SLMM606 SDM /1008

Semester-III Comprehensive Make-up Examinations Class of 2009

SLMM606 – Sales & Distribution Management
Part-A

1. In order to improve the profitability of an organization, sales manager should

a. Identify unprofitable sales unit
b. Reallocate sales personal job more effectively
c. Break down of the costs
d. All of the above
e. Selection of right candidates

2. To withstand foreign competition, domestic businesses must make conscious effort to

develop______________.
a. Top quality products
b. Cost competitive products
c. Market innovation
d. Expansion
e. Co promoting the brands

3. The communication between a sales person and the potential customer or group of customers is
described as
a. Direct marketing
b. Personal selling
c. Advertising
d. Publicity
e. Event marketing

4. ’Buyer – Seller dyad can be described as

a. Interaction between two people
b. Interaction between salesperson and the customer
c. Interaction between sales person and the prospective customers’
d. Interaction between customer and customers.
e. Interaction between families

5. Which of the following indicates customer satisfaction that results in repeat orders?
a. Prospecting
b. Order taking
c. Selling
d. Re-selling
e. Marketing

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6. Situation response theory is also known as

a. AIDS theory
b. Right set of circumstance theory
c. Buying formula
d. Response theory
e. Satisfaction theory

7. Identifying the prospective customers through referrals, sales records, etc is known as
_______________.
a. Targeting
b. Prospecting
c. Blind prospecting
d. Calling
e. Source

8. An increasing shift from local to national to international selling is described as

____________________.
a. Geographical expansion
b. Local expansion
c. National expansion
d. International expansion
e. Divisional expansion

9. Analysing the opportunities to develop new product for new markets is known as
_____________.
a. Marketing penetration
b. Market development
c. Product development
d. Diversification
e. Expansion

10. The maximum possible sales in a particular market over a future period of time is referred to
a. Forecasting
b. Market potential
c. Sales potential
d. Sales forecast
e. Sales development

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11. Through market identification, a firm can identify

a. Buyers and sellers

b. Buyers and prospective buyers
c. Buyers, users and prospective buyers
d. Buyers and family
e. Buyers and decision markers

12. An effective sales executive of an organization is involved in

a. Managing sales personal and making decisions

b. Long term planning
c. Both (a) and (b)
d. Short term planning
e. Strategic planning

13. Sales executive undertakes only

a. Long term planning

b. Short term planning
c. Medium term planning
d. Very short-term planning
e. Strategic planning

14. Sales executive performs operational functions that deal with

a. Sales program, the sales organization and its control

b. Achieving sales goal
c. Formulating policies and strategies
d. Sales force management and handling relationships
e. Objection handling

15. Apart from managing sales force, sales executives are also involved in formulating

a. Product planning
b. Pricing decisions
c. Promotional policies
d. All the above
e. Strategic planning

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16. A good sales organization facilitates the implementation of ________________.

a. Marketing strategy
b. Growth strategy
c. Personal selling strategy
d. Turnaround strategy
e. Strategic planning

17. Which of the following result if a well organized sales department avoids unnecessary movement
and duplication of efforts?

a. Maximizing cooperation
b. Minimizing friction
c. Maximizing friction
d. Both (a) and (b)
e. Only (c)

18. How should a sales management extend its effort towards the organization?

a. Formal
b. Informal
c. Both formal and informal
d. Line
e. Staff

19. In a large organization it becomes difficult to maintain close contacts with customers. Then
organization should assign the responsibility to an executive who has

a. Large contact with customers’

b. Specialized in customer relations
c. Good communication
d. None of the above
e. Publicity

20. A good sales organization can achieve harmony through

a. Co-ordination
b. Free flow of communication system
c. Both (a) and (b)
d. Communication
e. Cooperation

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21. Effective coordination restricts the number of subordinates who report directly to an executive.
This phenomenon is known as

a. Span of control
b. Specialization
c. Delegation of authority
d. Reporting
e. Communication

22. Organization, which deal with variety of product lines over a wide geographical area, tends to
follow certain organization structure. Identify it.
a. Line
b. Staff
c. Line and Staff
d. Committee
e. Matrix

23. If an organization has more local customers, it can adopt

a. Staffing
b. Centralized staffing
c. Decentralized staffing
d. Line
e. Line and Staff

