associated with XML, their value proposition increased at that point of time. Hence, XML exploited this situation even more. Even if the credit period was 6 months, the suppliers were being paid after a year or two. This lead to the descend of many local suppliers since they were not able to sustain the pressure of money.

On the other hand, the international suppliers were paid on-time. This increased the grudge in the local suppliers. They started meeting among each other without the knowledge of the company and started forming unions. Since the employees were also local people, the suppliers started encouraging for the employee unions. Finally after a lot of strikes, XML had to move its production unit to its headquarters.

In the new headquarters, XML decided to tie-up with more suppliers and spread its suppliers from over the entire country. This led them to take command over the few local suppliers they had. But this also put them into a lot of problems as the other suppliers were a lot more demanding with respect to the credit period. But XML did not change its strategy for the credit period. The suppliers now wanted to teach XML a lesson. Hence they now started to push all the rejected pieces into the manufacturing units by bribing the employees. This affected the quality of the products to a larger extent and the customer complaints started to increase. Since XML had never faced such a situation, it was not quick enough in responding to the customer queries and the service earned a very bad name.

Due to this, the international suppliers also did not see XML as the vendor they wanted to be associated with. Hence they also started to disassociate themselves with XML. This was a major hit-back for XML as it lost most of its suppliers. At the same time, competition had become fiercer in the market. Smoothening of the government norms had led to international brands enter the market. Hence the suppliers started to concentrate on tie-ups with the international brands. This lead XML to loose most of its quality suppliers.

Dealer problem:

Even though the government norms were eased and the foreign brands were allowed to enter India, these new brands had a very tough time initially. They had the main challenge of replacing the existing local players, setting up a distribution network and many other challenges.

With all the proceedings as depicted in the ‘Supplier problem’ section, the competitor took advantage of the situation. They paid a higher dealership price than what XML was paying. This made the dealers to concentrate more on the products of the competitors. The shelf space for XML kept reducing month-month. Many dealers discontinued their relationship with XML. The competitors need not have to think about penetration either. It was already present readymade in the market. This gave the competitors a cost advantage as the market was already open. Hence the competitors could manage a higher compensation to its dealers and suppliers.

Apart from the competition, dealer and the supplier problems, XML was also attacked by a family issue since it was a family run business. All this finally contributed to the collapse of the electronic home appliances section of XML.

Learning:

• For you to operate in a value chain created by your company, all the stakeholders in the supply chain have to be treated at par.
• Do not neglect competitors and update yourself on a regular basis. Though XML had a full fledged R&D team, they were not in par with the technology offered in the market by the competitors.
• Monopoly does not exist for long in an open market environment. Hence try to build brand values as long as you have the monopoly. These values will come handy during the time of immense competition. This will also help in arresting the competition from penetrating the market easily.
• Consider the business model of having exclusive dealers.
• Innovate the marketing strategies to be in sync with the changing business needs.

Sales ... A case study

Note: The discussions below are a true case study of a private company. Hence the name of the company, its clients and competitors are kept confidential for ethical purposes. Regret the inconvenience caused.

It was May 2008 and the top management of the entire organization was involved in a proposal to one of its most prospective clients. It was one of the highest revenue generating projects in the recent past for the organization. The company, XYZ Pvt. Ltd, is a niche telecom service provider in the market space of Europe. XYZ has been in a good relationship with its client organization CLT since more than half a decade providing constant innovative solutions to CLT and thus collaboratively helping them to growth in the highly competitive market. Due to the ever increasing demand of its customers, CLT decided to capture a place in the cloud to enable its systems to provide a cheap solution to its ever increasing client base. Hence CLT decided to change all the systems involved in providing the service so that the technical disability is avoided across the entire set of services.

XYZ was the most preferred vendor of CLT due to its constant innovative solutions provided. Hence they were asked to draft a proposal for this initiative. Over the period of more than seven years, many competitors had developed in the European market. Hence, along with XYZ, CLT also asked Comp A, Comp B and Comp C to bid for the proposal. Since the other three organizations were involved in supporting the other systems of CLT, this move of CLT did not surprise XYZ.

