A

field work study on

Sales and Distribution Management on
Consumer Durable Industry: Lava International

Submitted by,

Sudin
Sriram
Ashwathi

In partial fulfillment for the award of

Post Graduate Program in
Business Management






BS House No 31, Dr. Radhakrishnan Salai, 9th
Lane, Mylapore, Chennai, Tamil Nadu 600004

DECLARATION

Sudin Theja Sesha Anish, Sriram, and Ashwathi as bonafide students of the
department of Marketing and Sales, Chennai Business School, would like to
declare that this project done on Sales and distribution management on
Consumer Durable Industry: Lava International, is for fulfillment of the Post
Graduate Program in Management of Chennai Business School and is original
work.
















Date:


Place:

 TABLE OF CONTENTS

1. INDUSTRY INTRODUCTION AND COMPANY BACKGROUND 1

2. SALES ORGANIZATION OF THE COMPANY 7

3. TERRITORY ALLOCATION FOR SALES TEAM &PERFORMANCE

MEASUREMENT SYSTEM 7

4. CHANNEL STRUCTURE AND DESIGN 8

5. CHANNEL PERFORMANCE MEASUREMENT 11

6. DISTRIBUTORS: STRUCTURE AND ACTIVITIES 12

7. RETAILERS STUCTURES & ACTIVITIES 15

8. SUPPLY CHAIN NETWORK 18

9. TRADE PARTNER: CONFLICTS AND NEGOTIATIONS 19

INTRODUCTION:

The Indian phone is the fastest growing industry in the world and the industry is
expected to be a 174 million in 2017. From communication, networking,
entertainment and games to high speed data at the tip of your fingers, the
industry has revolutionized the way people live. The mobile phone industry has a
healthy FDI percentage to keep the market booming with production units. It is a
market that has no dearth of players, with each brand relying on aggressive
advertising via all marketing channels.

Key players include:

Industry Players Market Share (2016)

Samsung 25.1%
Xiomi 10.7%
Lenovo Group 9.9%
Oppo 8.6%
Vivo 7.6%
Mircromax 5.8%
Intex 7.1%
Lava International 7.0%
Karbonn 5.3%
*Source from IDC.

INDUSTRY SEGMENTATION:

Premium Segment:

Loaded with features, this segment caters exclusively for high-end technology like
top-end camera, extended memory, etc.

Low-to-medium cost:

This segment looks at value for money. There is expectation of features and its
balance with cost. The trade-offs in this case is what differentiates one
smartphone from its competitor.


Ultra-low cost mobile:

Being a cost leader is the main objective in this segment, with basic features
included calling and messaging, address book, etc.

LAVA INTERNATIONAL:

Amongst the many phone companies trying to capture the market in India, Lava
International is a notable Indian based MNC headquartered in Noida. Though the
company has had its roots since 2003, it became officially known as Lava
International in 2009.

Lava International is renowned for its fierce R&D with in-house teams employed
in India and China for gaining the tech edge over the clutter in all its range of
phone products. Lava, its flagship product caters to the low to mid income
segment, while its Intel-powered Xolo smartphones aims to capture the high-end
customer segment. However, Lava and Xolo are considered as different business
units.

The company is seen to have a 10% market share in India (in 2014) and ranked 5th
in safety in a report by The Brand Trust Report 2014. Owing to the low,
affordable cost of Lava mobiles, it reaches out to customers in Tier 2, tier 3 and
the rural crowd.

Lava sustainability feeds in its vision to the future. It is already looking at bringing
out cost-effective 4G LTE (Long term evolution) connected devices; a healthy
strategic company stride that is bound to bear fruit.

Its entry level smartphones are priced at Rs. 4444, while its mobile phone range
starts at Rs. 900. It has a network of 1000 distributors with whom they have a
direct relationship. At its retail front they have a well-developed 50,000 sale
counters to reach their customers. This is apart from their online presence.

PEST ENVIRONMENT:

Political:

1.) Favorable FDI policies.

2.) Make in India mandate pulling foreign players to invest in a manufacturing
facility in India.
3.) Govt. partnering with Jio to make high net speeds available to all at a lower
cost.