24. A firm can recruit qualified candidates through

a. Advertising
b. Firm’s present employees
c. Voluntary applications
d. All the above
e. None

25. If organizations aim to test its applicants interest, willingness and effectiveness of the work, then
organization should conduct
a. Personality test
b. Knowledge test
c. Aptitude test
d. Interest test
e. Capability test

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26. Most of the companies define sale as

a. At the time an order been received
b. When the order is shipped
c. Payment for the order
d. Profit
e. Growth

27. To attract more customers and generate high sales volume, retailers tend to
adopt________________.
a. High quality merchandise
b. Increase in customers services
c. More to more desirable locations
d. Sales promotion
e. Events

[28. Shopper’s Stop is able to provide modest supporting atmosphere in terms of exterior and interior
facilities. In which phase do you categorize Shopper Stop?
a. Entry phase
b. Trading up phase
c. Vulnerability phase
d. Events
e. Initial phase

29. Wholesalers can reduce the investment costs and risks of suppliers and customers by performing
the functions like
a. Assembling
b. Warehousing
c. Transporting
d. Stocking
e. Inventory

30. Middlemen who perform limited marketing activity without possessing the title of the goods in
exchange for a commission are referred as
a. Merchant wholesalers
b. Sales ranches and offices
c. Brokers and agents
d. Channel partners
e. C&F

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Part B
Problems testing, Conceptual Understanding and Application, Analytical Ability,
Caselets, Situational Analysis / Applications of concepts

1. Despite outlets such as McDonald’s and KFC enduring great success in India, franchising has
its advantages and disadvantages. Discuss the advantages and disadvantages of franchising to
a franchiser.
(10 marks)
Suggested Answer:
Advantages to the franchiser
Low capital and low risk: The franchiser can add on to his number of distribution outlets and
improve his business on the basis of capital obtained from the franchisee. This allows the
franchiser to utilize his capital to improve other aspects of the business, like enhancing the
manufacturing capacity.
Speedier Expansion: The company grows faster, since new distribution outlets have been added
in the form of franchisees. Such speedy expansion would not be possible for companies
handicapped by limited capital.
Extended Market Penetration: The speedy expansion due to the addition of distribution outlets
helps the franchiser to enter and capture new markets before its competitors can gain a
stronghold in them
Motivation of the Franchisee: Since the franchisee invests capital in the business, the motivation
of the franchisee to succeed is high.
Controlling the quality: Quite often, when business expands, it becomes difficult for a marketer to
focus on quality management issues. This results in poor quality output of products and services.
However, in franchising, the franchisee takes care of the day-to-day operations of the business,
leaving the franchiser with enough time to concentrate on issues related to quality and
standardization of products and services.
Disadvantages to a franchiser
Business Control: The franchiser runs a risk by agreeing to do business with the franchisee
because any negligence or failure in maintaining quality standards on the part of the franchisee
will have an adverse impact on the franchiser's business or brand image. Failure to have a strong
franchising agreement can lead to the franchiser's loss of control over his business.
Expenses Involved: Franchising involves a lot of expenses for a franchiser such as expenditure
pertaining to legal documentation during the agreement process, expenses of conducting a
certified financial audit of company records, advertising expenses to attract potential franchisees
and, at times, expenses incurred to fight legal battles against the franchisee. Keeping in view
these expenses, franchising may not appear to be a viable option for marketers with a limited
capital.
Lower Profit Potential: Since the franchiser only licenses the franchisee to do business and the
actual operation of the business is carried out by the franchisee, the franchiser gets a narrow
profit percentage as royalty from the franchisee.
2. The purpose of a sales training program is to increase the effectiveness and productivity of the
sales force and to refine its selling techniques. In this regard, explain the various types of training
that can be imparted by a company.
(10 marks)

