SALES MANAGEMENT TERM PROJECT REPORT TOPIC: Sales Territory Design by a FMCG company SUBMITTED TO

Sir Saeed ur Rehman

SUBMITTED BY:Syed Rehan Ahmed Muhammad Idrees Khan

LETTER OF TRANSMITTAL April 13th , 2010 Mr. Saeed ur Rehman Professor of Sales management Institute of Business Management, Karachi. Respected Sir, This is the term report on “Territory design of an FMCG company”. This report consists of the literature research, the company and competitor analysis, internal company resources, strategic analysis. The report has been completed after the perpetual hard work, determination and devotion of last two weeks. If you have any additional questions, we would be pleased to answer them. Thanking you. Sincerely, Muhammad Idrees Khan Syed Rehan Ahmed Shahbaz Aslam Samreen Uzair Sameera Idris Osama Mehboob

LETTER OF AUTHORIZATION April 13th , 2010 Dear Reader, We are students of Sales Management at IoBM and have been authorized by Mr. Saeed ur Rehman to prepare a term report on “Territory Design of FMCG company” which is to be submitted on April 13th , 2010. The preparation of this term report required us to perform a thorough analysis of the Distributor industry of Pakistan. We would like to thank our course instructor Mr. Saeed ur Rehman for such practical knowledge that he gave throughout the semester and all such practical exercises that help us to enable the skills of professionals. We would also like to thank Mr.Khalid khan (Regional Sales Manager (south) M&P for providing us thorough and cooperation in making this report by sharing information regarding our topic and by providing us useful data and facts for our report.

Sincerely, Muhammad Idrees Khan Syed Rehan Ahmed Shahbaz Aslam Samreen Uzair Sameera Idris Osama Mehboob

EXECUTIVE SUMMARY: M&P is a multinational company in the business of distribution and it is established in Pakistan’s region of south Asia since 1912. The area manager Mr.Khalid Khan (M&P) explained us the territory design of their company and how it operates. M7P divided Pakistan into three region and four zones. In every zone there are cities which in turn divided into depots and these depots consist of territories. Karachi is a city with four depots and 160 territories. M&P design its territories by analyzing its channels and business potential of an area and set its objectives according to the feasibility. These objectives are achieved by deg strategies and specific tactics and at last they implement their plan and control it thus following the territory management model.

INTRODUCTION Muller & Phipps commenced business operations in Karachi in the year 1912, and today has the distinction of being one of the largest and oldest distribution networks in the country. Muller & Phipps Pakistan Pvt. Ltd is now a division of the Getz Corporation; U.S.A. Getz is based in San Francisco and has a world-wide network of offices operating through 23 subsidiaries and associate companies, concentrated mainly in the Asia-Pacific region, Europe and USA. Through its association with Getz, Muller & Phipps is able to obtain a vast reservoir of knowledge, experience, and resources. Ever since its inception, it has been devoted to provide outstanding service to its Principals and Customers. Miller & Phipps operates in three business units namely: Pharmaceutical Distribution, FMCG distribution and Hospital and health care marketing and distribution division Through Pharma Division it currently represents ten companies out of which four are ranked in the top twenty companies of Pharma industry in Pakistan. Its highly motivated sales and delivery staff has maintained a more than the industry growth rate for the past several years. By maintaining a sales and delivery team of nearly 500 personnel divided in to three groups we directly cover more than 26,500 customers in 671 towns on a frequency of six days cycle. It represents Becton Dickinson Pakistan (Pvt.) Ltd., Bristol-Myers Squibb Pakistan (Pvt.) Ltd., Getz Pharma (Pvt.) Ltd. Merck Sharp & Dohme of Pakistan Ltd., Medics Laboratories, Martin Dow Pharmaceuticals (Pak) Ltd., Novo Nordisk Pharma (Pvt.) Ltd, Pharmatec Pakistan (Pvt.) Ltd., Roche Pakistan Ltd. and Ray Pharma Pvt. Ltd. M&P Consumer Product Division offers distribution infra-structure for diversified range of products that meet everyday need for nutrition, hygiene and personal care. Its distribution operating models are designed to deliver fast track services to the customers. Each of its eight businesses enjoys dominant market presence as well as un-matched brand equity. It has customer-friendly approach and innovative IT infrastructure ed by HHT (Hand Held Terminals) that provides first hand information at grass-root level essentially required to make strategic decisions in the era of stiff competition. It has its distribution in 3M Pakistan (Pvt.) Ltd., MITCHELL'S Fruit Farms Ltd., Nutricia Cow & Gate, Nestle Pakistan Limited. Perfetti Van Melle Export Far East Ltd., Pepsico International (Pvt) Ltd., Peridot Products Private Ltd. and Unilever Pakistan Ltd.