Economic:

1.) Disposable income is increasing in tier 2 cities and in BOP.

2.) Inflation rate is predicted to come down this quarter.
3.) Demand for larger flat screens, mutli-sims and high net speeds in a phone.
4.) GST may n have a huge impact on prices as it expected that at least Indian
made smartphones fall in the 5-12% tax slab. This can be seen unfavorably
as those phones assembled in India previously incurred 0 to 1% tax only.

Social:

1.) Increased dependency on phones for communication, internet

(information) and entertainment.
2.) Fastest growing mobile market in the world.
3.) Large untapped markets, especially in the rural sector.

Technology:

1.) Constant investment in technological upgrades.

2.) Fast turnover of technological innovations.
3.) Vast product variety across the sector.

SWOT:

Strength:

1.) Cost-effective phones due to penetration pricing.

 2.) Strong R&D backing in India and China.
3.) Well-developed spread of distributors and retailers throughout the country.
4.) Sustainability due to technology-led strategic decisions taken by the top
management.
5.) Capturing market share of tier 2 and rural markets where there is volume
and higher brand loyalty as compared to tier 1 cities.
6.) Effective implementation of Total Quality Management.
7.) Supports all 22 Indian languages.
8.) Good telecommunication industry favorable to mobile market.

Weakness:

1.) Market penetration not yet as strong as competitors such as Karbonn and
Intex.
2.) After-sale service not as per standards.
3.) Low margins.
4.) Comparatively lower brand awareness.

Opportunities:

1.) Investment in affordable LTE connected devices.

2.) Investing in triple-sim phones.
3.) Untapped markets in rural India still pose a good growth strategy.
4.) Encourage the use as a viable second phone.

Threats:

1.) Increasing competition with low competitive edge.

2.) Expansion involves high investment. And competitors have deep pockets.

5-FORCE PORTRS ANALYSIS:

Bargaining power of suppliers (low factor):

1.) Competitive landscape with ample supplier players in the field.

2.) Shifting from one supplier to the other isnt a costly switch and thus gives
manufacturers the upper hand.


Bargaining power of buyers (high factor):

1.) Customers are spoilt for choice and hence, exude a high bargaining power.
2.) Top-end technology at a more affordable price is the key focus.
3.) Camera, top processor and storage are the main points of consideration for
a buyer, and vary across segments.

Threat of new entrants (Medium factor):

1.) Though the market is cluttered there is still space for new entrants in terms
of technology, price, and features.
2.) Entry is easier in the low segment as opposed to the premium segment
where investment is much higher.

Threat of substitute products (low factor):

1.) Phablets
2.) Tablets
3.) The features of each of these products vary and the segments respond
differently to each of the product and hence, this factor is considered as a
low factor.

Rivalry among existing players (high factor):

1.) Competition is very high.

2.) The industry is populated with players that have very close USPs.
3.) Brand loyalty isnt very strong.
4.) Competition is in terms of price, features and ad spend.

ORGANIZATIONAL CHART:

Sales
North Regional
Distribution
Zonal Manager Sales
West Regional
Distribution
Sales
South Regional
Distribution
Sales
East Regional
Distribution

Roles:

1. Zonal Sales Manager (NEWS):

a. Handle a team for effective functions in the branch.
b. Branch administration, distribution, and channel management.
c. Dealer and distributor management, local marketing activities
2. Regional Sales Manager:
a. Oversee sales operation in a particular geographical area.
b. Delegate work to team and guide accordingly.
3. Sales representatives:
a. Ground reps interact with distributors and build a long-term
relationship on behalf of the company.

4. Distribution executives:
a. Overseeing the movement of goods from supplier or manufacturer to
point of sale. Refers to numerous activities and processes such as
packaging, inventory, warehousing, supply chain and logistics.

MEASUREMENT PERFORMANCE:
 1.) Sales performance is mainly based on units sold in allocated area (based on
sales projections).
2.) Market coverage and inventory management are the next level of
performance indication linked to KRA.
3.) Performance also depends on cross-department function and process flow
for completing the work within the target deadline.