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Suggested Answer:
The various types of training that can be offered by a company:
Centralized training
The training may be conducted at certain centralized locations and the company brings together
its sales personnel or the customers at these locations to train them. This method of training is
known as centralized training. Panasonic Broadcast & Television Systems Company uses the
centralized training method for its customers across the US. The company has its regional
training centers at four locations across the US -California, Georgia, Illinois, and New Jersey, the
location of the US headquarters of the company. With the launch of every new product, the
company ships and installs the product at these regional training centers. Using the centralized
training method, the company successfully trains about 500 customers per year at these training
centers. Sony is yet another company which offers centralized training programs to its customers
at California, its US headquarters, and at its sales offices located at Florida and New Jersey.
Third party training
In this type of training, manufacturers assign the responsibility of training to a third party. Often
these third party training companies offer training programs to more than one company. For
example, Future Media Concepts (FMC), an independent training company in New York, offers
training programs ranging from basic to advanced, to Microsoft/Softimage, Avid Technology,
Quantel, and Adobe Systems products. Third party training companies provide manufacturers
with the advantage of providing impartial training to the users as well as the ability to train a large
number of customers than would have been possible for the manufacturer.
Training tours
Most training programs involve the customers approaching the trainer or instructor for being
trained. Training tours, on the other hand, involve the instructor or the trainer going to the
customers. As part of training tours, the manufacturer conducts seminars and workshops in local
hotels for the convenience of the customers.
On-site training
In on-site training, manufacturing companies send an authorized instructor to the customer's
facility to train the customer in the use of the product. This method of training is suited for those
customers who are too busy with their schedules to be able to attend the training programs or
workshops conducted by the company. Hitachi is one such company, which provides on-site
training to its customers. The purpose behind providing this type of training is to avoid fetching
bad reputation for the company due to the customer's ignorance in using the products, which can
lead to operational errors. Sony is another company, which provides on-site training to its
customers at their retail locations. The company also sends its retailer advance study material
and pre-class exercises so that the duration of the training period can be utilized for acquiring
hands-on experience about the product.
Training through postal material
Another way companies can train their customers is by sending the customers instructional
material about the product either in the form of printed matter or in the form of videotapes.
Companies like Tektronix and Hitachi practice this method of training. These companies dispatch
how-to videotapes to their customers. These tapes assist customers not only in learning more
about the product but also in providing them the support in case of any problem with the product.
Satellite-delivered training
Some companies provide training to their dealers, service centers and customers through
satellite-based services. Panasonic, for example, set up the Panasonic Academy of Learning to
provide training to its dealers and service centers located across USA through live and pre-
recorded training programs beamed via satellite.

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Online training
Due to the sluggishness in the economy, companies are beginning to slash their budgets to avoid
unnecessary expenditure. As a result, one of the first areas to get affected is the training.
However, studies have revealed that in those companies where training is still considered
essential, about 66% of the sales force travels to the venue of the training leading to an increase
in expenditure for the company. Therefore, companies have come up with a viable option in the
form of training their sales force through online learning or e-learning. In e-learning, companies
host technical and educational material on their websites. This material can be accessed by sales
people or customers from anywhere in the world. Online training or e-learning also provides the
facility of videoconferencing and multimedia thereby making the training more interactive learning
experience. This method of training helps companies avoid having to withdraw their sales force
from the field for days together, in order to train them. This kind of training involves less cost to
the company both in terms of training costs as well as cost due to lost man-hours. Online training
results in significant cost savings to the company, although the initial costs of setting up the
system are high.
However, despite the cost savings, most companies are reluctant to adopt this method 'of training
due to the fear of loss Of face-to-face interaction. Companies that have adopted the online
method of training include Sony, Tektronix, Panasonic, and Chyron.
3 Sales force performance has a direct bearing on the overall performance of organizations.
Discuss the various internal factors that influence sales force performance.
(10 marks)
Suggested Answer:
Internal Factors
These factors are dependent on the individual salesperson. Sales performance is directly linked
to the make-up of individuals, and so differs from person to person. Some of the internal factors
that influence the performance of sales personnel are personal motivation, level of skills
acquired, and personality characteristics.
Motivation: This is the most important internal factor that influences a salesperson's performance.
An individual may have the required aptitude, knowledge, and skill to perform. Yet he may
perform poorly due to lack of motivation. Performance measurement and evaluation methods
have a strong bearing on the motivation levels and sales force morale. If a salesperson's
personal goals are in alignment with the organizational goals, the chances of the individual being
highly motivated are very high.
Skill level: The skill level of sales personnel has an impact on their performance in the
organization. An individual's skill level is his proficiency in a particular area. Sales personnel are
required to have a good skill-set, which includes public speaking, ability to establish relationships
with customers, and effective communication and interpersonal skills. The skills-set required by a
salesperson depends on factors like the industry he operates in, the products he sells, and other
selling activities that he has to perform. For example, the ability to gather and analyze customer
information and suggest products that fulfill those needs at the earliest is an essential skill for a
salesperson involved in selling technology-based products.
Job satisfaction: When an employee is satisfied at work, his performance tends to improve.
Compensation is one of the important factors that determine job satisfaction for all employees,
including the sales force. Organizations that have a well-established compensation system,
which is linked to performance, have satisfied employees. Interest in the particular job activity
and its alignment with their career objectives also influences the extent of job satisfaction of sales
personnel.
Role perception: The performance of the sales force is influenced by how the sales personnel
perceive their role in the organization. The extent of their awareness about the activities and

