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

1
 ABSTRACT

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.

3
 TABLE OF CONTENTS

PARTICULARS PAGE NUMBER

I CHAPTER-1 INTRODUCTION 1-6

1.1 OBJECTIVE 2
1.2 SCOPE 2
1.3 INTRODUCTION TO FMCG 3
1.3.1 SEGMENTS OF FMCG 4
1.3.2 TOP COMPNIES IN FMCG SECTOR 4
1.4 INTRODUCTION TO HUL 5
1.4.1 BRANDS 6

II CHAPTER-2 METHODOLOGY OF THE STUDY 9-11

2.1 RESEARCH METHODOLOGY 10
2.1.1 EXECUTION OF THE PROJECT 11
2.1.2 DATA COLLECTION INSTRUMENTS 11
2.1.3 PRESENTATION OF DATA 11
2.1.4 TOOLS AND TECHNIQUE FOR ANALYSIS 11

III CHAPTER-3 REVIEW OF LITERATURE 12-32

3.1 SALES ORGANIZATION DESIGN 13
3.2 TYPES OF SALES ORGANIZATION 14
3.2.1 LINE ORGANIZATION 14
3.2.2 ORGANIZATION DESIGN BY TERRITORY 15
3.2.3 ORGANIZATION DESIGN BY MANAGEMENT 17
FUNCTION
3.2.4 ORGANIZATION DESIGN BY PRODUCT 20
3.2.5 ORGANIZATION DESIGN BY CUSTOMER 21
3.2.6 COMBINED ORGANIZATIONAL DESIGN 23
3.3 ORGANIZATIONAL EFFECTIVENESS 24
3.3.1 SALES ANALYSIS 26

4
 3.3.1.1 ORGANIZATIONAL LEVEL OF ANALYSIS 27
3.3.1.2 TYPE OF SALES 28
3.3.1.3 TYPES OF ANALYSIS 28
3.3.2 COST ANALYSIS 29
3.3.2.1 PERCETAGE OF SALES METHOD 30
3.3.2.2 OBJECTIVE AND TASK METHOD 31
3.3.3 PROFITABILITY ANALYSIS 31
3.3.3.1 INCOME STATEMENT ANALYSIS 31
3.3.4 PRODUCTIVE ANALYSIS 31

IV CHAPTER-4 ANALYSIS AND TOOLS 34-42

4.1 HUL SALES ORGANIZATION STRUCTURE 35
4.2 SALES ORGANIZATION EFFECTIVENESS OF HUL 38
4.2.1 SALES ANALYSIS 38
4.2.1.1 ORGANIZATIONAL LEVEL OF ANALYSIS 38
4.2.1.2 TYPE OF SALES 39
4.2.1.3 TYPES OF ANALYSIS 40
4.2.2 COST ANALYSIS 41
4.2.2.1 PERCETAGE OF SALES METHOD 41
4.2.2.2 OBJECTIVE AND TASK METHOD 41
4.2.3 PROFITABILITY ANALYSIS 42
4.2.4 PRODUCTIVE ANALYSIS 43

V CHAPTER-5 CONCLUSION 44-47

VI BIBLOIGRAPHY 47

5
 LIST OF TABLES
TABLE PAGE NUMBERS
4.1 Types of analysis 40
4.2 Objective and task method 41
4.3 Percentage of sales method 41
4.4 Profitability analysis 42
4.3 Productivity analysis 43

LIST OF FIGURES

FIGURES PAGE NUMBERS

3.1 Line Organization 15

3.2 Organizational design by territory 17

3.3 Organizational design by management function 19

3.4 Organizational design by product 21

3.5 Organizational design by customer 22

3.6 Combined organization design 23

3.7 Sales organization effectiveness 25

3.8 Types of sales analysis 27

4.1 HUL sales organization structure 37

4.2 Organizational level of analysis 38

4.3 Types of sales 39

6
 Chapter – 1
INTRODUCTION

7
1 INTRODUCTION

1.1 OBJECTIVE:

To study the sales organization structure and its effectiveness in Hindustan

Unilever

Limited.

1.2 SCOPE:

 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

8
1.3 INTRODUCTION TO FMCG:

Products which have a quick turnover, and relatively low cost are known as Fast
Moving

Consumer Goods (FMCG). FMCG products are those that get replaced within a year.

