Study of Sales organization structure and its effectiveness in FMCG Sector
Submitted in partial fulfilment of the requirements For the award of the degree of
Master of Business Administration In Software Enterprise Management
Under the guidance of Mr. Amit kumar Gupta (ERP Consultant)
Centre for Development of Advanced Computing, Noida Affiliated to Guru Gobind Singh Indraprastha University Kashmere Gate, Delhi - 110006
Products which have a quick turnover, and relatively low cost are known as Fast Moving Consumer Goods (FMCG). Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper products, and plastic goods. FMCG may also include pharmaceuticals, consumer electronics, packaged food products, soft drinks, tissue paper, and chocolate bars. A subset of FMCGs is Fast Moving Consumer Electronics which include innovative electronic products such as mobile phones, MP3 players, digital cameras, GPS Systems and Laptops.
Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods Company, touching the lives of two out of three Indians with over 20 distinct categories in Home &Personal Care Products and Foods & Beverages. They endow the company with a scale of combined volumes of about 4 million tonnes and sales of Rs.10, 000 crores. HUL is also one of the country's largest exporters; it has been recognized as a Golden Super Star Trading House by the Government of India.
Sales structure provide framework for sales organization operation by indicating what specific activities are performed by whom in the sales organization. Designing a sales organization is difficult many different type of structure might be used, and many variations are possible within each basic type. Often the resultant structure is complex, with many boxes and arrows. The basic concept involved specialization, centralization, 2
span of control versus management levels, and line versus staff position. An effective sales organization structure shall facilitate working relationships between various entities in the organization and may improve the working efficiency within the organizational units.
Purposes of sales organization
To permit the development of specialist. To assure that all necessary activities are performed. To achieve coordination or balance. To define authority.
TABLE OF CONTENTS
PARTICULARS I CHAPTER-1 INTRODUCTION 1.1 1.2 1.3 OBJECTIVE SCOPE INTRODUCTION TO FMCG 1.3.1 SEGMENTS OF FMCG 1.3.2 TOP COMPNIES IN FMCG SECTOR 1.4 INTRODUCTION TO HUL 1.4.1 BRANDS PAGE NUMBER 1-6 2 2 3 4 4 5 6
CHAPTER-2 METHODOLOGY OF THE STUDY 2.1 RESEARCH METHODOLOGY 2.1.1 EXECUTION OF THE PROJECT 2.1.2 DATA COLLECTION INSTRUMENTS 2.1.3 PRESENTATION OF DATA 2.1.4 TOOLS AND TECHNIQUE FOR ANALYSIS
9-11 10 11 11 11 11
CHAPTER-3 REVIEW OF LITERATURE 3.1 3.2 SALES ORGANIZATION DESIGN TYPES OF SALES ORGANIZATION 3.2.1 LINE ORGANIZATION 3.2.2 ORGANIZATION DESIGN BY TERRITORY 3.2.3 ORGANIZATION DESIGN BY MANAGEMENT FUNCTION 3.2.4 ORGANIZATION DESIGN BY PRODUCT 3.2.5 ORGANIZATION DESIGN BY CUSTOMER 3.2.6 COMBINED ORGANIZATIONAL DESIGN 3.3 ORGANIZATIONAL EFFECTIVENESS 3.3.1 SALES ANALYSIS 4
12-32 13 14 14 15 17
20 21 23 24 26
220.127.116.11 ORGANIZATIONAL LEVEL OF ANALYSIS 18.104.22.168 TYPE OF SALES 22.214.171.124 TYPES OF ANALYSIS 3.3.2 COST ANALYSIS 126.96.36.199 PERCETAGE OF SALES METHOD 188.8.131.52 OBJECTIVE AND TASK METHOD 3.3.3 PROFITABILITY ANALYSIS 184.108.40.206 INCOME STATEMENT ANALYSIS 3.3.4 PRODUCTIVE ANALYSIS
27 28 28 29 30 31 31 31 31
CHAPTER-4 ANALYSIS AND TOOLS 4.1 HUL SALES ORGANIZATION STRUCTURE 4.2 SALES ORGANIZATION EFFECTIVENESS OF HUL 4.2.1 SALES ANALYSIS 220.127.116.11 ORGANIZATIONAL LEVEL OF ANALYSIS 18.104.22.168 TYPE OF SALES 22.214.171.124 TYPES OF ANALYSIS 4.2.2 COST ANALYSIS 126.96.36.199 PERCETAGE OF SALES METHOD 188.8.131.52 OBJECTIVE AND TASK METHOD 4.2.3 PROFITABILITY ANALYSIS 4.2.4 PRODUCTIVE ANALYSIS
34-42 35 38 38 38 39 40 41 41 41 42 43
3 Types of analysis Objective and task method Percentage of sales method Profitability analysis Productivity analysis PAGE NUMBERS 40 41 41 42 43
LIST OF FIGURES FIGURES 3.8 4.5 3.1 4.3 3.3 4.7 3.3 Line Organization Organizational design by territory Organizational design by management function Organizational design by product Organizational design by customer Combined organization design Sales organization effectiveness Types of sales analysis HUL sales organization structure Organizational level of analysis Types of sales PAGE NUMBERS 15 17 19 21 22 23 25 27 37 38 39
.4 3.2 4.4 4.1 4.1 3.2 3.2 4.6 3.LIST OF TABLES TABLE 4.