Hospital Care Unit was started more than 20 years back, It caters the vital needs of the healthcare segment throughout Pakistan with products for operation theatre, anesthesia, intensive care units , cardiology, Burn Units, Diabetic Care Centers, Plastic Surgery and Orthopaedics departments, by marketing and distributing following world renowned Heathcare Companies. It provides distribution of products of ConvaTec Ltd., Jhonson & Jhonson Pakistan (Pvt.) Ltd., Proton Healthcare, FZE and Rudolf Medical Gmbh. M&P is in the business of distribution since 1912 years. In 1912 the camel cart wheel started moving cargo to the then lesser developed markets. However, the high level of commitment, dedication and loyalty of its ancestors towards principals are the core values of M&P which has allowed it to grow steadily. A vision to keep time on your side and improve on services offered benefited M&P in becoming business associates of many valued principals. Even today M&P’s heritage plays a vital role in growth and sustaining business. MISSION STATEMENT We are a customer oriented service organization, leading in nationwide distribution and marketing of pharmaceutical, healthcare & consumer products. We derive our strong corporate image from our innovative approach to business, extensive distribution experience, competent staff, well equipped establishments and a vast operational network. We aggressively exploit new business opportunities by drawing strength from our corporate image and by promoting a culture that encourages initiative and decision-making at all levels. We take pride in adhering to ethical business practices; in being a good corporate citizen; and we recognize our responsibility to stakeholders and society. HEIRARCHY CEO \ MD GM sales NSM BDM RSM\ ASM RSM\ ASM BM BM FMs S/Os Delivery men

= MR Kamran Nishat = Mr Asif M Alavi = Mr Iftikhar Ahmed = Mr Ghazanfar Qadri (principle coordinator) = Mr Khalid Khan = Mr Amir Shahzad = Mr Adnan Gul = Mr Mehboob Khaliq

M&P ADVANTAGES  Nation-wide Coverage.  Nation-wide reach to meet distribution needs.  Convenience of one window operation creating contractual efficiency.  Robust and timely on sales, stocks, sales related statistics and batch recall.  Financially sound.  Motivated and ion driven team.  Large infrastructure and network.  Analytical IT and extensive reporting capabilities.  97 years of distribution experience and expertise.  Diverse portfolio of clients. BUSINESS PERFORMANCE M&P move more than 100,000 tons of merchandise every year across the country. Stocks of all sizes, weight and volume is moved from Karachi to its sales locations through containers & trucks that is then dispatched to various markets by special M&P operated vehicles. Performance chart

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PRODUCTS OFFERED BY M&P: M&P serves all the large and middle size businesses in Pakistan by offering its extensive distribution services. The list below contains few of the major names that M&P caters in FMCG industry.

3M Pakistan (Pvt.) Ltd.

MITCHELL'S Fruit Farms Ltd..

Nutricia Cow & Gate

Nestle Pakistan Limited.

Perfetti Van Melle Export Far East Ltd.

Pepsico International (Pvt) Ltd.

Peridot Products Private Ltd

Unilever Pakistan Ltd.

COMPETITORS: Distribution of product plays an important role as it provides end with the product they demand and on the other hand serve manufacturing companies to in selling their products to its customer. In Pakistan major players in the business of distribution are following; • Muller & Phipps • International Brands Limited • Ali Gohar Pakistan • BERC Now we provide an introduction of M&P’s major competitor IBL and its comparison with M&P.