After a month’s long hard work, the final proposal was ready and a few top executives of XYZ headed to Europe for selling the services offered by XYZ. The major parameters considered for measurement of the proposal by CLT were as below:
• Quality of service provided (QOS)
• Cost incurred by CLT (ROI)
• Overall service package offered

For the ease of maintenance, CLT had divided the systems into eight logical domains ranging from customer registration to billing.

Among the above four expected parameters, XYZ had an edge in the quality of the service provided since it had a very good track record over a period of seven years and also due to the fact that XYZ was the most preferred vendor of CLT. The other vendors were also very reputed for their deliverables in the industry. But the fact that XYZ was in a long running relationship with CLT gave it a clear cut advantage.

Considering the second parameter under consideration, the variation in the bidding amount proposed by all the four vendors is depicted by the graph below:

From the above graph it can be incurred that the amount proposed by XYZ was comparatively the highest. It was around 50 million € greater than the lowest bidder. This is when CLT started to bend towards the other clients and the interest of CLT towards XYZ started reducing. Hence the chances of XYZ winning the bid were really less after the cost related statistics was portrayed.

Now XYZ had only one opportunity left to showcase that they are different from the other vendors in the room. They had to do a proper service mix to make sure that the contract is not lost. Instead of concentrating on what went wrong, the top management at XYZ decided to take advantage of the fact that they were the most preferred vendors of CLT. They concentrated on the quality of service they provide. Instead of just offering the solutions to the existing problem at CLT, XYZ also offered value additions to the systems at CLT. This meant that, along with the normal expected services, XYZ offered a free value addition to the domain under operation. They also went a step ahead to align themselves with the customer to identify their existing problems and providing a permanent solution for the same (thus removing the recurrence of the issue). This was a perfect mix of services which XYZ offered and CLT (who trusted the quality of deliverables of XYZ) had no other choice but to choose XYZ for the contract. At the end of the meeting, XYZ had won 50% stake of the entire bid and the remaining 50% was split among the other three vendors.

It was a win-win situation created by XYZ which led to it bagging 50% of the stake. Due to the non-reduction in the cost factor, XYZ was even more thrilled to provide a better QOS. CLT was happy that XYZ was closely working towards their business goals and were ready to improve their customer experience free of cost in the form of value addition to the domains under consideration.

A few points derived out of the above case study are as below:
• Cost or ROI is not the only factor on which businesses work in this highly competitive environment. You should always have a competitive edge so that you can make a difference.
• Proper pricing strategy has to be considered while selling. In the above case even if XYZ had lowered down the price by 50 million €, they might not have won 100% of the bid. Purely because of the fact that the perception of client to spread the domains was not because of the cost factor. It was because he had to increase the pressure of QOS due to cut throat competition.
• At times, a perfect product/service mix appeals to the clients. It might create a win-win situation.
• A sales force has to be flexible enough to cater to the customer demands. If the customer requires technical solutions or projections, the sales force should deploy technical people. If high level decisions have to be taken, the proper DMU (Decision Making Unit) has to be deployed.
• Customer perceptions play a very important role.

A business called Education...

It was a gloomy evening at the Gandhibazar CCD in Bangalore. I was hanging out with my friends as one of them was travelling to Germany for his higher studies. Pissed off with his job at one of the software majors, my friend decided to go behind his dreams; joined IISc for a project in Electrical engineering. After an year and a half, he got an admit in one of the technical Universities in Germany. Over the small talk we had, I got to know that the fee he paid for the education which was spanned for a period of 2.5 years was just 16,000 INR! It took all of us with a shock! He later revealed the fact about the universities in Europe being completely funded, do not take much money from the students who come to study at the universities... This lead me to a completely different thought process altogether.

If you imagine a similar quality of education in India, it would have not cost you lesser than a few lakh INRs. Even for that matter, the US universities also take a hell lot of money for their MS programs. In the due of learning, the people who cannot afford the education will loose the inclination towards the main intent of their visit and try to work out a deal in their lives where the main motive shifts from education to earning money to get over the heavy loans that was made in the due coarse of getting quality education. Even in India if you see, institutions like IIMs and IITs have a respectable amount of funding a real good Alumni who can work out to get more funding into the institutions. I do agree that there is a lot of government interventions in these institutes; but the whole point here is about quality and cheaper education. If you see the industry I am associated with (the service industry), I can atleast comment that the world is moving towards a mode where quality products are expected to be delivered with a highly reduced costs.

