Harvard Case - Lakshmi Projects: Sales Structure Dilemma
"Lakshmi Projects: Sales Structure Dilemma" Harvard business case study is written by Sandeep Puri, Mehmet Begen, Akshay Nangia, Arjit Rawal, Mayank Rawat. It deals with the challenges in the field of Marketing. The case study is 10 page(s) long and it was first published on : Jun 5, 2015
At Fern Fort University, we recommend Lakshmi Projects implement a hybrid sales structure that leverages both direct sales and a network of independent distributors. This approach will allow Lakshmi Projects to capitalize on the strengths of both models while mitigating their respective weaknesses. The proposed structure emphasizes building strong relationships with key distributors, providing them with comprehensive training and support, and integrating them into Lakshmi Projects' overall marketing and sales strategy. This will enable Lakshmi Projects to achieve its ambitious growth goals while ensuring a sustainable and profitable business model.
2. Background
Lakshmi Projects is a growing Indian company specializing in the manufacture and distribution of high-quality, innovative building materials. The company faces a critical decision regarding its sales structure as it seeks to expand its market reach and achieve its ambitious growth targets. Currently, Lakshmi Projects operates primarily through a direct sales force, which has been effective in building strong relationships with key customers. However, this approach is becoming increasingly resource-intensive and limiting as the company expands into new markets and product categories.
The case study focuses on the dilemma faced by Lakshmi Projects' management team, who are considering various options for their sales structure. These options include:
- Maintaining the current direct sales model: This approach offers control over the sales process and customer relationships but can be expensive and limit market reach.
- Transitioning to a purely distributor-based model: This approach offers cost-effectiveness and broader market coverage but requires careful selection and management of distributors.
- Adopting a hybrid model: This approach combines the benefits of both direct sales and distributors, allowing for flexibility and adaptability.
3. Analysis of the Case Study
To analyze the situation, we will utilize a combination of frameworks:
1. SWOT Analysis:
- Strengths: Strong brand reputation, innovative product portfolio, experienced management team, strong relationships with key customers.
- Weaknesses: Limited market reach, resource-intensive direct sales model, potential for customer service issues with a purely distributor-based model.
- Opportunities: Expanding into new markets, developing new product categories, leveraging digital marketing channels, partnering with distributors.
- Threats: Increasing competition, economic volatility, changing customer preferences, potential for supply chain disruptions.
2. Porter's Five Forces Analysis:
- Threat of New Entrants: Moderate - The building materials industry is relatively fragmented, but entry barriers exist due to capital requirements and established brand loyalty.
- Bargaining Power of Buyers: Moderate - Customers have some bargaining power due to the availability of alternative products, but Lakshmi Projects' high-quality products and strong brand reputation offer some protection.
- Bargaining Power of Suppliers: Low - Lakshmi Projects has access to a wide range of suppliers, and its size provides some negotiating leverage.
- Threat of Substitute Products: Moderate - There are alternative building materials available, but Lakshmi Projects' focus on innovation and quality provides a competitive advantage.
- Rivalry Among Existing Competitors: High - The building materials industry is highly competitive, with both established players and new entrants vying for market share.
3. PESTEL Analysis:
- Political: Government policies regarding infrastructure development, building regulations, and environmental sustainability.
- Economic: Economic growth, interest rates, inflation, and consumer confidence.
- Social: Changing consumer preferences, urbanization, and increasing demand for sustainable building materials.
- Technological: Advancements in manufacturing processes, digital marketing, and online sales channels.
- Environmental: Growing concern for environmental sustainability and the use of eco-friendly building materials.
- Legal: Regulations regarding product safety, labor laws, and intellectual property.
4. Consumer Behavior Analysis:
- Target Market: Lakshmi Projects' target market comprises architects, builders, contractors, and individual homeowners.
- Buying Motives: Quality, durability, innovation, sustainability, price, and availability.
- Decision-Making Process: Research, comparison, consultation with experts, purchase decision.
5. Competitive Analysis:
- Direct Competitors: Other manufacturers of building materials, including both domestic and international players.
- Indirect Competitors: Substitute products, such as traditional building materials or alternative construction methods.