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.

The Indian FMCG sector is the fourth largest sector in the economy with a total
market

size in excess of US$ 13.1 billion. It has a strong MNC presence and is
characterized by

a well established distribution network, intense competition between the organized

and

unorganized segments and low operational cost. Availability of key raw materials,

cheaper labor costs and presence across the entire value chain gives India a
competitive

advantage. The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$
33.4

billion in 2015. Penetration level as well as per capita consumption in most

product

categories like jams, toothpaste, skin care, hair wash etc in India is low
indicating the

untapped market potential. Burgeoning Indian population, particularly the middle

class

and the rural segments, presents an opportunity to makers of branded products to

convert

consumers to branded products. Growth is also likely to come from consumer

'upgrading' in the matured product categories. With 200 million people expected to
shift

to processed and packaged food by 2010, India needs around US$ 28 billion of

investment in the food-processing industry.

9
1.3.1 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

1.3.2 THE TOP 10 COMPANIES IN FMCG SECTOR

S. Companies
NO.
1. Hindustan Unilever Ltd.
2. ITC (Indian Tobacco Company)
3. Nestlé India
4. GCMMF (AMUL)
5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries
9. Procter & Gamble Hygiene and
Health Care
10. Marico Industries

10
1.4 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, Hindustan

Vanaspati Mfg. Co. Ltd. and United Traders Ltd. 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, with a customer base of 2 out of every 3 Indian in the category of

Home & Personal Care Products and Foods & Beverages.

 The company has combined volumes of about 4 million tones and sales of Rs.

13,718 crores. HLL is also one of the country's largest exporters.

 Head quartered in Mumbai, India has employee strength of over 15,000

employees and contributes for indirect employment of over 52,000 people.

 The Anglo-Dutch company Unilever owns a majority stake (52%) in Hindustan

Unilever Limited. HUL was one of the eight Indian companies to be featured on

the Forbes list of World’s Most Reputed companies in 2007.

 The Government of India has recognized HLL as a Golden Super Star Trading

House

 It is a mission HUL shares with its parent company, Unilever, which holds

52.10% of the equity. A Fortune 500 transnational, Unilever sells Foods and

Home and Personal Care brands in about 100 countries worldwide.

11
1.4.1 BRANDS

The company has a distribution channel of 6.3 million outlets and owns 35 major

Indian brands.

 HOME CARE

 FOODS

 NUTRITION

 PERSONAL CARE BRAND

 WATER

A. HOME CARE

 Active wheel

 Cif

 Comfort

 Domex

 Rin

 Sunlight

 Surf Excel

 Vim

B. PERSONAL CARE

 Aviance

 Axe

 Lever ayush therapy

12
  Breeze

 Clear

 Clinic Plus

 Close Up

 Dove

 Faire & Lovely

 Humam

 Lakeme

 Lifeboy

 Liril

 Lux

 Pears

 Pepsodent

 Pond’s

 Rexona

 Sunsilk

 vaseline

C. FOOD

 Brooke bond 3 roses

 Red label
 Taj mahel
 Kissan
 Knorr
 Lipton

13
  Annapurna
 Brooke bond taza
 Bru
 Kissan amaze brain food
 Kwality’s walls

D. WATER
 Purit

14
 Chapter – 2
METHODOLOGY OF THE
STUDY

15
2.1 RESEARCH METHODOLOGY

Research can be defined as systemized effort to gain new knowledge. A

research

is carried out by different methodologies which have their own pros and cons.
Research

methodology is a way to solve research in studying and solving research problem

along

with logic behind them are defined through research methodology. Thus while talking

about research methodology we are not only talking of research methods but also

considered the logic behind the methods. 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. 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. Research methodology is the way to

systematically

solve the research problem.

2.1.1 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. I have executed the project after prior discussion with the guide
and

structured in following steps:

a. Study about the Indian FMCG sector and Hindustan Unilever limited.

b. Study about the various sale organization structure.

c. Study about the sales organization structure in Hindustan Unilever

limited.

d. Study about the effectiveness of sales organization.

16
 e. Analyse the effectiveness of HUL sales organization by doing cost
analysis,

profitability analysis, productive analysis, sales analysis.