Chapter – 1 INTRODUCTION
To study the sales organization structure and its effectiveness in Hindustan Unilever Limited.1 INTRODUCTION
Study about FMCG sector Study about HUL Study the concept of sales organization structure Study the sales organization structure of HUL Explain the determinants of organizational effectiveness Analyze the effectiveness of HUL sales organization
Examples of FMCG generally include a wide range of frequently purchased consumer products such as toiletries. and chocolate bars. With 200 million people expected to shift to processed and packaged food by 2010. toothpaste.4 billion in 2015. and relatively low cost are known as Fast Moving Consumer Goods (FMCG). hair wash etc in India is low indicating the untapped market potential. paper products. FMCG may also include pharmaceuticals.1 billion. It has a strong MNC presence and is characterized by a well established distribution network. skin care. packaged food products. The FMCG market is set to treble from US$ 11. India needs around US$ 28 billion of investment in the food-processing industry. Availability of key raw materials.
The Indian FMCG sector is the fourth largest sector in the economy with a total market size in excess of US$ 13. consumer electronics. batteries.6 billion in 2003 to US$ 33. soap. bulbs. Growth is also likely to come from consumer 'upgrading' in the matured product categories.1. intense competition between the organized and unorganized segments and low operational cost.
. tissue paper. tooth cleaning products. presents an opportunity to makers of branded products to convert consumers to branded products. and plastic goods. Burgeoning Indian population. particularly the middle class and the rural segments. cosmetics. FMCG products are those that get replaced within a year. soft drinks. Penetration level as well as per capita consumption in most product categories like jams. as well as other non-durables such as glassware. shaving products and detergents. cheaper labor costs and presence across the entire value chain gives India a competitive advantage.3 INTRODUCTION TO FMCG:
Products which have a quick turnover.
Companies Hindustan Unilever Ltd. 4. ITC (Indian Tobacco Company) Nestlé India GCMMF (AMUL) Dabur India Asian Paints (India) Cadbury India Britannia Industries Procter & Gamble Hygiene and Health Care Marico Industries
. NO.1.3. 7. 3. 5. 1. 8.2 THE TOP 10 COMPANIES IN FMCG SECTOR S. 10. 9.1 SEGMENTS OF FMCG • Personal care – Skin care – Hair care – Shampoos • Household care – Personal wash – Detergents • Branded and Packaged foods and beverages – Food segment – Tea • • Coffee Spirits and tobacco
1.3. 6. 2.
000 people. The company was renamed in late June 2007 to “Hindustan Unilever Limited”
Hindustan Lever Limited (HLL) is India's largest Fast Moving Consumer Goods Company.
Head quartered in Mumbai. A Fortune 500 transnational.4 INTRODUCTION TO HINDUSTAN UNILEVER LIMITED
Hindustan Unilever Limited also called Hindustan Lever Limited (HLL) was established in 1933 as Lever Brothers India Limited and came into being in 1956 as Hindustan Lever Limited through a merger of Lever Brothers. India has employee strength of over 15. with a customer base of 2 out of every 3 Indian in the category of Home & Personal Care Products and Foods & Beverages. Unilever. Ltd. Hindustan Vanaspati Mfg. which holds 52.10% of the equity. and United Traders Ltd. Co.1.
The company has combined volumes of about 4 million tones and sales of Rs. HLL is also one of the country's largest exporters.000 employees and contributes for indirect employment of over 52. 13.
