SPECTRUM BRANDS INC.– THE SALES FORCE DILEMMA Submitted By: GROUP 2 Avik Sen (u313008) Biswajit Bhuyan (u313010) Jyoti Ranjan Rout (u313018) Paritosh Mishra (u313033) Rasmiranjan Mallick (u313042) Soobhraj Purohit (u313050) Case 1- Spectrum Brands INC. - The Sales Force Dilemma 2 | P a g e QUESTION 1:- Make an assessment of the Spectrum organisation and each of the markets it operates, what are the key elements that Mr. Falconi must be worried or concerned about? (A tabular representation of the same would be useful, (5marks) Ans. In 2005 Spectrum brand was created when Rayovoc Corporation acquired United Industries Corporation, Nu-Gro corporation and Tetra Holdings .Spectrum brands is a global consumer products company. Formerly known as Rayovac Corporation, had made a lot of acquisitions to diversify its product and brand portfolio. The company has growing owing to the strategic acquisitions. Its range of brands portfolio has expanded. The company now has global presence and a wide retailer reach. But at the same time, total liabilities of the company (from exhibit 2) had become threefold which was majorly contributed long term debt, net current maturity and deferred income tax. Although the net sales has increased, but the Net income has decreased that shows that the expenses has increased. Brand markets Annual Growth Competitors Channel partners Market Share by Competitio rs Selling Period Factors Affecting the segment Battery market 1-2% Duracell (P&G) & Energizer (Energizer Holding INC) Wholesalers, Distributors, Professional & OEMs, Retailers (mass merchandisers, home and garden centres, niche electronic stores) 80% Months Leading upto Christmas & following Chirstmas sales : Upto 70% Brand Recognitio n, Relationsh ip with Channel partners Shaving & Groomi ng products market 3 – 4% Norelco (Koninklijke Philips Electronics) , Braun & Remington (P&G) Traditional Retail channels (Mass Merchandiser, Speciality Retailers) Gift giving seasons (like father’s day mother’s day, Christmas ) Quality, price & Brand Awareness Lawn & Garden market 4-5% Scotts (market leader) S.C. Jonson & Son Inc., CGPC (united was acquired) Mass Merchandisers,Ho me Centers, independent Nurseries & hardware Stores 50 – 60 % Demand peaks during first 6 months of the year starting from march, seasonal Dependen ce on weather, to drive sales Specialit y pet supply Market 6-8% CGPC (market leader) , Hartz Mountain Corporation (united was acquired) Pet Supply Store, National retailers : petsMat % PetCo Highly fragmented market share Sales is stable throughout the year Growth in sector attributed to increasing levels of pet ownership Case 1- Spectrum Brands INC. - The Sales Force Dilemma 3 | P a g e The Key elements Mr Falconi should be worried about is How to Best utilize the sales force keeping in mind the strengths of each brand How to leverage synergies and reduce the cost Make sure that the consumers receive service in the same fashion if not better How sales will not be affected To make the sales force work individually for each product line or make the sales force work together QUESTION 2:- What are the internal problems (employee reactions) that Mr. Falconi and team may have to deal with? , what could be the concerns which could slow down the process of sales force integration ( 10 marks) Ans. The reasons that can push Mr. Bob Falconi for a sales-force integration are: 1. Synergy across the various product lines which was the motive of all acquisitions and mergers. 2. Gain of bargaining power with retailers who enjoyed authority due to high of shelf space and were responsible for about 60% of sales 3. Scope to reduce salaries and bonuses expenses of the sales force 4. Reduced sales cost provide a scope for retail discounts and promotional activities 5. Grooming the sales force to efficiently combat the seasonality issues In case, Mr. Falconi goes ahead with the merger of the sales force among different product lines, the possible reactions of the employee that can be seen and has to be dealt with can be 1. A change in the sales structure may cause potential disturbance in the current momentum of operations 2. A merged sales force would be highly unfocused as sufficient knowledge base about all the product line might not be possible for all. 3. It would be costly on the part of distributers to reach out to large number of small retailers for all the product lines. Eventually it will put pressure on sales representatives. 4. Job insecurity among employees. 5. The employees may resist the change in the organisational structure 6. Possible inertia in undergoing training about other product lines and possible loss of productive employees particularly to competitors who employ a separate sales force strategy. This can cost dearly as Spectrum might end up losing retailers’ base. The possible concerns that might slow down the sales force integration can be: 1. Due to diversified product lines, identifying the best people to handle them and providing training can be time consuming, as they most likely, would be having expertise on only one product. 2. Identifying resources and channels to fit into the calendar year to balance out sales cycle to address seasonality issues. 