Coming back to the institutions in India, no doubt that they have a real good set of individuals who contribute to the technical innovations of the world. They have to be backed with a good funding from either private organizations or the government should work towards it so that atleast the quality is not lost. They are not here to make money by venturing into education considering it as a business and an evergreen market. (Of course, I do agree that money has to be associated but not to an extent at a which it is now) This is when even the poorest kid in the society can afford to get an access into the education offered in these institutes. This is when bright ideas won't die due to lack of money. This is when there will be an economic balance created between the poor and the rich. This is when India can grow as a super power!

Signing off as of now ... Good luck to my friend!

The new age entrepreneur

I was just collecting all my thoughts today which used to ponder around my head for more than an year now! It was more than an year back that I had set out with loads of dreams in my eyes! I joined MBA with an intension of meeting like minded people there with whom I can hopefully end up being an entrepreneur. Not because it was in the air, but I had a dream and my parents supported it. So I decided to give up my personal time to discover my dream. Went in search of people... the right idea... the right moment... In the due course, many new ideas came in... this made me shift my thought process of just a software engineer to that of a person who can actually make a difference in the top management! I became more and more creative... everyday was a new discovery for me... every night was tiring... We used to slog our nights out for just one small hope of making the real difference! We used to meet a lot of young / old guys who were there making a difference. A lot of marketing ideas came out of our brains. We began to observe each and every small thing around us like never before. Hope was at its highest level. We had gathered all courage to go ahead and take the ultimate step. Then came the great American recession! It just shattered our business plans, all the courage was washed out in just a very short span of time :'( ... The markets were hit!! The forecasts were bad!! Hence we had to do the thing we were never prepared for... We dropped the whole idea for the time being...

I didn't want my creativity to die ... I had started photography in the meanwhile and had picked up quite well in a short span of time. Hence decided to play in the market with it being a tool... setup a supply chain of my own with tie ups with 2 local vendors and a retail store. It was a real learning for me! I learnt to make business there... Though I came into the limelight, the recession had hit the art market also. I learnt a lot from the retail store manager (a Punjabi). This gave me the real essence of running a local retail business. It was an amazing experience nevertheless. Later on the ideas kept on coming in making some online business, thus making money etc... finally I tied up with an art market startup to sell my photographs. But it again failed!

Then came a dry period where I just had my normal job and MBA had become screwing now demanding a lot of my time and attention. But my dream was still ON! Then came a time where I got an opportunity to actually join an already running startup to build the sales and plan for the future marketing prospects. Looked like a deal for me! But somewhere inside I did not have a great feeling towards it (probably because it was not my original idea). Nevertheless I agreed for a few things with them. Went ahead and put in a lot of ideas and the real work of a sales and marketing fellow was done. This is when I met a few clients as well trying to convince them about the offerings and stuff. But this feeling which had initially developed in me made me feel more and more tired. I used to go back home everyday in the night with an amazing amount of headache! This is when I realized a few other things and decided to concentrate more on my health.

This was an amazing breathtaking, mind boggling journey for me. Though there was absolutely no monetary benefits for me, it changed me as a person and made me thick skinned! Today I have no fear to failure! I have got over all that. In the due course I discovered quite a few real good people who will be associated with me for lifetime! Even if not physically in contact, at least I would never forget the difference they made in my life!

There was a lot of learning that I take back from this experience of mine! Here it goes...

• Never compensate for your health! You just will loose the interest and the potential if you loose your health!
• Identify who is what and exploit the goodness in them rather than cribbing that they should have had this etc.
• You should have a core team of people with REAL stuff. The idea cannot be implemented otherwise.
• Go behind your dreams and not compensate for anything at least in this. If you are in a mode of compensation, get out of it. It is better to have a job and work for someone else.
• There is a lot of difference between what happens in the real world and what is being portrayed.
• Always have a parallel source of income which serves your bread n butter. This is required if you are not filthy rich or have a family who is dependent on you.
• Have a vision beyond 10-15 yrs. Things will not work out overnight. You cannot expect a sale to be done in 3-4 months, esp if you are a startup!
• Create a buzz in the market, even if your product is virtual!
• Customer is really the emperor!
• Learn from your mistakes; but don't repeat them. You will burn your fingers otherwise!
• Do not neglect even the smallest of the market triggers. The bull whip effect actually exists in the normal business scenarios as well!