The Government of India has recognized HLL as a Golden Super Star Trading House
It is a mission HUL shares with its parent company. HUL was one of the eight Indian companies to be featured on the Forbes list of World’s Most Reputed companies in 2007. Unilever sells Foods and Home and Personal Care brands in about 100 countries worldwide.
The Anglo-Dutch company Unilever owns a majority stake (52%) in Hindustan Unilever Limited.
HOME CARE FOODS NUTRITION PERSONAL CARE BRAND WATER
A.3 million outlets and owns 35 major Indian brands.1 BRANDS The company has a distribution channel of 6. PERSONAL CARE Aviance Axe Lever ayush therapy 12
.1. HOME CARE Active wheel Cif Comfort Domex Rin Sunlight Surf Excel Vim
Breeze Clear Clinic Plus Close Up Dove Faire & Lovely Humam Lakeme Lifeboy Liril Lux Pears Pepsodent Pond’s Rexona Sunsilk vaseline
Brooke bond 3 roses Red label Taj mahel Kissan Knorr Lipton 13
Annapurna Brooke bond taza Bru Kissan amaze brain food Kwality’s walls
Chapter – 2 METHODOLOGY OF THE STUDY
I have executed the project after prior discussion with the guide and structured in following steps: a. So that research result is capable of being evaluated either by researcher himself or by others Research has its special significance in solving various operational and planning problems of business and industry.
2. Study about the sales organization structure in Hindustan Unilever limited.
.1 RESEARCH METHODOLOGY
Research can be defined as systemized effort to gain new knowledge.2. Study about the effectiveness of sales organization.1 Execution of the project: It is the very important step in the research process accuracy findings depends on how systematically the study has been carried out in time so that it can make some sense when required. c. Study about the various sale organization structure. b. A research is carried out by different methodologies which have their own pros and cons. Study about the Indian FMCG sector and Hindustan Unilever limited. Thus while talking about research methodology we are not only talking of research methods but also considered the logic behind the methods.1. Research methodology is a way to solve research in studying and solving research problem along with logic behind them are defined through research methodology. Research methodology is the way to systematically solve the research problem. d. We are in context of our research studies and explain why it is being used a particular method or technique and why the others are not used.
1. Analyse the effectiveness of HUL sales organization by doing cost analysis. Sales analysis 2. Research paper
2.4 Tools and Techniques for Analysis
The various technique used for analyze the effectiveness of sales organization was 1.3 Presentation of Data
The data are presented through tables and figures. profitability analysis.2 Data Collection Instruments:1. sales analysis. productive analysis. Productivity analysis
.1.e. Internet 2.1. Cost analysis 3. Profitability analysis 4.
2. Books 3.
Chapter – 3 REVIEW OF LITERATURE
and the external condition of the market and the level of competition. the qualifications and experience required to undertake the job. organizational structure is relatively fixed.3. and rewards associated with the performance of the job. and improves an individual’s quality of work by identifying the contents of the job. and branch heads are appointed to assist the sales manager in the large organizations. A proper organizational design helps in enhancing productivity. The developed structure helps the sales people in the organization to identify their roles.1 SALES ORGANIZATIONAL DESIGN
Sales organizational design refers to the formal and coordinated task of assigning territories and establishing flows of communication and responsibilities of sales groups and individuals to serve customers effectively. Divisional. The sales manager in the organization is the head of sales department and is the representative of the top management in the chain of command. responsibilities and command in the organization. market coverage strategy. formally defined set of relationships among jobs and within the organization. So.
. reduces conflicts. Though organization structures look rigid. They report to the sales manager and are accountable to the sales manager for their responsibilities. they should respond to the changes in the competitive environment and should be adaptable to the changing situations. district. complexity of the product offered. The organization of the sales department is based on the nature and size of the organization.
some degree of specialization occurs in most of the organizations. decisions are made faster. or combination of all these forms. Many small sales firms have such a structure.2 TYPES OF SALES ORGANIZATION
Sales organizations adopt different kinds of structures starting from the simple line organization to special designs based on functions. These kinds of organizations are called one-man show organizations or a typical line organization. Organization Design by Territory 3. In these organizations. Organizational design by product 5. overhead costs are lower. this kind of person-centric organization suffers from the daily fire fighting operations of the executives. The various sales organization structures are 1.1 LINE ORGANIZATION In a pure line organization. geographic markets. as they have no time to do sales planning and are busy in achieving sales targets set at the top. Combined Organizational Design
3. The chief executive has all the authority over the sales function.
. Organizational Design by Customer 6. Organization Design by Management Function 4. products. But. the chief executive does the decision making and decisions flow down the line for execution. Line organization 2.2. Organizations are designed around geographic areas or territories. customers. As organization grow in size.3. and sales people need to follow the command.