INTERNATIONAL BRAND LIMITED (IBL): IBL is a diversified business house engaged in a wide range of business activities in Pakistan including international trading, sales and distribution of various products. It has got 61 offices in PAKISTAN and is engaged in diversified (products) distribution including FMCG, pharma, technology and telecom products as well. IBL is one of the major competitors of MnP and has following companies’ products in their distribution • • • • •

I

• • •

HABITT Dunkin Donuts Gillette Imperial Paints & Varnish Works Mead Johnson Nutritionals USA Mobilink Procter & Gamble PTCL

• • • • • • •

SARA LEE Searle (Pharma & Consumer) Mars Confectionary (Chocolates) Master Food (Ice Cream) Canderel Kellogs Shezan Wrigley's ( Chewing Gums )

ANALYSIS OF IBL and M&P IBL competes directly with M&P because it both the companies have diversified products in their product mix. And has strong presence in consumer goods and pharmaceutical industry. Pharmaceutical M&P has the strongest hold in pharma distribution and this industry contributes most in their revenue (Rs 10 billion in 2009) IBL has SEARLE ‘s products while M&P has 10 companies including fastest growing GETZ, JOHNSON & JOHNSON, ROCHE, MERCK. M&P has advantage over IBL in this industry. CONSUMER PRODUCTS In FMCG products the competition is close. IBL has got maximum products of GILLET, P&G, KIWI, CANDEREL, SHEHZAN,DUNKIN DONUTS and many more companies including ice cream, confectionary. On the other hand M&P has consumer market giant NESTLE and UNILEVER along with MICHETTLES, LAYS,3M and many others. There is intense competition between 2 in this industry. IBL also has HABITT (FURNITURE PRODUCTS), paints and varnish products and telecom products (PTCL cards, and mobilink) in their product mix which is absent in M&P and gives IBL edge over M&P. while M&P has hospital care products of multinationals in their product mix, also strong hold in pharmaceutical than IBL gives company strong competitive edge on IBL.

MULLER AND PHIPPS commenced business operations in Karachi in the year 1912, and today has the distinction of being one of the largest and oldest distribution networks in the country. Pakistan Pvt. Ltd is now a division of the Getz Corporation; U.S.A. Getz is based in San Francisco and has a world-wide network of offices operating through 23 subsidiaries and associate companies, concentrated mainly in the Asia-Pacific region, Europe and USA. Through its association with Getz, since its inception,

is able to obtain a vast reservoir of knowledge, experience, and resources. Ever has been devoted to provide outstanding service to its Principals and Customers.

TERRITORY MANAGEMENT AT Has divided its distribution into 3 business units •

Pharmaceutical distribution

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FMCG distribution

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Hospital & Health care marketing and distribution division

TERRITORY DIVISION: For dividing Pakistani market into territories the Pakistani market M&P has divided Pakistan into 4 zones. These zones are divided according to the provincial boundaries of Pakistan i.e. each province represents a single zone. M&P has divided Pakistan into following zones: Z1- SINDH Z2- BALUCHISTAN Z3- PUNJAB Z4- PAKHTOONKHAWA- KHYBER Each zone (province) consists of cities therefore M&P has further divided the zones into cities .Currently the company has 35 offices in 24 cites. Cities are further divided into DEPOTS and each depot has got territory in it. Sales Volume vise classification of towns: METRO TOWNS = KARACHI , ISLAMABAD \ RAWALPINDI , LAHORE Teer 1 towns = Hyderabad, sukkur , quetta , Bhawalpur , Larkana etc Teer 2 towns = Tando Adam , Mir pur Khas , tando allah yaar etc

ILLUSTRATION OF TERRITORY

ZONE (consists of 4 zones)

CITIES

DEPOTS

TERRITORIES belts, a/c, key a/c etc)

(territory consists of

EXAMPLE OF TERRITORY DESIGN Karachi lies in zone 1 (Sindh), this zone is further divided into cities and Karachi is one of them, next Karachi is divided into 4 depots and these 4 depots are divided into territories. Karachi in all has 160 territories. So the smallest unit able in territory design is “territory” and zone is the largest able unit at M&P. M&P has 35 offices in 24 cities in Pakistan. Each office is responsible for supplies to the area under its jurisdiction. These cities includes KARACHI