These were the few learnings which I would always want to have in mind! This has not been a phase of failure but a learning phase for me! As of now, taking a good break and concentrating more on my health... But will definitely return to it one day with a new idea; a new initiative! The energy is still ON! Also looking at how to change the way India is working now... Any bright sparks out there ...??

Photography & Nudity

Before I start, let me make you guys aware of the fact that this is a pretty matured write and I would expect a professional thought process running through your mind while reading this. Thanks for your co-operation.

It was just a lazy afternoon for me at Reliance timeout near office. I was trying to get some inspiration for photography which has kind of dried up off late :'( ... I was just flipping the pages of this book called "The Photo Book". There were a lot of Nude photographs in the book which took my thoughts to a conversation I had with my marketing professor almost an year back. He had one of his friends who was into Nude photography esp black n white. I feel a nude photograph taken in black n white is a great combination! You will have a LOT of scope of expressing the feelings through a perfect mixture of lighting and facial expression.

Even today nudity is usually considered as a taboo in the Indian society especially with so many narrow minded a**holes around. But even according to the religion, nudity is the purest form of a human being. It is his/her own self. It outrightly displays the amount of confidence portrayed by the person. The day Indians get this into their nerves, we can expect a lot more matured approach towards issues related to it.

Just found this excerpt from the wiki ...

"Nude photography is a style of art photography which depicts the nude human body as a study. Nude photography should be distinguished from erotic photography, which has a sexually suggestive component. Nude photography should also be distinguished from glamour photography, which places more emphasis on the model and her/his sexuality, and treats the model as the primary subject.

Many photographers consider an art nude photograph to be a one that studies the human body, rather than the person. A photograph of a person that is meant to be recognized is called a portrait, and nude photographs often do not show a face at all. Nude photography is generally not a snapshot, but a composed image of a person in a still position. As an art form, nude photography is a stylized depiction of the nude body with the line and form of the human figure as the primary objective. Photographers sometimes use extremes of light and shadow, oiled skin, and shadows falling across the body to show texture and structure of the body."

I feel Nude photography is a very matured way of expressing your thoughts. It not only involves a lot of photography skills, but also is a lot dependent on the expressions of the model! Even with a lot of good work towards lighting, if the model doesn't have good expressions, the pic will be filled with vulgarity. It is a thin line of demarcation which a photographer has to be careful about! Even with a proper lighting set, the photo has to have a good exposure of colors. This will help to differentiate in the depth of the different shades of gray.

Even as an observer, one has to understand photography to actually make out the inner meaning of the photograph so that it can be appreciated and not blamed for vulgarity reasons.

Just took this topic to write about today... Hope you guys liked it... Happy blogging!!

The selling experience...

It feels really good start writing again!! Had gone out of it to gain an experience! Had the real life experience of selling... It was fun! Though I haven't got into it full time; this made my idea of MBA even more clear ;) ... For the ones who are following my blog it isn't new, but for the benefit of the ones who are not, here it goes.... "MBA is always just a facilitator! Its there to just give you a platform from where its upto u to launch forward or collapse..."

Yeah... Just thought of briefing about my experience in sales... It is a profession which is usually seen as a low profile thing in the society. When I say sales, all people will imagine is the sales person who either calls up and disturbs (or wakens u up ;)..) every now and then or the person who rings your doorbell!! These push marketing tactics have actually brought down the value of sales. The whole perception of sales in India has been hit due to these things. But just imagine a world without Sales 'n marketing. There would have been a huge barrier built between the demand and the suppply and would have led to an economic imbalance and created a lot of monopoly in the market. Only since marketing is existing is there a sense of utmost competition and thus an urge to succeed in the business world.

Getting into my experience, I got this small oppurtunity to sell an IT product to an age old sector in India which has a very strong background and covers the largest mass in the nation. The whole sales cycle inclusive of a sales call, meeting the higher officials, convincing them, making a concept selling, convince them about the product etc is so very well defined and it really works! You simply don't have to think twice before going ahead and executing this. BUT ... (that was huge but by the way :)... ), here comes the trickiest part. if it was so simple and st fwd, you might ask me the question as to y doesnt everyone click in this case? There is a lot of drama which needs to happen before and after selling. Lot of negotiations, hard talks, disagreements, rejections, retries and many more adjectives are involved.