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responsibilities of the job, the needs of customers, the types of products the company offers, and
how it meets customers' requirements help to provide salespersons with a clear perception of
their roles.
Personal factors: Personal factors include all internal individual aspects related to sales force
performance, except those that come under aptitude, skill level, role perception and motivation.
Thus personal factors include those like age, sex, weight, height, appearance, marital status,
education, and number of dependents. Studies conducted over the years have been unable to
identify a direct relationship between sales force performance and some of these personal
factors, but some definitive conclusions have been made concerning the influence of age and
education on performance. Studies have shown that, at the beginning of their career, sales
personnel prefer to sell high margin products and that, with age and experience, they tend to shift
towards selling lower margin products in order to achieve sales targets. Sales performance also
increases with age and experience and usually tapers off after the salesperson has worked for
more than 18 years.
Ego Drive: Sales personnel who take the closing of each sale as a personal challenge and
experience a sense of victory when they make a sale, have a high ego drive. They usually
perform better than sales personnel with a lower ego drive. For those with a high ego drive,
achieving sales targets becomes a personal affair in terms of self-worth or reputation and this
pushes them towards improving their sales performance.
Empathy: The salesperson must be able understand the way the buyer feels. Simply stated,
empathy means stepping into the customer's shoes. A salesperson who is more empathetic, has
a better chance of identifying a customer's needs and developing a cordial long-term relationship
with him. An aggressive salesperson, on the other hand, may be so preoccupied with selling the
product that he may be blind to the customer's needs. So, sales personnel with better empathy
show better sales performance

4. Designing a sales organization is difficult in the present day business environment owing to
increasing competition and ever-changing customer expectations. Discuss the various basis for
designing a sales organization.
(10 marks)
Suggested Answer:
Basis for designing a sales organization
Designing a sales organization is difficult in the present day business environment owing to
increasing competition and ever-changing customer expectations. No set formula can be
followed. Factors in the external environment, like target market segments and technology, along
with internal factors, such as company objectives, culture, staffing activities, reward systems etc.,
influence the design of a sales organization.
Mission and Objectives of the Company: The sales organization's design and activities must
support top management strategies. Otherwise, there is a possibility that sales personnel act in
contradiction to the strategies framed by the top management. For example, the sales personnel
may concentrate on maximizing profits, while the top management focus may be on market
development.
Target Market Segments: The sales manager must keep in mind the market segments in which
the organization is operating. An awareness of market characteristics and customer needs in the
target market is necessary to formulate the sales strategy (which is aligned to the corporate
strategy) according to the said market. Fulfillment of the sales strategy is possible if the
organization design supports it. For example, if the target market has a large number of similar or
competitive products, the organization should opt for a strategy that focuses on developing long-
term relationships with customers. A geographic or customer-based sales organization structure

