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Business to Business

Marketing

WESCO Distribution,
Inc. - Case Analysis

Submitted By: Group 49

Situation Analysis: - With $1.6BN 1996 USA sales & 3% EBIT ((overall $2.2BN
globally), WESCO is the 3rd largest full line wholesale EES (Electrical Equipment &
Supplies) distributor in the USA. To attain $3BN sales and 5% EBIT by 1999, Ron
Haley(CEO) decided to spend $12MM/year on ‘National Accounts’(NA) program
which targeted larger high potential industrial customers.
Issue: - In the backdrop of below-expected sales and profits, Jim has to make a
strong business case for continuing the NA program. He also needs to take a stance
on supplier/distributor tiering and alliances. Most importantly, he needs to decide
whether to proactively pitch to potential NA customers or react to their demand.
Company: - It was established in 1922 as a distribution arm of Westinghouse and
later sold to Clayton, Dublier and Rice in 1994 due to its disappointing performance.
Under the leadership of Roy Halley the company grew to be the third largest
wholesale EES distributor with global revenue of $2.2 billion and US contributing to
a little over $1.6billion by 1996. WESCO dealt with three types of customers:
Customers

WESCO’S
Sales ($)
465 million

Description

Characteristic

Construction
Projects; lowest
overall prices
preferred

Industrial Customers

~>1 billion

Commercial,
Industrial and
Government
Customers

147.5 million

Ongoing need for
EES products in
MRO activities. NA
program.
$5.9 billion market.
Government source
of large orders

- Project Mentality
- Needs vary on
project basis
- no guarantee of
business, forecasting
difficult
- Low prices expected
- Long term contracts
likely
- High level of service

Electrical
Contractors

NA

WESCO had 150 suppliers wherein Cutler-Hammer, Thomas and Betts, Philips and
Leviton were the largest.

Analysis:-The customer segmentation is attached below:

Segment

Mkt
Size/Shar
e

Customer
needs

Relations
hip

Trend
noticed

Electrical
Contractors

$17.9BN/2.
6%

Deliver in
time with
the least
possible
price.

Tender
based

N/A

Industrial
Customers

$16.7BN/6
%

One stop
solution for
MRO needs

Long Term
JIT

Tiering

CIG
Customers

$5.9BN/2.5
%

N/A

Stable

N/A

National Accounts – The decision
WESCO should definitely not drop the NA program.
Customer Type

Sales($ millions)

Forecasted
annual growth
1996-2000

NA Customers
Other Industrial
Customers
Industrial
Contractors
CIG
International
Overall

266
721

15-19
1-3

Forecasted sales
1996-2000 ($
millions) [lower
limit of growth
considered]
305.9
728.21

465

2-4

474.3

148
675
2275

2-4
1-3

150.96
681.75
2341.12

 The overall growth by 2000 is forecasted to be 3% out of which 13% would
be due to the NA program.
 The most growth potential can also be seen in the NA program which will
increase from 11% of the overall sales in 1996 to 13% of the overall sales in

2000. The rest would continue to have approximately the same share of the
total
 The customer value index for all the NA customers is greater than or equal
100 as per exhibit 5, which states that WESCO has the ability to provide
value to the customer segment thus increasing sales if acted upon in a proper
manner
The Aim of the company is 6-8% sales growth, and 12-15% growth in profit
by 2000, thus the sales should increase to $2411 million and profitability
to be $88.6million. The NA program is one of the biggest driver of this growth and
the one that can add value to the customer’s business. If discontinued there would
be very less growth for the company. The growth can further be increased with
proper planning and acquiring the right customers. Thus due to the above factors
the NA program should be continued with.
Recommendations: The local branches should be included in the NA team that concludes the final
negotiations. They (the branches) can provide feedback on rapport with local plant,
cost aspects etc so that suitable safeguards/controls can be built in the contract
itself. Also, the staffing ratio of NA serving branches should reflect the increased
need for ‘internal salespersons’ who are to build the relationship at the plant level.
Sustainable and profitable growth comes from competitive advantage-where both
customer and WESCO gain. From above, we note that (i)Key NA (ii)Other Industrial
Customers (iii) CIG customers can be serviced more profitably than existing
business. So the recommendation is Continue the NA program proactively
pitching for tiering business but limit targets to the existing ‘Key NA’
accounts while cherry picking ‘Other Industrial Customers’ using the rationale
outlined above.