products. and higher expenses of sales realizations. customers. integration.2. 21
. and a combination design.1 Line Organization
3.2 ORGANIZATION DESIGN BY TERRITORY The simplest method of designing an organization is on the basis of a geographic territory. where every sales person is assigned a specific area for making sales.functions. Several areas are combined together has a territory for assigning a supervisor and then a number of territories are combined for sales manager. Specialization brings challenges of coordination.
Fig3. The basic objective is to increase the sales force effectiveness and enhance productivity and allow sales people to grow as customers experts.
The sales people. and the skills and the experience of the sales person. for example have to sell the entire line of the product in a specific area to all types of customers. demand. The quality of customer service is better because the number of customers to be served is limited and geographically concentrated. The new product demand for each area can also be identified and the necessary product modifications can be done to suit this need of each customer in the specific territory. brands too turn into commodities. when sales people have to sell entire range of products in a specific area over the same period. There is a tendency to become mere order takers. the travel times are limited and the sales force remains close to the customer. and in the process. But these kinds of designs are not free from problems.
.This is a very distinct form of design. The varied marketing strategy can be developed for each market as a response to the level of competition and a comparative sales analysis is possible between territories. while sales recruitment can be conducted as per the requirements of the job. area. In this kind of design. The conflict is minimised among sales staff as the responsibility of serving customer is clearly identified in each area. The sales people spend too much time with the customers for products that are easy to sell but may not be profitable or provide high growth opportunity.
Fig 3.2 Organization Design by Territory
where the same sales staff report directly to the HR head or the regional sales manager. It is grouping of a sales task according to their characteristics. advertising function. It is very difficult for any single executive in charge of sales to handle all the sales activities in large and complex organizations. recruitment. and other functions like sales analysis and marketing research. The Functions across the departments slow down due to their dependence on each other for the final delivery of
. Line authority means that people in the management positions have formal authority to direct and control immediate subordinates.2. The staff authority adds the line managers in the planning and operation function. The number of departments can be increased or decreased depending upon the organizational requirements and business success. Firms need special expertise for which the divide the selling activities according to the functions to be performed like sales planning. Here. sales promotion. recommend. This type of organizational design is used for organizations having single product lines. staff authority is narrower and includes the right to advice. and counsel the staff.3 ORGANIZATION DESIGN BY MANAGEMENT FUNCTION An organization based on the management function is also called a line and staff function design. supervision of sales personnel.3. This kind of organizational design helps in achieving specializations at different levels in the organizational hierarchy. training of sales personnel. The line and staff design is less expensive in comparison to other designs but the attention needed on specific product lines is affective by this design. The line function runs from the head of sales force to the company sales people.
Fig 3. The integration of the function happens at higher level. making the job of the higher authority more complex and rigid in nature.customer service.3 Organization Design by Management Function
. Interdepartmental rivalry and non cooperation are issues that immerged in such organizations and the inefficiency in one department effects the functions of other department. such organizations are suitable when the size of the organization is small. and there is a single line of operation in the organizational production process. However. there are limited products.
When any combination of such factors exists for the firm.4 ORGANIZATIONAL DESIGN BY PRODUCT Many organizations with a diversified product portfolio prefer a design on the basis of the type of product. Sales people from the same organization often make calls to the same customer for a sale leading to the duplication of efforts and
. The satisfaction level of customers in this kind of organizational design is the highest as the customer receives maximum attention.2. which include close attention to each product in the product portfolio.3. control. A General Manager (Sales) is appointed for the overall supervision. when the product lines are distributed through the entire trade channel. So. and when different products are sold to similar markets. more-or-less commodities. There are disadvantages of such a design as there is a difficulty in coordinating the sales function across product category. There are advantages of such a design. Product specialization is necessary when the product are technical and complex. The sales person can master all the relevant product information and gather the required product knowledge to market complex products. the companies follow a product design. and coordination of the product line. The interference by other functions is avoided but this design and it is easier to assign responsibilities to each member in the sales department thus making it easier to do a comparative evaluation of sale personnel. These types of organizations are expensive because separate sales staffs are required for each product line. organizations are designed on the basis of products so that one can recruit sales people specializing on each product line. and relatively simple but completely different from one another.