3. Assuaging the insecurity among employees due to structural changes to hold onto its name as preferred employer. Hence all the changes have to be gradual. 4. A plan for optimization of distribution of Nu-Gro as the product has low value by weight ratio and time-consuming compared to other product lines. Also this line was handled by an exclusive team. Similarly, another plan must be devised for the merged team to handle Tetra in the highly fragmented Canadian market. 5. Formation of “platform teams” can be time consuming as well since it would done for the first time in the organisation. Case 1- Spectrum Brands INC. - The Sales Force Dilemma 4 | P a g e QUESTION 3: What are the major problems with external stakeholder (customers) as the company makes this sales force transition? What could be the possible adverse reactions? ( 10 marks) Ans. Due to the sales force transition in Spectrum brand, there will be problems and adverse reaction involving the customers. This is because customer loyalty will be tested since the adaptability of loyal customers to change is very rare. In the context of sales force options the possible adverse reactions are: Separate sales forces: Provided expert sales force for the product line, it might affect the purchase, because a customer has to deal with different sales personnel for each product under same brand - which may discourage the buyer. The time taken will increase as the customer has to deal with more than one sales personnel. Sales personnel handling seasonal products will face a time gap which will affect the customer and sales person relationship and also future purchases. For example as shaving and grooming products were purchased during gift giving seasons like Chirstmas, father’s day, mother’s day etc., the sales person dealing with this kind of product may lose his relationship with customer which may affect future purchase. Merged sales force: Since one representative will be in charge of all product line, he may be incapable of attaining a sufficient knowledge base about all product line. The representative may fail to solve all the queries of customers which might affect buying decision of customer. Due to unfocussed sales force, the relationship between the brand and customer might get diluted and the gap between them increase which may lead to kill of the existing momentum of the brands Distributor sales force: The relationship of company will be indirect with retail customers and the relationship will hugely depend on distributor. In case of any disturbance arise between the distributor and company; the company may lose its large consumer base. Combination of Merged sales force and distributor: This will increase the gap between sales personnel and customer. Due to seasonality factor there will be indirect relationship with customer and the company may miss out existing customer base. Platform Teams: In this model the business manager is the key person or, interface between company and retailers. So if he leaves the company, the company may lose out retailers those of are dealing with the business manager. So selection of the business manager will be a very risky decision for the company because it may back fire in a huge way by deflecting the existing customer base to another company that he goes in future. Case 1- Spectrum Brands INC. - The Sales Force Dilemma 5 | P a g e QUESTION 4: What should be some key questions that Mr. Falconi must ask himself to make this process a success? ( 5 marks) Ans. The basic questions that Mr Falconi should ask himself are: 1. Is the existing sales force structure the best way to handle the job? 2. Or should he follow competitor’s sales framework? 3. Should he have region based sales reps or product based? i.e. should he consider having one sales representative dealing with all the products with a particular retail chain or in an area or should he retain the old style? 4. What should be the sales force size? Should he cut some jobs or should he alternate people with different positions so as to get the best without increasing the costs? 5. How he could synergize the effect of the mergers, so as to consolidate the expenses and get more out of the sales representatives? 6. Should he go for a mix of both the strategies so as to reap the benefits of both the systems?? 7. If yes what should be the ideal way?? Like:- Should he have an area head of sales representatives who deals in all products and under him different sales representatives working on different product lines? This way he won’t have to spend much on training as he will have to train a fewer people and these people can in turn synergize the efforts of the sales reps. In deciding the entire structure, Mr Falconi has to consider some of the following points: He has limited time and resources with him to spend on the rearrangement of the structure. The extended brand portfolio means that some of his sales reps will have to have knowledge about all the products offered and this could hamper their focus on selling the products. Maintaining relationships with the existing channel partners or retailers. Creating synergies between the different divisions without boosting costs. Training the sales reps on the various products could increase the costs drastically in the short run. ----------------------------------*****------------------------------------