Dealing with dealer demands
A report submitted to
Instructor: Prof. Avani Desai
Academic Associate: Mr. Rahul Shukla
In partial fulfilment of the requirements of the course
Written Analysis and Communication - I (2013-14)
Balbudhe Kishor Madhukar (13085)
Dayama Dipesh (13105)
August 3, 2013
INDIAN INSTITUTE OF MANAGEMENT, AHMEDABAD
Date: May 25th, 2012
Subject: Decision on Vickers' request for distributorship
I have comprehensively analysed the situation at hand and the problem facing Bolster Electronics on deciding a response for Vickers' request for distributorship. I've evaluated key possible options to address the issue employing different criteria in their order of importance. I have also suggested key recommendations to tackle the problem with an action plan for the future.
I recommend that Bolster should refuse Vickers' request for territorial distributorship in northern Alberta without giving any price discount.
Please find the report enclosed containing a detailed action plan.
General Sales Manager
Bolster Electronics has to respond to Vickers' request for territorial distributorship in northern Alberta where they now claim to be performing the roles of a distributor. They had posed a similar request earlier in 2007. While the company has to stick to its business policy of having only national distributors, it has to account for the improved performance shown by Vickers in that region. The company can either reject their request for distributorship with or without price discount or accept it. While making this decision, Bolster should consider the impact on their primary line business with National Electronics - the biggest distributor for Bolster, change in their contribution margins from the industry standards which are at 40%, the kind of precedent that they are setting and their impact on their business with Vickers.
It is recommended that Vickers' request for distributorship be refused without giving any price discount as well.
Number of Words: 149
Table of contents
Executive Summary iii
Situational Analysis 1
The Problem 3
The Options 3
Criteria for Evaluation 3
Evaluation of Options 4
Action Plan 6
Exhibit 1 7
Exhibit 2 8
Exhibit 3 9
Bolster Electronics is currently one of the four similar sized major suppliers who jointly hold 60 percent of the market share in Canada. All suppliers are primarily selling through national distributors, Bolster being the primary supplier's product line with both its national distributors - National Electronics and Albright Industries. Distributors have been responsible for stocking inventory, systems engineering and selling to the local dealers and end-users. They are also expected to dedicate resources to grow the business volume and build brand equity as Bolster has been firm on its operations as a B2B company. The business policy has been to sell through national distributors, who would be the company's channel to market.
National Electronics has been the distributor for Bolster since its founding. But, following a seven per cent drop in Bolster's market share and National's lack of focus in expanding the video surveillance business, Albright was added as a second distributor in 2004. National had initially expressed disagreement with this move. But, Albright operated in Eastern Canada, comprising of Quebec, Montreal, Toronto and Halifax (Exhibit 1) where National had always been weak and hence, the two distributors did not compete for the same customers.
Dealers have been stocking only products that have a track record of sales volume. In 2007, Vickers had approached Bolster for distributorship in northern Alberta (Exhibit 1) where it had been serving the industrial sector for over 20 years. National just had a warehouse in Calgary, a sales office in Edmonton. Albright didn't have its presence in western Canada. However, the area surrounding Fort McMurray has been the fastest growing economic areas in the country for several years. Thus, an agreement was made for territorial dealership with Vickers giving a provision for technical support, sales team training and system design services as a concession. In the first year, Bolster had five per cent local-market share and in the following five years there was a ten-fold increase in sales volume. This accounted for a maximum of 50% market share in the region in 2011 (Exhibit 2). Hence, Vickers is again asking to be named as a distributor and qualify for the distributor's discount. They are performing warehousing and design function in the area. They have highly trained sales people and have serviced the area better than either of the national distributors. They are now servicing over 75% of the accounts in the area. Even, Bolster's total market share in North Alberta is the highest in Canada. Hence, they claim to be performing the role of a distributor in
This B2B instance describes a common situation that appears when success is gained by channel partners as well as the perceived balance of power shifts to the channel from the provider. The manager for Bolster Electronic Equipment, among the biggest providers in Canada of state of the art industrial video equipment for harsh environments, must think about a request from Vickers Industrial Supplies, a regional dealer, to be upgraded to a distributor from a car dealer.
Vickers was creating a growing business volume for Bolster in an important market segment, the Canadian oil sands in northern Alberta. Approving Vickers' request will generate smaller margins for the producer, which may be made up with higher projected volume, if the projections are acceptable. The possible reaction of the national distributors of the company is causing concern. Its policy is to distribute its products in Canada through two national providers although Bolster sells to regional car dealers in the U.S., plus it worries that growing Vickers' job will alienate these vendors. Each choice has hazards and benefits.
PUBLICATION DATE: October 02, 2012 PRODUCT #: W12242-HCB-ENG
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