This is also referred to as vertical marketing.4 Organization Design by Product
3.5 ORGANIZATIONAL DESIGN BY CUSTOMER Organizations with several and distinct markets are designed on the basis of customer profile. Modern sales firms are shifting from a product-based structure to a customer-based structure because of customer profitability analysis and varied service delivery product mix for each customer. The operational costs are higher because of the large number of employees in the organization with product specialization.2. Each sales person sells the entire product line to the same customer.an increase cost in surveying customers.
. This design is more customers driven and is successful when the customers are geographically concentrated.
These kinds of organizations are also expensive and there is also a duplication of efforts. as controlling and coordinating sales activity across the customers is difficult to undertake in large firms. and training the customers to use the products or services for a longer period of time.This kind of design helps in building successful customer relationships where trust and corporation are the fundamental values of business. Sales organizations design on the basis of the customer help in buyer and supplier integration and in co-creating products and services for end users in a business-tobusiness market. Sales managers create multiple linkages with customers through cross-selling. This develops increased buyer loyalty.5 Organization Design by Customer 28
. Sales and market planning can be developed depending upon the customer requirements and behaviour.
Fig 3. up-selling.
or the customer. Such a setup is essential for the organization to get a specialization at every stage of marketing
Fig 3.2.6 Combined organizational design
. The combination can be made on the basis of the product.3.6 COMBINED ORGANIZATIONAL DESIGN Many organizations those are large in size and complex in product offering prefer a complex design that is a combination of different levels of hierarchy in the organization. geography. function. depending on the market coverage and scope of business.
Profitability analysis 4. In simple terms better the structure of an organization more effective would be the organization and vice versa. Sales analysis 2.3 ORGANIZATIONAL EFFECTIVENESS
The study of organizational structure is necessary to understand organizational effectiveness.
There is four type of analysis are typically necessary to develop a comprehensive evaluation of any sales organization
1. Productive analysis
Conducting analyses in each of this area is a complex task for two reasons
1. sales of specific product sales to specific customer or other type of sales and might include sales
. There is no one more summary measure of sales organization effectiveness sale organization has multiple goals and objectives and thus multiple factor must be assessed. Cost analysis 3. cost profitability. and productive result for example a sales analysis might focus on total sales. Many types of analyses can be performed to evaluate sales. On the extreme side some organizations perform badly and within a short period of time go out of business.3. You must be aware that some organizations perform better and grow more rapidly than other.
or other type of analyses. to sales of competitor . to previous periods. profitability and productivity analyses can be conducted to evaluate sale organization effectiveness. Separate sales analyses need to be performed for different levels in sales organization.comparisons to sales quotas. districts. and territories. 2.7 Sales organization effectiveness
. regions. cost. Thus a typical evaluation would include separate sales analyses for sales zone.
Now we will discuss how sales.
Fig 3. Customer satisfaction is also heavily relied upon sales organization effectiveness.
and a paid order. sales analysis is an obvious and important element of evaluating sales organization effectiveness. Another consideration is whether to focus on sales dollars or sales unit this can be extremely important during times spanning price increase or when sales people have substantial latitude in negotiating selling prices. a shipped order.1 SALES ANALYSIS:Because the basic purpose of a sales organization is to generate sales. Definitions include a placed order. defining a sale by when an order is shipped is probably most common.3. the sales organization must be consistent and develop an information system to track sales based on whatever sales definition is used. Type of analysis
. The difficulty however is to determining exactly what should be analyzed. Type of sales 3. Organization Level of Analysis 2.3. Regardless of the definition used.
We can sub divide the sales analysis in different categories
1. One key consideration is in defining what is by a sale.
1. Second. a useful way to identify problem areas in achieving sales effectiveness is to perform a hierarchical sales analysis.3.8 Types of sales analysis
3. a regional sales manager should have sales analyses for all regions as well as for all districts within his or her region this makes it possible to assess the sales effectiveness of the region and to determine sales contribution of each district.1 ORGANIZATIONAL LEVEL OF ANALYSIS Sales analysis should be performed for all levels in the organization for two basic reasons First sales managers needs at each level sales analysis at their level and the next level below for evaluation and control purposes. which consists of evaluating sales results throughout the sales organization from a top-down perspective essentially the analysis
.Fig 3. For example.