ISLAMABAD

HYDERABAD

ABBOTABAD

LARKANA

MINGORA

SUKKUR

MARDAN

NAWABSHAH

PESHAWAR

RAHIM YAR KHAN

BANNNU

BHAWALPUR

SARGHODA

MULTAN

D I KHAN

SAHIWAL

D G KHAN

FAISLABAD

QUETTA

LAHORE

PESHAWAR

GUJARANWALA SIALKOT JEHLUM RAWALPINDI

Distribution Flow at MULLER AND PHIPPS

CHANNELS: Channels are defined as ways through which products of the company reach to the customers. M&P uses a combination of these channels in order to get 100 % successful sales transaction and to provide end s the product that they demand. Following are different forms of channels that M&P uses; 1. Wholesale 2. Retail 3. Key 4. International model trade (IMT) 5. Small distributors 6. Institutions

HOW M&P DEFINE ITS OBJECTIVES: M&P is a distribution house which serves as an intermediary between manufacturer and end . Thus in order to execute the business efficiently every type of company has some objectives same is the case of M&P as their objectives are defined in following manner. •

PRINCIPAL DEFINED OBJECTIVES: Principal is the manufacturing company it sold its products to distributor like, M&P.It has its own objectives like primary objective of principal is to sell the product to M&P and its secondary objectives are to push the product in different channels (wholesaler, retailer etc) whereas the secondary target of Principal becomes the primary target of M&P i.e. to sale the product to different channels .So this is a chain of actions in which objective of one serves as the pre-requisite of other’s objective. Thus it is called principal defined objectives as primary objective of distributor is the secondary objective of Principal.

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HIERARCHICALLY DEFINED OBJECTIVES:

Objectives in side M&P are also defined according to hierarchy. Objectives of national sales manager (NSM) define the objectives of overall hierarchy down the stream. Like objectives of NSM are the prerequisite of area sales manager’s objectives and they serve as the corner stone in the definition of Branch manager’s objective so on and so forth.

TERRITORY DESIGN:

M&P design its territories using three different techniques together which are listed below; •

Geographically

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Product vise

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Logical outlet

GEOGRAPHICALLY: Geography is the terrestrial boundary that is used to identify the area of influence of an individual or group. In the situation of M&P geographical aspect serves as an important tool in its territory design. They use two aspects in deg geography of territory which are; •

vise

•

Belt vise

VISE: M&P define s as the shops in an area which are located inside and do not have exposure to main road of an area. BELT VISE: Belts as the name indicate a long straight line of shops along the road. They are few in an area and serves as a place where a large chunk of shops present.

Geographically it has divided its areas into 3 classes according to their sales potential and contribution in the city. A class areas contribute maximum in sales volume and requires special set of sales force to operate and handle customers where as B and C class areas also require different selling skills according to the nature of the customers present in the areas. A Clifton Defense Societies Gulshan

B Gulistan-e-jauhar Shah faisal F.B area North nazimabad Nazimabad

C Korangi Orangi Landhi Malir Baldia New Karachi North Karachi

PRODUCT VISE: It is another technique which M&P uses in territory design. They classify products into three main categories which are; •

Category A

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Category B

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Special Category

CATEGORY A: In category A they have products like Colgate, Doritos(I), PVM and etc. CATEGORY B: In category B they have products like Kernel pop, Nestle, and Saralee(kiwi) etc. SPECIAL CATEGORY: It is a separate category which is dedicated to only one product line i.e. 3M .In M&P there is a separate sales force for 3M scotch.

LOGICAL OUTLET:

This is the term that is used in M&P for all those shops which keep its products. These are the potential s which are the targets of the company. So in deg territory you also consider logical outlets as they can serve in increasing the business of the company.