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best suits the implementation of this sales strategy. Companies like DaimlerChrysler planned
their expansion programs in Eastern Europe, a high potential market, through fully owned sales
organizations. In small markets, Daimler operates through independent distributors. To sum up,
target market segments are crucial while designing a sales organization.
Core Competence: The sales organization should be designed to help the company leverage its
core competencies. For example, if a company's core competency lies in introducing new
products, the organization structure should facilitate streamlining of all activities to achieve this
core competency. A horizontal organization structure with coordination between different
functions such as production, marketing, finance and research & development will enable the
company to develop and launch new products rapidly, outsmarting competitors.
Organizational Relationships: The sales organization should be designed keeping in mind the
different hierarchical levels and reporting relationships within the department, as well as between
sales and other departments. The sales organization design should complement the authority
and reporting relationships within the company.
Flexibility: The sales organization design should be flexible so that it can adapt to changes in the
external environment. If it is unable to adapt quickly to changes in the external environment, its
ability to compete in the market place will be hampered. For example, if innovation is the core
competence of a company, its inability to adapt before its competitors do so will result in it losing
its competitive advantage.
Organizational Culture: Organizational culture can influence the design of a sales organization.
Sales culture, a part of organizational culture, if not properly evolved, can eventually lead to poor
efficiency of the sales force by affecting their motivation and satisfaction levels, skills and beliefs.
Size and Type of Sales Force: The size of the sales force depends on the resources allocated to
the sales organization by the top management, and the costing method adopted by the
organization. The management can have its sales force specializing in customer segments,
product-lines or geographic territories. The sales manager must keep in mind the organizational
resources, the corporate strategy and operations in various departments.
Terms of Employment: A sales organization can have three types of sales options in hand -- in-
house sales force consisting of people who are paid a fixed salary, independent sales people or
distributors' agents who sell products of several companies. Dow Corning has been using
manufacturers' agents for nearly two decades to sell their products at lower selling costs. Lucent
Technologies uses independent representatives to sell to small customers. Nowadays, many
companies with a direct selling strategy have a quasi-sales force, i.e. people who serve as
distributors for the company's products but are not on its rolls. The sales force of direct selling
companies like Amway is an example of a quasi-sales force.
Staffing Activity: The qualifications and behavioral traits required for a particular sales position
depend on the type of product, customer and geographic location. For example, the sales
person's knowledge of products and market segments assumes importance if the company's
products are high-tech. These sales persons need to be either technically qualified or sufficiently
trained to answer customer queries.
Compensation System: The type of compensation system adopted by the sales organization i.e.,
salaries and incentives given to sales personnel, should reflect the management's approach. For
example, in a new company, the compensation system should focus on a straight salary method
(refer Chapter 13) to motivate and retain sales personnel. A commission-based compensation
system might discourage sales personnel, as it is difficult to achieve targets for a new product
that is yet to establish itself in the market.
Market Orientation: The market orientation of a company can be understood from the
management's emphasis on the customer's current and future needs. The sales organization
design should complement the management's emphasis on customers. Market orientation also
enhances sales force innovation and productivity. It helps the sales force understand that rather
than just achieving a certain volume of sales in a specified period, understanding the right

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approach of selling to customers will help the company earn goodwill.

Technology: Technology too influences the design of a sales organization. It has a bearing on the
kind of investment made for training and developing its sales people. Investment in technology
may be in the form of providing automation tools to the sales force, implementing e-CRM
programs etc. If the organization plans to enter high-technology mature markets, to succeed, it is
essential to provide its sales force with advanced automation tools. Companies are also using the
Internet to improve sales and profitability. Dell Corporation has reaped the benefits of using
advanced technology. Using e-commerce, Dell does $40 million worth of online business
everyday.
Company Size: If the company is small sized, it cannot have a product, geographic and
combination-based sales force structure because of limitations in resources and personnel. As
the company evolves, the scope for having a complex sales force structure increases