2.3.1. 3. Product type or specific products. 4.1.
3. Type of distribution method.begins with total sales for the sales organization and proceeds through each successively lower level in the sales organization . Account type or specific account.
The analysis of different types of sales at different organization levels increases management ability to detect and define problem areas in sales performance. Order size.
1. However.3 TYPE OF ANALYSIS The discussion to this point as focus on the actual sales results for different organizational levels and type of sales however the use of actual sales results limit the analysis to comparison across organizational level or sales type these with in
3. incorporating different sales types into the analysis complicates the evaluation process and requires an information system capable of providing sales data concerning the desired breakdowns.3.2 TYPES OF SALES It is usually desirable to evaluate several type of sale such as by the following categories.
A final type of analysis to be considered is a comparison of actual sales results to those achieved by competitors this type of analysis is used to determine the sales growth rate for different organizational levels and for different sales type. Another type of useful analysis is the comparison of actual results to previous periods. and time periods for a specified strategy. The emphasis here is on assessing the costs incurred by the sales organization to generate the achieve level of sales the general approach is to compare the cost incurred with planned costs as defined by selling budgets. This type of analysis is used to determine the sales growth rate for different organizational levels and for different sales type. Comparing actual sales with sales results with sales forecasts and quotas is extremely revealing.organizational comparison provide some useful information but are insufficient evaluation of sales effectiveness. 35
. The sales effectiveness makes it easy to compare directly the sales effectiveness of different organizational levels and different type of sales. Based on this definition a sales forecast provide a basis for establishing a specific sales quota and the reasonable sales objective for a territory And effectiveness index can be computed by dividing actual sales results by the sales quota and multiplying by hundred. A sales forecast represents an expected level of firm sales for defined products. Corporate resource earmarked for personal selling expenses for a designated period represent the total selling budget.3.
3.2 COST ANALYSIS A second major element in the evaluation of the sales organization of sales organization effectiveness is cost analysis. markets.
Both the total expenditure for each of these categories and sales management budget responsibility must be determined. Objective and task method
3.Selling budgets are developed at all level of the sales organization and for all key expenditure categories.2. more centralized sales organization will place budget responsibility at higher sales higher sales management levels. then the regional sales managers will have responsibility for this budget category. For example. Percentage of sales method 2. The basic objective in budgeting for each category is to determine the lowest expenditure level necessary to achieve the sales quotas. if sales force recruitment and selection take place at the regional level. In general. Determining expenditure levels for each selling expense category is extremely difficult. The effectiveness of the percentage of sales method depends on the accuracy of sales forecasts and the appropriateness of the expenditure percentage. Sales management budget responsibility depends on the degree of centralization or decentralization in the sales organization. If the sales forecasts are
.1 PERCENTAGE OF SALES METHOD: The percentage of sales method calculates an expenditure level for each category by multiplying an expenditure percentage times forecasted sales. two approaches warrant attention
1.3. Although there is no perfect way to arrive at these expenditure levels.
Sales management should adjust the percentage up or down to reflect the unique aspects of their sales organization. and the costs associated with performing the necessary tasks.3 PROFITABILITY ANALYSIS Sales and cost data can be combined in various ways to produce evaluations of sale organization profitability for different organizational levels of different types of sales. If the sales forecasts are accurate.3. In essence.
3.2 OBJECTIVE AND TASK METHOD It is a type of zero based budgeting. This percentage may be derived from historical spending patterns or industry averages.not accurate. Consequently income statement can be developed for profitability analysis. One of the major difficulties in income statements analysis is that some costs are shared between organization levels or sales types.2. The profitability analysis is done by Income statement analysis
3. each sales manager prepare a separate budget request that stipulates the objective to be achieved.3. the selling budget will be incorrect.1 INCOME STATEMENT ANALYSIS The different levels in a sales organization and different types of sales can be considered as separate business.3. regardless of the expenditure percentages used. the key is determining the expenditure percentage. the task required to achieve these objective.
This result in a net profit figure for each unit.
3. Full costs approached Contribution approached
1.4 PRODUCTIVE ANALYSIS Productivity is typically measured in terms of ratios between output and inputs. The contribution approach: It is different in that only direct costs are included.3. Full cost approach: It attempts to allocate the shared costs to individual units based on some type of cost allocation procedure.
