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    1. UniGlobe, a consumer goods company operating in the Philippines, was facing low profitability from its small local stores (SLS) division despite high volumes. Problems included low margins, inability to move customers to larger products, and conflicts between distributors and UniGlobe's incentives. 2. Four potential solutions were proposed: redistributing SLS volume to other wholesalers, shifting volume to SLS from other channels, distributing only lower margin products through SLS, and incorporating SLS operations in-house. 3. The suggested solution was for UniGlobe to incorporate SLS operations in-house, which would allow more control over the channel while increasing profits by 2.5% and

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    1. UniGlobe, a consumer goods company operating in the Philippines, was facing low profitability from its small local stores (SLS) division despite high volumes. Problems included low margins, inability to move customers to larger products, and conflicts between distributors and UniGlobe's incentives. 2. Four potential solutions were proposed: redistributing SLS volume to other wholesalers, shifting volume to SLS from other channels, distributing only lower margin products through SLS, and incorporating SLS operations in-house. 3. The suggested solution was for UniGlobe to incorporate SLS operations in-house, which would allow more control over the channel while increasing profits by 2.5% and

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    5 views11 pages

    Vaibhav Chaudhary (230101349) SDM Assignment Section F

    Uploaded by

    VaibhavChaudhary
    1. UniGlobe, a consumer goods company operating in the Philippines, was facing low profitability from its small local stores (SLS) division despite high volumes. Problems included low margins, inability to move customers to larger products, and conflicts between distributors and UniGlobe's incentives. 2. Four potential solutions were proposed: redistributing SLS volume to other wholesalers, shifting volume to SLS from other channels, distributing only lower margin products through SLS, and incorporating SLS operations in-house. 3. The suggested solution was for UniGlobe to incorporate SLS operations in-house, which would allow more control over the channel while increasing profits by 2.5% and

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    of 11

    Reaching the Bottom:

    Uniglobe’s Small Local Stores


    Dilemma Case Analysis
    By – Vaibhav Chaudhary
    (230101349)
    Section F
    Case Background

    UniGlobe: A consumer goods company


    serving wide array of products, operating
    in Philippines (Headquartered in US). It's
    sales operations was made up of four
    main decisions
    • Small Wholesale (SW)
    • International Supermarkets
    • Wholesale
    • Small Local Stores (SLS)
    Problems at Hand
    Stakeholder Problems
    Uniglobe 1. Low Profitability, in spite of huge volumes.
    2. Not successful in moving customers from small to large
    SKUs.
    3. Low Profit Margin

    Distributor 1. High capital investment and low margins are keeping


    profits low.
    Retailer 1. Small shop size.
    2. No "stocking fees" from UniGlobe.
    3. Frequent restocking.
    Reasons for Problems
    Incentive structures Retail Presence
    • The distributors are incentivized to sell • Retailers are not paid ‘stocking fees’
    brands with low awareness, making it which means the products are not stocked
    difficult to sell high volumes. at noticeable locations and since these are
    • SLS is designated as the medium for new brands the customers don't ask for
    selling new brands, however these brands them.
    have no ‘pull’ value and hence sell in low
    volumes.

    Low Margins Distributor Conflict


    • Usually a channel for smaller SKUs which • The channel is a set up in a way where the
    have low profit margins. distributor is incentivized to make the least
    • Payment of higher margins to the retailer amount of capital investment and get as
    than the small scale wholeseller also cuts much margin as possible while the firm is
    into the margin. incentivized for the exact opposite.
    Solution 1: Redistributing SLS Volume To
    Other Wholesellers

    ROI decreases from 15% to Company profit margin per Volume of wholesale division Growth of 13.52 % increase in
    12%. unit manufactured increases increases from 56% to 88% profit margins
    from 2.07 to 2.35
    Company profit margin per unit
    manufactured - increases from
    1.10 to 1.55

    Solution 2: Shift
    volume from Volume of SLS division
    other trade increases from 22% to 100%

    channels to SLS
    Growth - 25.6% decrease in
    profit margins
    Company profit margin per unit
    manufactured further decrease from
    1.10
    Solution 3:
    Distribute Volume of SLS division decreses from
    only lower 22% to 20.75% and wholesale volume
    increases from 56% to 73%
    margin SKU
    through SLS
    Decrease in profit margins
    ROI decreases from 15 - 12%.

    Solution 4: Company profit margin per unit manufactured -


    increases from 2.07 to 2.31
    Incorporating
    the SLS Volume of wholesale division stays at 22%

    operations in-
    house Growth of 11.59 % increase in profit margins

    More control on operations and on channel


    Suggested Solution
    After going through the above analysis, it can be said that
    UniGlobe should go ahead with Option 4 out of all the
    solutions available on the table i.e. Incorporating the SLS
    operations in-house.
    In this case UniGlobe has to do following activities:
    • Move all personnel and investments to UniGlobe from SLS
    distributors and manage them internally
    • The effect of these on UniGlobe would be as follows:
    • More control on the channel and increase UniGlobe's capital
    investment and its fixed costs
    • Increase in Gross Profit margins adhering to UniGlobe's
    corporate strategy
    Suggested Solution

    • Impact on ROI would decrease it from 15% to 12%


    • Increase in profits through trade channels by 2.5% as it
    will be exempted from paying 8% commission to
    distributors and rest 5.5% would be used to cover
    variable expenses
    • Overall Growth increases by 11.59%
    • Volume remains constant at 22% initially
    Thank You

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