Part C
Case Analysis

5. In these competitive times, effective selling is becoming a challenge for the retail sales person.
What are the fundamental requirements for effective selling?
(10 marks)
Suggested Answer:
Requirement for effective selling
In these competitive times, effective selling is becoming a challenge for the retail salesperson. He
has to meet the requirements and expectations of both retailers and customers. Retailers expect
a continuous increase in sales, while customers expect good customer service and value for
money. Customers expect the salesperson to understand their needs and requirements and
update them on the market trends. The increasing sophistication in technology and a wide variety
on products has made the job of a salesperson more difficult. To become a successful
salesperson, one should find time to cultivate strong relationships with customers and develop a
comprehensive understanding of various industries, markets and customers.
The salesperson should have a clear understanding of the store's policies and procedures
because while making the buying decision, the customer may require this information. The
salesperson should be able to provide them information about safety measures, the product
guarantee and the after-sales service etc. If the salesperson does not have adequate knowledge
on the subject, he should refer the customer's query to another person in the store who could
answer the query satisfactorily and clear the confusion.
There are certain fundamental requirements for a salesperson:
• Listening
• Questioning
• Interpreting and Non-verbal communication
• Flexibility and Adaptive selling
Listening
A salesperson who is not experienced may think that he can attract the customer's attention by
being a good orator. However, to gain customer attention, a salesperson should be an attentive
and good listener as well.
The salesperson should allow the customer to talk and should carefully listen to his requirements.
Listening is more than just hearing. A salesperson may hear many things, but need not register

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everything in his mind. The technique of active listening includes repeating or rephrasing
information, summarizing conversations and remaining silent at times.
By listening carefully, the salesperson can understand the nature and requirement of the
customer more correctly and predict what the customer is looking for. An effective salesperson is
one who listens carefully and can even change the decision of a prospective customer to make
him a customer.
Questioning
By asking questions, the salesperson can actively involve the customer in the sales process. This
helps the salesperson know customers more clearly, understand their needs and thus, provide
the merchandise that they need. It also helps salesperson to make complementary sales.
For questioning to be effective a retail sales person should:
Seek long responses: The questions asked by the salesperson should not be answerable in
simple 'Yes' or 'No'. The questions of the salespersons should evoke a long response from the
customer. This would help the salesperson understand the customer better, find out what the
customer is looking for and provide a more efficient service.
Space out the questions: If a customer is bombarded with a series of questions, there is a
possibility that he may feel uncomfortable and stop responding to them. Hence, a salesperson
should space out the questions to the customer at various stages of the discussion.
Keep the questions short and simple: The salesperson should ask short and simple questions
that would make the customer comfortable and feel at ease. If a salesperson asks lengthy
questions, the customer may get bored and lose interest in the conversation.
Interpreting and using Nonverbal Communication
It is not enough for a salesperson to be a good listener. He must know how to interpret the body
language of the customers and understand other forms of non-verbal communication as well.
Awareness of the prospect's personal space, a. firm and confident handshake, and accurate
interpretation of body language can be of tremendous help to a salesperson. Salespeople must
listen closely to what customers have to say, analyze their spoken words, and be attentive to
their non-verbal communication. The eyes, gestures, vocal intonations, and overall appearance
of customers reveal much about their thoughts. Salespeople must carefully note their
impressions of these verbal and non-verbal expressions and structure their sales communication
such that the critical product features presented meet the customers' desires and he decides to
buy the product.
Flexibility and Adaptive Selling
A salesperson should tailor his selling techniques according to the requirements of the customer.
The customers in a retail store vary in their tastes and preferences. A salesperson should be able
to understand this and should provide the merchandise and service according to the requirement
of customers. They should be flexible enough to change their sales presentation depending on
the customer they are serving.
The main job of a retail salesperson is to attract customer's interest to the product by describing
its benefits, demonstrating its use; offering them a wider choice by showing different models,
sizes, colors, etc. A retail salesperson should be flexible and adaptive enough to cater to the
customers' needs quickly and politely

6. Read the case and answer the following questions:

In December, Mr. Ashok Bhalla began to prepare for a meeting scheduled for the next week
with his boss, Mr. Atul Singh. The meeting would focus on distribution strategy for Konark
Television Ltd., a medium-sized manufacturer of television sets in India. At issue was the
nature of immediate actions to be taken as well as long-range strategy. Mr. Bhalla was