COMPENSATION AND INCENTIVE SCHEME:

1.) Stock compensation, performance bonus (10%), and profit sharing

comprise the main part of the compensation.
2.) Employee discounts on certain products and services.
3.) Vacation includes paid vacation, sick leave and bereavement leave.
4.) As per statutory standards, there are provisions for maternity/paternity
leave.
5.) Salary hike is based on position in the company and the quarterly results of
the company.

T&D INITIATIVES:

1.) Monthly Quality Improvement Programs (QIP) based on feedback forms

and alignment with vision of the company.
2.) There is also an apprenticeship program for the mid-level management.
3.) Employment Assistance programs that is kept confidential for the holistic
betterment of the employees.

CURRENT CHANNEL STRUCTURE:

Manufacturer

Direct Distribution Indirect Distribution

Distributor e-commerce
 Retailer Consumer

Lava International is proud its direct interaction with the distributors. By cutting
down the intermediaries, this cost benefit can pass on to their customers, which
will give Lava an edge on competition with lower prices.

CONCEPT OF CHANNEL SYSTEM:

Vertical:

There is no presence of vertical marketing system in the mobile industry. Each

component of the channel structure behaves as a separate entity and comes into
the process flow only due to buyer-seller relationship.

Horizontal:

There are mobile showrooms like Univercell and Poorvika (to name a few) and
many unorganized players who sell mobile phones. In the case of Lava mobiles,
distributors have the responsibility of selling to both organized and unorganized
retailers, especially as these phones target BOP and tier 2 cities.

Multi-channel systems:

Mobile companies usually use a mix of distributors for physical retailers and e-
commerce sales to reach the same target customer. The direct marketing channel
is used to target BOP, where infrastructure isnt great and needs the conventional
system for distribution. E-commerce is more for tier 1 and tier-2 (picking up
online shopping), where an increasing number of shoppers are turning to these
convenient platforms for even their consumer durable needs.

RELATIONSHIPS IN CHANNEL STRUCTURE:

As Lava has a direct relationship with the distributors, the relationship is more
collective than individualistic. Lava doesnt yet have a great pull factor so the sales
will have to be a push factor. This means that the distributor sometimes may have
an upper edge in the negotiations (credit terms and volume).
The relationship in the channel structure is generally good, with decent margins
given to the distributors. In times where sales are needed to be pushed, discounts
on margins are given and the company can still make a profit.

Retailers data is captured via their sales orders.

SOLUTION FOR 5-CHANNEL DISCREPANCIES:

Spatial:

Most mobile companies manufacture their products in China and assemble the
final product in India before entering the next leg of the transportation chain.
Lava mobiles, however, has a factory in Noida and Tirupati, from where they
reach the various distributors. This shows a smaller spatial discrepancy as the
manufacturing facility is within the country.

A recommendation would be to not increase the capacity of the Noida facility but
instead start a Greenfield project in another strategic location of the country, so
that the spatial discrepancy will decrease further.

Temporal:

Considering the small product life-cycle of mobile phones, it is important to get

the phone to the customer in the least amount of time. While online player Xiomi
is successful in implementing JIT in India, it will be hard to replicate this model in a
direct distribution system, where there is wide-network of distributors and
retailers, and a credit system in place.

The temporal discrepancy, though an important factor for phones, may not be
easy to reduce by Lava International.

Assortment:

Assortment range extends to tablets, phablets, earphones, and chargers.

Financial Support:

Days of credit are extend up to a maximum of 15 days in this industry, for each
the distributor and retailer. Financial support is also given in terms of discounted
cost and increased margins to help push the sale of Lava mobiles.

RECOMMENDATIONS ON CHANNEL ALTERNATIVES:

For rural markets: Cooperative society and self-help groups can look for
sales.
Mobile van selling Can give an experiential feeling to the customers as a
part of the marketing strategy.
Event selling strategy: Gaining popularity by the masses.

