Ingersoll Rand Case Study

Ingersoll Ingersoll Rand (A) Managing Multiple Channels:1985 Section S4, Group 9

The Problem Which channel should the newly developed 200 hp centrifugal model, Centac-200 should be sold? •

Ingersoll Rand (I-R) Sales Force

•

The distributor network

•

Air centres

The Situation Direct Sales Force: Advantages: •

Well established established service capabilities capabiliti es

•

Good addition to the shrinking line

Disadvantages: •

Sales force tend to become ‘elephant hunters’

The Situation Distributor network: Advantages: Well established network. Consistent with the hp portfolio. Good reward to the loyal distributors •

•

•

Disadvantages: Attention away from the smaller compressors. Distributor training is required. Channel not completely under control •

•

•

The Situation Air Centers: Advantages: •

Useful in areas where distributors were not successful.

•

Inventory Transfer Facility Facil ity..

•

Centralized Order Entry System.

Disadvantages: •

High Overheads.

•

Apprehension in the minds of distributors.

Cost Analysis Cost of Centac- 200

=$225*200= $45000 (19 Mill/200 Units=$45000)

Installation Cost

= 12% of $45000 = $5400

Spare Parts and Maintenance Cost = 2% of $45000 =$900 Gross Margin on Compressors Compressors

= 15% of $45000 = $6750

Gross Margin on Spare Parts

= 30% of 900 = $270

Air Centre: Gross Margin per unit

= $6750+$270-$5400 = $1620

Sales of Air Centres

= 20% of 200 = 40

Gross Margin for market

= 40*$1620 40*$162 0

(40 units)

=$64800

Sales

=200*0.46=92

Total sales

=92*45000=$ =92*45 000=$41400 4140000 00

Cost to Company

=0.19*4140000=$786600

Sales Force: Gross Margin per unit Sales of direct Sales force force Ex Factory price of product (60 units) Sales Total sales Cost to Company

= $6750+$270-$5400 $6750+$270-$5400 = $1620 = 30% of 200 = 60 = 60*$1620 =$97200 = 200*0.22=44 Units = 44*45000=$1980000 44*45000=$19 80000 =0.11*1980000=$217800 =0.11*1980000=$217800

Distributor Network: Gross Margin per unit

= $6750-$5400 = $1350

Sales of Distributor Network= 35% of 200 = 70 Gross Margin for market

= 70*$1350 70*$135 0

(70 units)

=$94500

Sales

= 200*0.32=64

Total sales

= 64*45000=$28 64*4500 0=$2880000 80000

Cost to Company

=0.21*2880000=$604800

Recommendations

Distributor Network

Why? •

Distributor Networks Networks earn higher profits than air centres. ce ntres.

•

Distribution centres have a better chance of earning profits due to the reach.

•

The distributor network is bigger compared to any of the channels.

•

Distributor centres centres have better structure than Air Centres and Direct Sales Force.

•

Also the cost to company to to maintain a distributor network is less compared to air centre.

•

Distributors Distributors may push the products better than the sales s ales force.