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managing director of Konark, responsible for a variety of activities, including marketing. Mr.
Singh was president.
The television industry was started in India in late 1959 when the Indian government used a
UNESCO grant to build a small transmitter in New Delhi. The station soon began to broadcast
short programs promoting education, health, and family planning.
Numerous changes took place over the next 30 years. Programming increased with the addition
of news and entertainment offerings; commercials aired for the first time in 1976. Hours of
broadcasting have grown to almost 12 hours per day. The number of transmission centers
reached 300, sufficient to cover over 75 percent of India's population. Television was clearly the
most popular medium of information, entertainment, and education in India. The network itself
consisted of one channel except in large metropolitan areas, where a second channel was also
available. Both television channels were owned and operated by the Indian government.
The television market in India is concentrated among the affluent middle and upper social
classes, variously estimated at some 12 to 25 percent of India's population (1 billion). Members
of this upscale segment exhibited a distinctly urban lifestyle. They owned videocassette
recorders, portable radio-cassette players, motor scooters, and compact cars. They earned
MBA degrees, lived in dual-income households, sent their children to private schools, and
practiced family planning. In short, members of the segment exhibited tastes and behaviors
much like their middle-class, professional counterparts in the United States and Europe.
Although there was no formal marketing research available, Mr. Bhalla thought he knew the consumer
fairly well. The typical purchase probably represented a joint decision by the husband and wife. After
all, they would be spending over one month's salary for Konark's most popular color model. That
model was now priced at retail at 11,300 rupees (Rs), slightly less than the retail prices of many
national brands. However, a majority in the target segment probably did not perceive a price
advantage for Konark. Indeed, the segment seemed somewhat insensitive to differentials in the range
of Rs 10,000 to Rs 14,000, considering their TV sets to be valued possessions that added to the
furnishing of their drawing rooms. Rather than price, most consumers seemed more influenced by
promotion and by dealer activities.
Konark Television began operations in 1973 with the objective of manufacturing and marketing
small black-and-white TV sets to the Orissa state market. The state is located on the east coast
of India, directly below the state of West Bengal (containing Calcutta). Early years of operation
found production leveling at about 5,000 sets per year. However, the company adopted a more
aggressive strategy and grew rapidly. Sales revenues reached Rs 640 million in 1993, based on
sales of 290,000 units. Revenues and unit volume were expected to increase by 25 percent and
15 percent, respectively. Company headquarters remained in Bhubaneswar, Orissa's capital.
Manufacturing facilities were also located in Bhubaneswar except for some assembly performed
by three independent distributors. Distributor assembly was done to save state sales taxes and to
lower the prices paid by consumers. That is, many Indian states charged two levels of sales
taxes depending on whether or not the set was produced within the state. The state of
Maharashtra (containing Bombay), for example, charged a sales tax of 4 percent for TV sets
produced within the state and 16.5 percent for sets produced outside the state. Sales taxes for
West Bengal (Calcutta) were 6 percent and 16.5 percent, while rates for Uttar Pradesh (New
Delhi) were 0 percent and 12.5 percent. State governments were indifferent as to whether
assembly was performed by an independent distributor or by Konark, as long as the activity took
place inside state borders. Manufacturing capacity at Konark was around 400,000 units per year
but could be easily expanded by 80 percent with a second shift.
The Konark product line was designed by engineers at Grundig, a German manufacturer known
for quality electronic products. This technical collaboration resulted in a line considered by many
in the industry to be of higher quality than those of many competitors. Circuitry was well
designed, and engineers at Konark paid close attention to quality control. In addition, each
Konark set was operated for 24 hours as a test of reliability before being shipped. The entire line
reflected Konark's strategy of attempting to provide the market with a quality product at prices

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below the competition. In Orissa, the lowest-priced black-and-white model marketed by Konark
sold to consumers for about Rs 2,200, while its most expensive color set sold for about Rs
15,000.
Konark had a well-established network of more than 500 dealers located in 12 Indian states. In
eight states, Konark sold its products directly to dealers through branch offices operated by a
Konark area manager. Each branch office also contained two or three salespeople who were
assigned specific territories. Together, branch offices were expected to account for about 30
percent of Konark's sales revenues and cost Konark about Rs 10 million in fixed and variable
expenses for 1994. In three states, Konark used instead the service of independent distributors to
sell to dealers. The three distributors carried only Konark TV sets and earned a margin of 3
percent (based on cost) for all their activities, including assembly. All dealers and distributors
were authorized to service Konark sets. The branch offices monitored all service activities.
In Orissa, Konark used a large branch office to sell to approximately 250 dealers. In addition,
Konark used company owned showrooms as a second channel of distribution. Konark would
lease space for showrooms at one or two locations in larger cities and display the complete line.
The total cost of operating a showroom was estimated at about Rs 100,000 per year. Prospective
customers often preferred to visit a showroom because they could easily compare different
models and talk directly to a Konark employee. However, they seldom purchased-buyers
preferred instead to buy from dealers because dealers were known to bargain and to sell at a
discount from the list price. In contrast, Konark showrooms were under strict orders to sell all
units at list price.
About half of Konark's 1990 sales revenues would come from Orissa; about 95 percent of
Orissa's unit sales would come from dealers.
The appointment of dealers, either by Konark or its distributors, was made under certain
conditions. Essential among them was the dealer's possession of a suitable showroom for the
display and sale of TV sets. Dealers were also expected to sell Konark TV sets to the best of
their ability, at fixed prices, and in specified market areas. Dealers were not permitted to sell sets
made by other manufacturers. Dealers earned margins ranging from Rs 100 (small black-and-
white model) to Rs 900 (large color model) for every set they sold. Mr. Bhalla estimated that the
average dealer margin would be about Rs 320 per set.