CHANNEL PERFORMANCE EVALUATION METRICS:

Evaluation Parameter Comment Weightage

Target delivery Whether the channel can (Depends on company
meet the sales policies)
requirements of the
company. This is what
generates sales for the
company.
Cost effective Cost affects margins. If the
cost is too high, either the
channel structure or the
cost of the product will
have to be revisited.
Timely outputs As the product-life cycle is
small, the phones will have
to sell quickly. This
parameter estimates if the
channel can sell the
 phones within a time
frame.
Information (Data) capture Whether the system can
capture forward and
reverse flow of
information. MIS may not
be integrated, but data
captured in excel sheets or
ledgers should be utilized
properly.
Transportation reliability If there is more than two
modes of transport
involved, then the risk
increases.
Extent of financial support Number of days of credit
that can be allowed vs
number of days of credit
that distributors/retailers
ask.
Risk Associated with the supply
chain of the channel.

IT SYSTEMS:

ERP only for Lava Internationals facility.

Doesnt extend to the distributor network because the number of
distributors is high (around 50,000) and cost for implementing these
practices for them cannot be recovered.

POWER EQUATION AND CHANNEL CONFLICT ISSUES:

Conflict may arise due to collections (long days outstanding).

Negotiation of volumes to push sales and meet sales target.

DISTRIUTOR:
Ajanta Mobile Pvt. Ltd. is a distributor for Itel and Lava mobiles founded in 2013
by Mr. Kishore. It is a small scale profitable company situated in Sankarapuram
(Villipuram district).

Ajanta Mobiles currently has an well-developed 130 retail network covering 4

towns - Kalakurchi, Thirukovilur, Chinnasalem, Kachirayapalayam.

BRANDS AND PRODUCTS HANDLED:

Itel and Lava mobiles are the 2 brands that Ajanta Mobiles deals with.

Product Mix Price Range Key Features

KKT Uno+ 1750 Long Battery
ARC One+ 1850 Durability
Spark Icon-x 1900 Bluetooth
ARC Selfie 1549 Selfie
KKT Jumbo 2 2000 Speaker
Lava A50 3999 Gorilla Glass
Lava V2s 7899 Camera
Pixel V2 9499 Touch Sensitivity
Lava Z10 11500 Dual Camera

BUSINESS VOLUMES AND REVENUE:

The target for each sales representative is a billing of 1 lakh a month, keeping an
average of 50 mobile units sold. There are 3 sales representatives (along with two
sales executives who ride as a buddy).

Though the target is 3 lakhs a month, the sales volume is

ACTIVITIES:

Daily:

1. Check ledger for inventory and price of merchandize.

2. Manager gives Daily Sales Target to the sales team.
3. Based on the retailer request (of existing network) and market coverage,
the sales reps cover the necessary retail stores.
 4. Getting orders from retailers and resolving any conflicts arising due to sales
volumes, discounts and margins.
5. Submit DSR to the manager.
6. Check and submit stock report.
7. Random call check by manager to retailers visited by the sales team on that
day.

Weekly:

1. Team meeting for sales projections of next consecutive week.

2. Give feedback to sales rep based on retailer feedback.

Monthly:

1. Check stock and order from supplier accordingly.

2. Based on target achieved, informal training is given to improve the
necessary areas usually negotiation and soft-skills.
3. Fixed incentive is given if there is a festival in that month.

Annual:

1. Review yearly performance as per sales target. Collections are also reviwed
for the sales rep. If sales performance is poor, the sales rep is fired.
2. Revisit relationship retail network and look at new markets to expand to.

Yes, all these activities add value. However, the process flow can be improved by
leveraging work hours to increased efficiency. The performance system is sales
oriented, and has only a fixed component to it.

CONCEPT APPLICATION BY DISTRIBUTOR:

As sales are the main focus of the company, forecasting is done. The
method is mainly subjective, and based on input from sales team based on
previous experience with retailer comments.
The sales force team maintains a small PDI, where the compensation and is
largely fixed. Possibility of high attrition rate as career growth is pretty
much non-existent.
 Channel system discrepancies are reduced as the distributor is close to the
target market and can respond to demand very easily.
Logistics is developed as per the infrastructure of tier-3 and rural areas, and
has high reliability.