2.1.2 Data Collection Instruments:-

1. Internet

2. Books

3. Research paper

2.1.3 Presentation of Data

The data are presented through tables and figures.

2.1.4 Tools and Techniques for Analysis

The various technique used for analyze the effectiveness of sales

organization was

1. Sales analysis

2. Cost analysis

3. Profitability analysis

4. Productivity analysis

17
 Chapter – 3
REVIEW OF LITERATURE

18
3.1 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. The developed structure helps the
sales

people in the organization to identify their roles, responsibilities and command in

the

organization. A proper organizational design helps in enhancing productivity,

reduces

conflicts, and improves an individual’s quality of work by identifying the contents

of the

job, the qualifications and experience required to undertake the job, and rewards

associated with the performance of the job. The organization of the sales
department is

based on the nature and size of the organization, market coverage strategy,
complexity

of the product offered, and the external condition of the market and the level of

competition.

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. Divisional, district,

and

branch heads are appointed to assist the sales manager in the large organizations.
They

report to the sales manager and are accountable to the sales manager for their

responsibilities. So, organizational structure is relatively fixed, formally

defined set of

relationships among jobs and within the organization. Though organization

structures

look rigid, they should respond to the changes in the competitive environment and

should be adaptable to the changing situations.

19
3.2 TYPES OF SALES ORGANIZATION

Sales organizations adopt different kinds of structures starting from the

simple

line organization to special designs based on functions, geographic markets,

products,

customers, or combination of all these forms.

The various sales organization structures are

1. Line organization

2. Organization Design by Territory

3. Organization Design by Management Function

4. Organizational design by product

5. Organizational Design by Customer

6. Combined Organizational Design

3.2.1 LINE ORGANIZATION

In a pure line organization, the chief executive does the decision making
and

decisions flow down the line for execution. The chief executive has all the
authority over

the sales function. Many small sales firms have such a structure. In these
organizations,

decisions are made faster, overhead costs are lower, and sales people need to
follow the

command. These kinds of organizations are called one-man show organizations or a

typical line organization. But, this kind of person-centric organization suffers

from the

daily fire fighting operations of the executives, as they have no time to do sales
planning

and are busy in achieving sales targets set at the top.

As organization grow in size, some degree of specialization occurs in most of the

organizations. Organizations are designed around geographic areas or territories,

20
functions, products, customers, and a combination design. The basic objective is to

increase the sales force effectiveness and enhance productivity and allow sales
people to

grow as customers experts. Specialization brings challenges of coordination,

integration,

and higher expenses of sales realizations.

Fig3.1 Line Organization

3.2.2 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.
Several

areas are combined together has a territory for assigning a supervisor and then a
number

of territories are combined for sales manager.

21
 This is a very distinct form of design. In this kind of design, the travel
times are

limited and the sales force remains close to the customer. The quality of customer

service is better because the number of customers to be served is limited and

geographically concentrated. The conflict is minimised among sales staff as the

responsibility of serving customer is clearly identified in each area. 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. 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, demand, and the skills and the

experience of the sales person.

But these kinds of designs are not free from problems. The sales people, for
example

have to sell the entire line of the product in a specific area to all types of
customers.

There is a tendency to become mere order takers, when sales people have to sell
entire

range of products in a specific area over the same period, and in the process,
brands too

turn into commodities. 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.

22
Fig 3.2 Organization Design by Territory

23
3.2.3 ORGANIZATION DESIGN BY MANAGEMENT FUNCTION

An organization based on the management function is also called a line and

staff

function design. It is grouping of a sales task according to their characteristics.

Line

authority means that people in the management positions have formal authority to
direct

and control immediate subordinates. Here, staff authority is narrower and includes
the

right to advice, recommend, and counsel the staff. Firms need special expertise for

which the divide the selling activities according to the functions to be performed
like

sales planning, recruitment, training of sales personnel, supervision of sales

personnel,

advertising function, sales promotion, and other functions like sales analysis and

marketing research.

This type of organizational design is used for organizations having single product
lines.

It is very difficult for any single executive in charge of sales to handle all the
sales

activities in large and complex organizations. The line function runs from the head
of

sales force to the company sales people, where the same sales staff report directly
to the

HR head or the regional sales manager. The staff authority adds the line managers
in the

planning and operation function.

