WEIKANG PHARMACEUTICAL CO.

,LTD:
CHANNEL MANAGEMENT DILEMMA

SECTION A [Group- 02]

Athul Subran (18PGP039)
Spandana Reddy (18PGP044)
Chekka Geetha (18PGP045)
C.Poojitha Saranya (18PGP046)
Gopikrishnan S (18PGP059)
ISSUES :

 Cross-boundary sales by Li Zhong to Nanning People’s Hospital

 Reported to management by Sun Qiang for action against the distributor

 Meeting arranged for all the regional managers and sales managers

 Survey conducted for opinions of all distributors and salespersons

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Alternative 1: Economic Punishment to the
distributor
o Violation of agreement signed with the company
o Company’s pricing system and sales system getting affected
o Bargaining power of the hospitals might increase as certain hospitals in Nanning already
started bargaining with the distributors
o If not punished, conflicts might sharpen between the two distributors
o Internal Conflicts between distributors might further lead to conflicts between distributors
and the manufacturer
o If not addressed, this might become a common practice and distributors might collectively
cheat the management
o Economic punishment ensures that a potential distributor is not completely lost

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Alternative 2: Peaceful Settlement

o Since Nanning Second People’s Hospital is a significantly large account, the company should not take
any action to retreat the offer made by Zhong
o For a company with annual operating income around 85 million RMB, an account as large as 300
million RMB a year cannot be avoided
o Although Zhong broke the terms under Article 3 of the distribution agreement, he should not be
severely punished as
o The actions made the company’s footprint in South China increase
o He did not cannibalize the company’s sales, as he converted an account the distributor of Nanning failed to
convert
o Punishing him will discourage enthusiastic distributors, who drive sales growth
o Offending a distributor who was able to cover almost all of his region would not be a feasible solution for the
company

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Comparison of Alternatives:

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Recommendations:

• Peaceful Settlement with distributors can include the following recommendations:

• Re-design the incentive plans for the distributors to avoid selling at lower prices

• Contract should be signed with the distributors to inform the management before entering other regions

• The company should mandate the distributors to convert sales of only those customers whom the
specific region’s distributors were unable to convert but not new customers

• The distributor moving into other regions should pay a percentage of their profit to the local distributor
if deal is converted. This ensures that there are no conflicts between the distributors

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Thank You