TERRITORY MANAGEMENT MODEL: •

ANALYSIS

In analysis part we simply check channels, geography, Logical outlets, belt, market, trade and depots. M&P will simply go through that what channels are available to reach geography i.e. the means of reaching a particular retailer or wholesaler, and which area has more potential; to check this they will check the whole area and then sub-divisions of that area. Proper analysis of these channels and territory area is very important. The analysis component deals with three key concerns: load, potentials, and servicing requirements. The term ‘ load’ refers to the number of actual and potential customers assigned to a given salesperson. Sales records provide a reasonable potential of each ’s total purchase volume in a certain product category. From this information, the territory manager can project potential, or the share of an ’s business that the firm can reasonably expect to attract. New business potentials must also be considered. Established and new s have servicing requirements that are based on both their past volume with the company and their unique needs and problems. •

OBJECTIVES:

M&P looks in defining objectives they look for its feasibility, worth (potential &output), size of territory, and Return on Investment factor. By this the mean that after they have gone through analysis of all the key features of deg a suitable territory, they will now look that is it feasible. The place or territories that they have sorted out in analysis part are lucrative enough, I mean won’t it result in wastage of potentials of the company, it should provide top potentials and output should be productive. Size of territory should be appropriate, it shouldn’t be too big or too small i.e. sugar in a cup of tea should not spoil the health nor should it make him feel tea without sugar. And return on Investment is considered to be the boss of all the objectives of M&P. once the product has been bought by distributor (M&P), they should get profit on selling it, the return should be lucrative enough to keep the business going. •

STRATEGY They define strategies as:

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Call frequency should be weekly, fortnightly, or monthly. These frequencies depends on the type of customers. Capturing new customers for M&P is not a big deal, this is just a piece of cake for them. The marketing of products, quality of products and price makes its customers at its own. Lets get back to the call frequencies, as I mentioned it depends on the customer, i.e. some customers get feed up with too frequent calls and some need to be treated frequently. Their targets are month vise. At the end of the month they make measurements of their sales and in this way they evaluate that where do they stand, how much is there return on investment and how much growth have they made. It is very important for a Sales Rep that his sales grow; by this he can judge his success. Division of channels, it means that means through which our finish product will reach to our end s. For this division, we need wholesalers, retailers, key s, International model trade (IMT) and small distributors. These are the aspects on which the distributor can rely and make his sales target achievable. Like wholesaler is the person who buys different products from the distributor, in bulk quantity and avails the discount of bulk buying. Then he sells his bulk quantity in segments to the small shopkeepers, for example: Pakistan Super Rice Store, in Gulistan-e-Johar. TACTICS:

How to bring the strategies in practice is known as tactics.Quarterly target achievement, mapping, men power, and van power.M&P will make all the possible measures that have been discussed in strategies part to achieve its quarterly targets, and as added by Mr. Khalid Khan, they do achieve there quarterly targets and there sales is growing every quarter. Then comes distribution of areas to the respective sales force but before that the man power and area potential is taken into consideration and decision is made accordingly.Intensity of territory and coverage and the minimization of nonproductive time come under tactical issues.

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IMPLEMETATION:

As we have studied the whole scenario, now we implement our game plan. This is the way they implement their sales design and they work in the way described by the charts below.

DAILY PERFORMANCE REVIEW AND IMPLEMENTATION SELFMANAGED CHART

EVALUATION: Evaluation is like checking that the recipe has provided us the food with delicious taste or more ingredients and required to add deliciousness. In this phase of selling process, companies make check that whatever tactics they have implemented, are they resulting good for the company? And M&P does evaluation on following grounds. •

SALES TEAM: Individual assessment and group assessment. M&p will check that the tasks allocated to a particular Area Sales Manager, has been achieved or not? And after this the individuals enrolled (Sales Rep.) under that area sales manager will be checked for their productivity.

•

Periodic Check: It is on Daily, Weekly, Monthly, Quarterly, and Annually basis. All the

essential things are checked accordingly and appropriate measures are timely taken by M&P to overcome the mishaps. The things which require prompt attention are checked on daily basis and things that are part of long term plans are taken into consideration according to their allocated time. •

Territory Check: M&P checks whole of its territory. Mr. Khan told us that in Karachi they have for depots and under those four depots there are 160 outlets. For every depot there is a person who is able and under him there is a team who is responsible for particular region of that depot. In this way task allocation, and controlling the huge number of outlets becomes easier.