This kind of organizational design helps in achieving specializations at different

levels

in the organizational hierarchy. The number of departments can be increased or

decreased depending upon the organizational requirements and business success. 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 Functions across
the

departments slow down due to their dependence on each other for the final delivery
of
24
customer service. The integration of the function happens at higher level, making
the job

of the higher authority more complex and rigid in nature.

Interdepartmental rivalry and non cooperation are issues that immerged in such

organizations and the inefficiency in one department effects the functions of other

department. However, such organizations are suitable when the size of the
organization

is small, there are limited products, and there is a single line of operation in
the

organizational production process.

Fig 3.3 Organization Design by Management Function

25
3.2.4 ORGANIZATIONAL DESIGN BY PRODUCT

Many organizations with a diversified product portfolio prefer a design on

the

basis of the type of product. So, organizations are designed on the basis of
products so

that one can recruit sales people specializing on each product line. These types of

organizations are expensive because separate sales staffs are required for each
product

line. Product specialization is necessary when the product are technical and
complex,

more-or-less commodities, and relatively simple but completely different from one

another, when the product lines are distributed through the entire trade channel,
and

when different products are sold to similar markets. When any combination of such

factors exists for the firm, the companies follow a product design. A General
Manager

(Sales) is appointed for the overall supervision, control, and coordination of the
product

line.

There are advantages of such a design, which include close attention to

each

product in the product portfolio. The sales person can master all the relevant
product

information and gather the required product knowledge to market complex products.

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. The satisfaction level of customers in

this kind

of organizational design is the highest as the customer receives maximum attention.

There are disadvantages of such a design as there is a difficulty in

coordinating

the sales function across product category. Sales people from the same organization

often make calls to the same customer for a sale leading to the duplication of
efforts and
26
an increase cost in surveying customers. The operational costs are higher because
of the

large number of employees in the organization with product specialization.

Fig 3.4 Organization Design by Product

3.2.5 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. This is also referred to as vertical
marketing.

Each sales person sells the entire product line to the same customer. This design
is more

customers driven and is successful when the customers are geographically

concentrated.

27
This kind of design helps in building successful customer relationships where trust
and

corporation are the fundamental values of business. Sales and market planning can
be

developed depending upon the customer requirements and behaviour. 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.

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-
to-

business market. This develops increased buyer loyalty. Sales managers create
multiple

linkages with customers through cross-selling, up-selling, and training the

customers to

use the products or services for a longer period of time.

Fig 3.5 Organization Design by Customer

28
3.2.6 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.

The combination can be made on the basis of the product, function, geography, or
the

customer, depending on the market coverage and scope of business. Such a setup is

essential for the organization to get a specialization at every stage of marketing

Fig 3.6 Combined organizational design

29
3.3 ORGANIZATIONAL EFFECTIVENESS

The study of organizational structure is necessary to understand

organizational

effectiveness. In simple terms better the structure of an organization more

effective

would be the organization and vice versa. You must be aware that some organizations

perform better and grow more rapidly than other. On the extreme side some

organizations perform badly and within a short period of time go out of business.

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.

There is four type of analysis are typically necessary to develop a comprehensive

evaluation of any sales organization

1. Sales analysis

2. Cost analysis

3. Profitability analysis

4. Productive analysis

Conducting analyses in each of this area is a complex task for two reasons

1. Many types of analyses can be performed to evaluate sales, cost profitability,

and

productive result for example a sales analysis might focus on total sales, sales of
specific

product sales to specific customer or other type of sales and might include sales

30
comparisons to sales quotas, to previous periods, to sales of competitor ,or other
type of

analyses.

2. Separate sales analyses need to be performed for different levels in sales

organization.

Thus a typical evaluation would include separate sales analyses for sales zone,
regions,

districts, and territories.

Customer satisfaction is also heavily relied upon sales organization effectiveness.

Now we will discuss how sales, cost, profitability and productivity analyses can be

conducted to evaluate sale organization effectiveness.

Fig 3.7 Sales organization effectiveness

31
3.3.1 SALES ANALYSIS:-

Because the basic purpose of a sales organization is to

generate

sales, sales analysis is an obvious and important element of evaluating sales

organization

effectiveness. The difficulty however is to determining exactly what should be

analyzed.