2. Therefore various types of productivity ratios are calculated on a per sales person basis. The specific ratios depends on the 38
. 2. the most useful input unit for productivity analysis is the sales person.Two approaches for dealing with the shared costs are 1. Because the basic job of sales managers is to manage sales people. The net contribution calculated from this approach represents the profit contribution of the unit being analyzed. This profit contribution must be sufficient must be sufficient to cover indirect costs and other overhead and to provide the net profit for the firm. A major advantage of productivity ratio is that they can be compared directly across the entire sales organization and with other sales organization. This direct comparison is possible because all the ratios are expressed in terms of the same units.
Productivity improvements are obtained in one of two basic ways:
1.characteristics of a particular selling situation but often include important output such as sales. calls. Increasing output with the same level of input 2. demonstrations. The productivity analysis provides useful evaluative and diagnostic information that is not directly available from the other type of analyses. and proposals. Maintaining the same level
Chapter – 4 ANALYSES AND TOOLS
is headed by a Vice President. HUL and Group companies have about 15. Commercial. Board is headed by the Chairman. Divisions each division is self-sufficient with dedicated resources and assets in sales.Home & Personal Care and Foods & Beverages . The fundamental principle determining the organization structure is to infuse speed and flexibility in decision-making and implementation. with empowered managers across the company’s nationwide operations.1 HINDUSTAN UNILEVER SALES ORGANIZATION STRUCTURE
Hindustan Unilever Limited is India's largest Fast Moving Consumer Goods (FMCG) Company. each category and each function .
. For this.000 employees. commercial. and manufacturing. The two divisions are further reorganized into categories. Managing Director (Foods) and the Finance Director.Sales. HUL is organized into two self-sufficient divisions . Typically. including 1200 managers. Managing Director (HPC).supported by certain central functions and resources to leverage economies of scale wherever relevant.4. and comprising 5 whole time Directors and 5 independent non-executive Directors. marketing. The day to day operations are supervised by the National Management comprising the Vice Chairman. They with their respective Managing Director comprise that Division's Management Committee. Manufacturing .
Engineering. with each factory peopled by teams of Production. HUL divides the country into four regions. Quality Assurance. they comprise Regional Sales Managers and Area Sales Managers. There are teams dedicated to sourcing.For managing sales operations. Commercial and Personnel Managers. with regional branches in Delhi. In Marketing. each category has a Marketing Manager who heads a team of Brand Managers dedicated to each or a group of brands. Kolkata. Headed by a Regional Manager. assisted by dedicated field forces. Chennai and Mumbai. comprising Sales Officers and Territory Sales Incharges. planning and logistics. The commercial team of a Division is responsible for its supply chain management. Each Division has a nationwide manufacturing base.
1 Hindustan Unilever sales organization structure
2 organization level of analysis
. Cost analysis 3.4.2 SALES ORGANIZATION EFFECTIVENESS OF HINDUSTAN UNILEVER LIMITED
To measure the sales organization effectiveness of Hindustan Unilever limited we apply the following analysis on HUL sales organization.2.2.1. Profitability analysis 4. Productive analysis
4. 1.1 ORGANIZATION LEVEL OF ANALYSIS
Fig 4. Sales analysis 2.1 SALES ANALYSIS
so the analysis proceeds to investigate the sale for all the districts on west region.Sales for west region appear to be lower than those for other regions. Additional analysis within this product is needed to determine why sale are low in these areas and what to be done to improve sales effectiveness.
.1.3 Types of sales
It shows low sales volume for product Lipton tea.
4. The result of this analysis suggest potential sales problem within konark territory. then district Orissa sales are analyzed by territory.2.2 TYPE OF SALES
Fig 4. Low sales are identified for Orissa district.
4.232 cr 1.200 cr 98. So here sales growth of orissa region is less.8 950 cr 3%
West Bengal 1178 cr 1.1 1108 cr 6%
Table 4.3 TYPE OF ANALYSIS
Bihar Sales Sales quota Effectiveness index Sales last year Growth 1.100 cr 112 1.000 cr 98.2.1.
.1 Type of analysis
An effectiveness index can be computed by dividing actual sales result by sales quota and multiplying by 100.170 cr 5%
Orissa 988 cr 1. additional analysis will be done to identify the problem and what need to be done to improve sales organization effectiveness.