Questions:

a. Konark Television Ltd. is a medium-sized manufacturer of television sets in India. Explain

i. The Indian television industry scenario when Konark entered the market.
ii. The measures Konark took to develop a quality product line.
(10 marks)
Suggested Answer:
i. The television industry was started in India in late 1959 when the Indian government used a
UNESCO grant to build a small transmitter in New Delhi. The station soon began to
broadcast short programs promoting education, health, and family planning.
• Numerous changes took place over the next 30 years. Programming increased with the
addition of news and entertainment offerings; commercials aired for the first time in 1976.
• Hours of broadcasting have grown to almost 12 hours per day. The number of transmission
centers reached 300, sufficient to cover over 75 percent of India's population.
• Television was clearly the most popular medium of information, entertainment, and
education in India.

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• The network itself consisted of one channel except in large metropolitan areas, where a
second channel was also available. Both television channels were owned and operated by
the Indian government.
• The television market in India is concentrated among the affluent middle and upper social
classes, variously estimated at some 12 to 25 percent of India's population (1 billion). So
there is more demand for low priced products which can be afforded by middle-class people.

ii. The Konark product line was designed by engineers at Grundig, a German manufacturer
known for quality electronic products.
• The technical collaboration with German manufacturer resulted in a line considered by many
in the industry to be of higher quality than those of many competitors.
• Circuitry was well designed, and engineers at Konark paid close attention to quality control.
• In addition, each Konark set was operated for 24 hours as a test of reliability before being
shipped.
• The entire line reflected Konark's strategy of attempting to provide the market with a quality
product at prices below the competition.
In Orissa, the lowest-priced black-and-white model marketed by Konark sold to consumers for
about Rs 2,200, while its most expensive color set sold for about Rs 15,000.

b. Describe the distribution strategy of Konark Television.

(10 marks)
Suggested Answer:
Konark had a well-established network of more than 500 dealers located in 12 Indian states. In
eight states, Konark sold its products directly to dealers through branch offices operated by a
Konark area manager.
• Each branch office also contained two or three salespeople who were assigned specific
territories. Together, branch offices were expected to account for about 30 percent of
Konark's sales revenues and cost Konark about Rs 10 million in fixed and variable
expenses for 1994. In three states, Konark used instead the service of independent
distributors to sell to dealers.
• The three distributors carried only Konark TV sets and earned a margin of 3 percent (based
on cost) for all their activities, including assembly.
• All dealers and distributors were authorized to service Konark sets. The branch offices
monitored all service activities.
• In Orissa, Konark used a large branch office to sell to approximately 250 dealers.
• In addition, Konark used company owned showrooms as a second channel of distribution.
• The appointment of dealers, either by Konark or its distributors, was made under certain
conditions. Essential among them was the dealer's possession of a suitable showroom for
the display and sale of TV sets.
• Dealers were also expected to sell Konark TV sets to the best of their ability, at fixed prices,
and in specified market areas.
Dealers were not permitted to sell sets made by other manufacturers. Dealers earned margins
ranging from Rs 100 (small black-and-white model) to Rs 900 (large color model) for every set
they sold. Mr. Bhalla estimated that the average dealer margin would be about Rs 320 per set.

16