One key consideration is in defining what is by a sale.

Definitions include a placed order, a shipped order, and a paid order, defining a
sale by

when an order is shipped is probably most common. Regardless of the definition

used,

the sales organization must be consistent and develop an information system to

track

sales based on whatever sales definition is used.

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.

We can sub divide the sales analysis in different categories

1. Organization Level of Analysis

2. Type of sales

3. Type of analysis

32
 Fig 3.8 Types of sales analysis

3.3.1.1 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. For example, 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.

Second, a useful way to identify problem areas in achieving sales effectiveness is

to

perform a hierarchical sales analysis, which consists of evaluating sales results

throughout the sales organization from a top-down perspective essentially the

analysis

33
begins with total sales for the sales organization and proceeds through each
successively

lower level in the sales organization .

3.3.1.2 TYPES OF SALES

It is usually desirable to evaluate several type of sale such as by the following

categories.

1. Product type or specific products.

2. Account type or specific account.

3. Type of distribution method.

4. Order size.

The analysis of different types of sales at different organization levels increases

management ability to detect and define problem areas in sales performance.

However,

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.

3.3.1.3 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

34
organizational comparison provide some useful information but are insufficient

evaluation of sales effectiveness.

Comparing actual sales with sales results with sales forecasts and quotas is
extremely

revealing. A sales forecast represents an expected level of firm sales for defined

products, markets, and time periods for a specified strategy. 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. The sales

effectiveness makes it easy to compare directly the sales effectiveness of

different

organizational levels and different type of sales.

Another type of useful analysis is the comparison of actual results to previous

periods.

This type of analysis is used to determine the sales growth rate for different

organizational levels and for different sales type.

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.

3.3.2 COST ANALYSIS

A second major element in the evaluation of the sales organization of sales

organization

effectiveness is cost analysis. 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.

Corporate resource earmarked for personal selling expenses for a designated period

represent the total selling budget.

35
Selling budgets are developed at all level of the sales organization and for all
key

expenditure categories.

Both the total expenditure for each of these categories and sales management budget

responsibility must be determined. Sales management budget responsibility depends

on

the degree of centralization or decentralization in the sales organization. In

general,

more centralized sales organization will place budget responsibility at higher

sales

higher sales management levels. For example, if sales force recruitment and
selection

take place at the regional level, then the regional sales managers will have
responsibility

for this budget category.

The basic objective in budgeting for each category is to determine the lowest

expenditure level necessary to achieve the sales quotas.

Determining expenditure levels for each selling expense category is extremely

difficult.

Although there is no perfect way to arrive at these expenditure levels, two

approaches

warrant attention

1. Percentage of sales method

2. Objective and task method

3.3.2.1 PERCENTAGE OF SALES METHOD:

The percentage of sales method calculates an

expenditure level

for each category by multiplying an expenditure percentage times forecasted sales.

The

effectiveness of the percentage of sales method depends on the accuracy of sales

forecasts and the appropriateness of the expenditure percentage. If the sales

forecasts are
36
not accurate, the selling budget will be incorrect, regardless of the expenditure

percentages used. If the sales forecasts are accurate, the key is determining the

expenditure percentage. This percentage may be derived from historical spending

patterns or industry averages. Sales management should adjust the percentage up or

down to reflect the unique aspects of their sales organization.

3.3.2.2 OBJECTIVE AND TASK METHOD

It is a type of zero based budgeting. In essence, each

sales

manager prepare a separate budget request that stipulates the objective to be

achieved,

the task required to achieve these objective, and the costs associated with
performing the

necessary tasks.

3.3.3 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. The profitability analysis is done by Income statement

analysis

3.3.3.1 INCOME STATEMENT ANALYSIS

The different levels in a sales organization and different types of sales

can be

considered as separate business. 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.

37
Two approaches for dealing with the shared costs are

1. Full costs approached

2. Contribution approached

1. Full cost approach:

It attempts to allocate the shared costs to individual units based

on some

type of cost allocation procedure. This result in a net profit figure for each
unit.

2. The contribution approach:

It is different in that only direct costs are included. 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.