- Competitive Advantages: Lakshmi Projects' strengths lie in its product innovation, quality, and brand reputation.
4. Recommendations
Lakshmi Projects should adopt a hybrid sales structure that combines the benefits of direct sales and a network of independent distributors. This approach will allow the company to expand its market reach, reduce costs, and improve customer service.
Key Elements of the Hybrid Sales Structure:
- Direct Sales Force: Maintain a direct sales force focused on key accounts, strategic partnerships, and new product launches.
- Distributor Network: Establish a network of independent distributors in key geographic markets, carefully selecting partners based on their experience, market knowledge, and commitment to Lakshmi Projects' brand.
- Training and Support: Provide distributors with comprehensive training on Lakshmi Projects' products, sales processes, and marketing materials. Offer ongoing support through technical assistance, marketing resources, and sales incentives.
- Integrated Marketing Strategy: Develop a cohesive marketing strategy that integrates both direct and distributor channels. Utilize digital marketing, social media, and content marketing to reach a wider audience and generate leads.
- Performance Monitoring and Evaluation: Establish clear performance metrics for both direct sales and distributor channels. Regularly monitor sales data, customer feedback, and distributor performance to identify areas for improvement.
5. Basis of Recommendations
This recommendation considers the following factors:
- Core Competencies and Consistency with Mission: The hybrid sales structure aligns with Lakshmi Projects' core competencies in product innovation and quality, while supporting its mission of providing high-quality building materials to a wider customer base.
- External Customers and Internal Clients: The hybrid model caters to the needs of both existing and potential customers, providing them with convenient access to Lakshmi Projects' products and services. It also empowers internal sales teams by providing them with additional resources and support.
- Competitors: By adopting a hybrid sales structure, Lakshmi Projects can effectively compete with both direct sales and distributor-based competitors, leveraging the strengths of both models.
- Attractiveness ' Quantitative Measures: The hybrid model offers a balance of cost-effectiveness and market reach, potentially leading to increased sales and profitability.
6. Conclusion
The hybrid sales structure is the most strategic approach for Lakshmi Projects to achieve its growth objectives while ensuring a sustainable and profitable business model. By leveraging the strengths of both direct sales and independent distributors, Lakshmi Projects can expand its market reach, improve customer service, and enhance its overall competitiveness in the building materials industry.
7. Discussion
Alternative Options:
- Maintaining the current direct sales model: This option would limit market reach and increase costs.
- Transitioning to a purely distributor-based model: This option could lead to a loss of control over the sales process and customer relationships.
Risks and Key Assumptions:
- Distributor Selection and Management: Careful selection and management of distributors are crucial to ensure their commitment to Lakshmi Projects' brand and values.
- Training and Support: Providing adequate training and support to distributors is essential for their success and customer satisfaction.
- Marketing Integration: Integrating direct and distributor channels into a cohesive marketing strategy is vital to maximize reach and effectiveness.
8. Next Steps
- Develop a detailed implementation plan: Outline the steps for selecting and onboarding distributors, providing training and support, and integrating them into the overall marketing and sales strategy.
- Pilot the hybrid model in select markets: Test the hybrid model in a few key markets to gather data and refine the approach before rolling it out more broadly.
- Monitor performance and make adjustments: Continuously monitor sales data, customer feedback, and distributor performance to identify areas for improvement and make necessary adjustments to the hybrid model.
By implementing these recommendations, Lakshmi Projects can position itself for continued growth and success in the competitive building materials industry.
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Case Description
In July 2014, the managing director of Lakshmi Projects in Delhi, India, finds himself struggling with the marketing and sales strategy for the year ahead. Founded in 1997, the company specializes in offering turnkey solutions for bulk material handling systems for industries in the fast-growing infrastructure segment of the Indian economy; its two main product categories are elevator and conveyor systems. Yet, the company was failing to meet its sales targets, largely due to an overextended and underachieving salesforce. What was the right structure for the sales, after-sales and quality teams in the organization? An additional concern was that a sales strategy for the company's new product, set to launch in October 2014, had not yet been decided. Fluctuating industry dynamics, financial strains, field sales and service requirements meant that this was a complex decision that held larger consequences for the company's future.
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