Initially at the stage of conceptualization of any product or service, you should and must understand who is your target customers and the target market, thier psychology, the way they react to situations, the current, future and the historic trends, their future plans, the government involvement, the internation position etc etc. In short you should just know who you are talking to . Try doing an extensive research about the person and the organization you are planning to visit. Unless this is done, there is no point if you blindly go and meet. In case you happen to meet them just on the fly, be street smart to strike a deal. They will try to suck your blood and get the maximum in which case know what ur objectives are in the market and how will it affect if the deal is struck at a wong place and under wrong terms and this has to happen in a fraction of a second only because its a split second decision which you will have to take when you are in front of the client (prospective). You should know who is the decision making authority in the client organization. By hook or crook, get an entry to his chanber and sell with utmost passion as though you have nothing else from this and this is your life! These are just a few things which you need to know before hand (Guess now u know y everybody doesn't click :D)

I haven't got an oppurtunity to click a deal till now. Shall update the blog once I get the oppurtunity.

India is now going towards the after sales service part of it. Though it has been existing since years, the major chunk of the population is still isn't bother about the service quality and the after sales service. But if your end customers are organizations, then it is very important that you have an after sales service. Since the time of globalization, the organizations have realized the importance of after sales service. The individuals have now started realizing the importance of after sales service. The culture is fast growing in India now!

That was the experience as of now... Thanks for dropping in! Happy blogging!!

Moving from Constructive destruction to Destructive construction??

2nd of July 2009 was marked as the first Railway budget from the newly formed UPA government in India. I was not aware of it until I went and sat in front of the idiot box during my lunch time at office. There stood Madam Mamata with her list of offerings for the railway department of the nation for the new financial year. The first statement she made too the whole enthusiasm out of my mind! "Railways is not only for economic benefits. It should also appeal for the society." With this being plain English words, this is an ideal scenario. But if one can look deep into the thought process that would have gone while conveying this, it is devastating...

During the time of our Laloo Prasad Yadav, Indian railways recorded the highest profits in its lifetime! Thousands of crores of profit was recorded! More than 40% of it went into the develpment processes of the nation. All Laloo did were simple things. Nothing great, no technological advancements happened overnights. Implementation of simple ideas here and there was what led to the amazing turn over. This took Laloo to places like IIMs to deliver lecures on management! Though people might argue that he is very currupt and a few hundreds of crores has gone into his pocket, I still support Laloo. Why?? Here it goes... All of you will agree to the fact that the Indian goverment and all government related activities are surrounded by corruption. This is the way things work in India. I agree that it has to change so that the common man is not affected very much. But, this cannot happen overnight. It is very simple. Say you are following a ritual since your birth. Suddenly after 50 years somebody comes and asks you to go against it, the natural tendency is for you to resist the change even though there might be enormous amount of benefits by you not following the ritual. This has a lot to do with psychology and mind games people play. Okay... coming back to Laloo's kaarnama... He might have taken bribe, but dont forget, this has yielded for 1000s of crores being invested in the development of India.

This is what I term as Constructive destruction. You destroy an existing way of doing things to come out with amazing (though small) ideas to make things better. If you feel Laloo was destroying the money of the public, then he was doing so to get a return of an amount which no Indian could think of! This is the display of constructive destruction!

Coming back to where I started from; the budget is good to the public. But I don't see returns in the way it had in the previous term. All Mamata wanted to prove is that she has the capability to win hearts and not pockets (which she did eventually! Hats off to her for that...) and thus to disprove Laloo and show him that she is better than him (egoism plays a very major role in politics. Infact it is the base for politics to occur.) But, considering the economic downturn which happened very recently, it makes sense to concentrate more on the pockets. The hearts will be there for many more generations to come... She tried to constructively destroy what ever was done. Hopefully a few of her ideas will work out (I doubt though).

This is where I began thinking, will the railway budget be in a position to provide India with the same ROI which it did the last time? Was the roughness between Laloo and the UPA affect the growth of our nation? Where is India heading towards; Constructive destruction or Destructive construction??? Looking forward for the Budget today...

PS: Please note the big picture here without spending much energy on the intricacies of politics of India (If you feel anything is wrong, it is your thought process and I respect it completely...)