3.3.4 PRODUCTIVE ANALYSIS

Productivity is typically measured in terms of ratios

between

output and inputs. 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.

Because the basic job of sales managers is to manage sales people, the most useful
input

unit for productivity analysis is the sales person. Therefore various types of
productivity

ratios are calculated on a per sales person basis. The specific ratios depends on
the

38
characteristics of a particular selling situation but often include important
output such as

sales, expenses, calls, demonstrations, and proposals.

The productivity analysis provides useful evaluative and diagnostic information

that is

not directly available from the other type of analyses.

Productivity improvements are obtained in one of two basic ways:

1. Increasing output with the same level of input

2. Maintaining the same level

39
 Chapter – 4
ANALYSES AND TOOLS

40
4.1 HINDUSTAN UNILEVER SALES ORGANIZATION

STRUCTURE

Hindustan Unilever Limited is India's largest Fast Moving Consumer Goods

(FMCG) Company. HUL and Group companies have about 15,000 employees, including

1200 managers.

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.

For this, HUL is organized into two self-sufficient divisions - Home & Personal
Care

and Foods & Beverages - supported by certain central functions and resources to

leverage economies of scale wherever relevant.

Board is headed by the Chairman, and comprising 5 whole time Directors and 5

independent non-executive Directors. The day to day operations are supervised by

the

National Management comprising the Vice Chairman, Managing Director (HPC),

Managing Director (Foods) and the Finance Director.

Divisions each division is self-sufficient with dedicated resources and assets in

sales,

marketing, commercial, and manufacturing. The two divisions are further reorganized

into categories.

Typically, each category and each function - Sales, Commercial, Manufacturing - is

headed by a Vice President. They with their respective Managing Director comprise
that

Division's Management Committee.

41
For managing sales operations, HUL divides the country into four regions, with
regional

branches in Delhi, Kolkata, Chennai and Mumbai. Headed by a Regional Manager, they

comprise Regional Sales Managers and Area Sales Managers, assisted by dedicated
field

forces, comprising Sales Officers and Territory Sales Incharges.

In Marketing, each category has a Marketing Manager who heads a team of Brand

Managers dedicated to each or a group of brands.

The commercial team of a Division is responsible for its supply chain management.

There are teams dedicated to sourcing, planning and logistics.

Each Division has a nationwide manufacturing base, with each factory peopled by
teams

of Production, Engineering, Quality Assurance, Commercial and Personnel Managers.

42
Fig 4.1 Hindustan Unilever sales organization structure

43
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.

1. Sales analysis

2. Cost analysis

3. Profitability analysis

4. Productive analysis

4.2.1 SALES ANALYSIS

4.2.1.1 ORGANIZATION LEVEL OF ANALYSIS

Fig 4.2 organization level of analysis

44
Sales for west region appear to be lower than those for other regions, so the
analysis

proceeds to investigate the sale for all the districts on west region. Low sales
are

identified for Orissa district, then district Orissa sales are analyzed by
territory. The

result of this analysis suggest potential sales problem within konark territory.

4.2.1.2 TYPE OF SALES

Fig 4.3 Types of sales

It shows low sales volume for product Lipton tea. 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.

45
4.2.1.3 TYPE OF ANALYSIS

Bihar Orissa West Bengal

Sales 1,232 cr 988 cr 1178 cr

Sales quota 1,100 cr 1,000 cr 1,200 cr

Effectiveness index 112 98.8 98.1

Sales last year 1,170 cr 950 cr 1108 cr

Growth 5% 3% 6%

Table 4.1 Type of analysis

An effectiveness index can be computed by dividing actual sales result by sales

quota

and multiplying by 100.

So here sales growth of orissa region is less, additional analysis will be done to
identify

the problem and what need to be done to improve sales organization effectiveness.