Table 4.2 Objective and task method
985.000 -200.000 830.000 2.4 6.000
North 4.000 2.000 -230.150.030.000 3.0
6 6 6 6
+60.000 +70.1 OBJECTIVE AND TASK METHOD
Compensation cost Actual Cost Budgeted Cost Variance Actual Cost
Training Cost Budgeted Cost Variance
South East West
3.000 -250.2.1 2.040.660.000 3.000 3.160.8 184.108.40.206 PERCENTAGE OF SALES METHOD
Compensation cost Actual %Sales Budgeted %Sales Actual %Sales
Training Cost Budgeted %Sales
South East West North
6.2 COST ANALYSIS
4.6 3.600.000 2.1
3 3 3 3
Table 4.000 3.060.700.900.3 percentage of sales method 47
1.000 3.400.000 2.000
-45.9 3.4.110.000 +300.000
3.1 5.2.340.000 +180.2.
130 8.The first type of analysis calculates the variance between actual costs and budgeted costs for the regions in a sales organization.565 3.038
1.668 1.2. 48
4.3 PROFITABILITY ANALYSIS
Full cost Approach HUL Sales North East
Sales Cost of Goods Sold Gross Margin Regional Selling Expenses Zone Direct Selling Expenses Profit Contribution
21. especially when actual costs far exceed budgeted costs.945 2.4 profitability analysis * All figures is in Crore
The full cost approach for accessing sales region profitability and the contribution approaches for evaluating the district within the region.780 956
3.805 4.122 1. but the reason for variations should be determined. Regions with the largest variation.630 1.927 13.360 618
6. Large variations are not necessarily bad.857
1. should be highlighted for further analysis.797 3.683 3.
4 PRODUCTIVITY ANALYSIS
Bihar Sales Selling Expenses Sales calls Proposals Number of Sales people Sales/Sales person Expenses/Sales Person Calls/Sales person Proposals/sales Person 1. but is also suggest the sales people in this district may not be covering the district adequately. Take information concerning district Bihar.102 81.3 9.25
Table 4.2 0.000 220 110 11.25 3.232 cr 11. This may explain why selling expenses are low.146 106.56 0.2 150 3.
.4.500 260 80 14.81 2
Orissa 988 cr 10 7.72 0. Although sales per person are reasonable and expenses per person is relatively low.500 180 50 19.2.5 Productivity analysis
Above table shows how productivity analysis provides a different and useful perspective for evaluating sales organization effectiveness.6
West Bengal 1178 cr 11. The high sales may be due to a few large customers. both calls per sales person and proposals per sales person are much lower than those for the other districts.7 8.
Chapter – 5 CONCLUSION
Careful attention to organizational design and costs in serving the customer helps in designing the customer sales organization. A sales organization is a structural body through which the functions o sales management are carried out. Each type of sales organization structure has certain advantage and disadvantages and. A good sales organization always aims at achieving the sales target at the minimum cost and with maximum efficiency. The appropriate way to organize a sales force and sales management depends on certain characteristics of a particular selling situation. identify problem area and use this information to improve future sales organization effectiveness. There is no one best way to structure a sales organization. so HUL use combined structure that combine the feature of several types. The objective underlying each of the analysis is to be able to evaluate effectiveness.CONCLUSION
The organization should be based on certain principles like the principles of unity of direction and command.
cost profitability. to previous periods. Thus a typical evaluation would include separate sales analyses for sales zone. and territories. sales of specific product sales to specific customer or other type of sales and might include sales comparisons to sales quotas. Conducting analyses for sales organization effectiveness is complex task for two reasons
1. Many types of analyses can be performed to evaluate sales. Separate sales analyses need to be performed for different levels in sales organization. districts.
.or other type of analyses. to sales of competitor . 2. regions. and productive result for example a sales analysis might focus on total sales.
Sunil sahadev  “Sales and distribution management”
Oxford university press. William l. Aila. Decarlo  “Sales management” Willy India
edition. Thomas E. page no 202-234
3. page no 166 -180
1. Panda. fifth reprint. Schwepker jr. sixth edition page no 7990. Crone.BIBLIOGRAPHY
Books 1. Ninth edition. Williams  “ Sales management
analysis and decision making” Thomson corporation . Ingram. 245-278
2. Tapan k. Elizabeth McMillan “Considering organization structure and design from a complexity paradigm perspective”