46
4.2.2 COST ANALYSIS

4.2.2.1 OBJECTIVE AND TASK METHOD

Compensation cost Training Cost

Actual Budgeted Variance Actual Budgeted

Variance
Cost Cost Cost Cost

South 3,660,000 3,600,000 +60,000 985,000 1,030,000

-45,000

East 3,500,000 3,700,000 -200,000 2,110,000 2,040,000

+70,000

West 3,150,000 3,400,000 -250,000 830,000 1,060,000

-230,000

North 4,200,000 3,900,000 +300,000 2,340,000 2,160,000

+180,000

Table 4.2 Objective and task method

4.2.2.2 PERCENTAGE OF SALES METHOD

Compensation cost Training

Cost

Actual Budgeted Actual

Budgeted
%Sales %Sales %Sales
%Sales

South 6.1 6 2.9

3

East 5.8 6 3.1

3

West 5.4 6 2.6

3

North 6.0 6 3.1

3

Table 4.3 percentage of sales method

47
The first type of analysis calculates the variance between actual costs and
budgeted costs

for the regions in a sales organization. Regions with the largest variation,
especially

when actual costs far exceed budgeted costs, should be highlighted for further
analysis.

Large variations are not necessarily bad, but the reason for variations should be

determined.

4.2.3 PROFITABILITY ANALYSIS

Full cost
Contribution Approach
Approach

HUL Sales North East

West South

Sales 21,927 7,805 4,448

3,398 6,565

Cost of Goods Sold 13,130 4,683 2,668

2,038 3,945

Gross Margin 8,797 3,122 1,780

1,360 2,630

Regional Selling 3,857 1,245 956

618 1,038
Expenses

Zone Direct Selling 1,985

Expenses

Profit Contribution 2,955 1,877 824

742 1,592

Table 4.4 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.

48
4.2.4 PRODUCTIVITY ANALYSIS

Bihar Orissa West

Bengal
Sales 1,232 cr 988 cr 1178 cr
Selling Expenses 11.3 10 11.7
Sales calls 9,000 7,500 8,500
Proposals 220 180 260
Number of Sales people 110 50 80
Sales/Sales person 11.2 19.56 14.72
Expenses/Sales Person 0.102 0.2 0.146
Calls/Sales person 81.81 150 106.25
Proposals/sales Person 2 3.6 3.25

Table 4.5 Productivity analysis

Above table shows how productivity analysis provides a different and useful
perspective

for evaluating sales organization effectiveness.

Take information concerning district Bihar. Although sales per person are
reasonable

and expenses per person is relatively low, both calls per sales person and
proposals per

sales person are much lower than those for the other districts. This may explain
why

selling expenses are low, but is also suggest the sales people in this district may
not be

covering the district adequately. The high sales may be due to a few large
customers.

49
 Chapter – 5
CONCLUSION

50
 CONCLUSION

 The organization should be based on certain principles like the principles of

unity of

direction and command.

 A sales organization is a structural body through which the functions o sales

management are carried out.

 A good sales organization always aims at achieving the sales target at the
minimum

cost and with maximum efficiency.

 Careful attention to organizational design and costs in serving the customer

helps in

designing the customer sales organization.

 Each type of sales organization structure has certain advantage and disadvantages

and, so HUL use combined structure that combine the feature of several types.

 There is no one best way to structure a sales organization. The appropriate way
to

organize a sales force and sales management depends on certain characteristics of a

particular selling situation.

 The objective underlying each of the analysis is to be able to evaluate

effectiveness,

identify problem area and use this information to improve future sales organization

effectiveness.

51
 Conducting analyses for sales organization effectiveness is complex task for two

reasons

1. Many types of analyses can be performed to evaluate sales, cost profitability,

and

productive result for example a sales analysis might focus on total sales, sales of
specific

product sales to specific customer or other type of sales and might include sales

comparisons to sales quotas, to previous periods, to sales of competitor ,or other

type of

analyses.

2. Separate sales analyses need to be performed for different levels in sales

organization.

Thus a typical evaluation would include separate sales analyses for sales zone,
regions,

districts, and territories.

52
 BIBLIOGRAPHY

Books

1. Ingram, Lagorge, Aila, Schwepker jr. Williams [2007] “ Sales management

analysis and decision making” Thomson corporation , sixth edition page no 79-

90, 245-278

2. Tapan k. Panda, Sunil sahadev [2005] “Sales and distribution management”

Oxford university press, fifth reprint, page no 202-234

3. William l. Crone, Thomas E. Decarlo [2009] “Sales management” Willy India

edition, Ninth edition, page no 166 -180

Research paper

1. Elizabeth McMillan “Considering organization structure and design from a

complexity paradigm perspective”

53