LOGISTICS AND STORAGE FACILITY:

From supplier (Lava): Stock is received from a multimodal channel, which

involves rail and bus.
To retailer: As per the orders, the stock is sent using bikes, as infrastructure
isnt well developed in the tier-3 district. For faster delivery, buses are used
to send for shipment.

EVALUATION OF DISTRIBUTOR PERFORMANCE:

Evaluation Parameter Comment

Target delivery Ajanta Mobiles is very prompt with their
supply.
Cost effective A discount of 0.5-2% is given to the retailer
based on volume and days of credit.
Timely outputs Ajanta Mobiles re-orders stock every
month which shows that they are efficient
in moving the goods through the pipeline.
Information (Data) capture Data is captured in a ledger every day. This
is not linked to the company, but the only
data flow that goes back is based on the
purchase order generated.
Transportation reliability Transportation modes are reliable and
even if there is a bus strike, there will be no
delay in supply on both ends.
Extent of financial support Number of days of credit is 20 days from
supplier and a maximum of 14 days to the
retailer. This gives Ajanta Mobiles a buffer
of 6 days.
Risk Risk is always there in terms of collections
and

RETAILER:

Sakthi Mobile Store (SMS): SMS is a consumer durable store that sources its Lava
mobiles from Ajanta Mobiles. The store sells a variety of products, from the low-
utility category to the premium segments.

PRODUCT MIX AND REVENUE:

Revenue was undisclosed as per the conditions of the retailer.

Product Mix in this store includes:

HTC
Apple
Karbonn
Lyf
Samsung
Huawei
Lava
Micromax
Cellkon
Itel

ACTIVITIES:

Daily:

1. Administer day-fills.
2. Manage inventory.
3. Stocking on shelves and store-check.
 4. Interact with customers.
5. Record sales, walk-in, and bills generated.

Weekly:

1. Improve merchandizing based on weekly experience.

2. Check out competitors via mystery shopping.
3. Examine which categories are generating highest sales.

Monthly:

1. Review stock levels and generate purchase order from distributor.

2. Plan promotional activities for the next month and set aside budget.

Annual:

1. Review yearly performance as per retail target.

2. Review brand-wise sales contribution as per space allocation and decide
volume ratio for brands likewise.

Yes, all these activities add value. The process flow is more organized as there is
timely review of sales and good balance of supply and demand.

CONCEPT APPLICATION BY RETAILER:

Retailer does forecasting for each category and brand. Basic software is
used for this purpose (name undisclosed).
Assortment matrix and breaking bulk is done by retailers as it is the final
stage (customer interface). These are done based on buyers profile in the
area.
Pricing is as competitive pricing and the communication mix is given in the
local language.

EVALUATION OF RETAILER PERFORMANCE:

Evaluation Parameter Comment

Timely outputs SMS re-orders stock every 3 months for
Lava mobiles. This shows that even
retailers are pushing Lava mobiles.
Information (Data) capture Data is captured by the software every day.
No backward flow other than sales order
for distributor
Risk Risk is high as retailers have to balance
sales and credit offered by distributor.



MERCHANDISING AND PROMOTIONAL ACTIVITIES:

1. Visual merchandising involves shelves display, SEL, and in-store banners.
2. Offers and discounts during festivals and end-of-season via local
newspapers, posters, buntings and hangings on the front store.
3. Pamphlets distributed during off-season to increase visibility.

EFECTIVENESS OF SALES PROMOTION:

1. There is no formal system of capture but it is seen that there is an increase
in walk-ins, and number of bills generated during the promotion week.
2. There is more brand awareness as the average footfalls increase yearly.
This validates the effectiveness of the sales promotional activities.

SCM:

Effective SCM is needed to handle logistics, storage and inventory levels and the
physical flow of goods through the pipeline. Inventory levels are closely looked at
especially as it costs about 20-40% of the value of product, depending on how
well the company handles its inventory management.

Supplier

Shipping (imports)
HTV

ERP

Manufacturer (inventory turnover target: 1.1)

Rail
Buses/Van

 Distributor (re-order <15%)

Bike
Van

Software
Retail
Retailer (re-order <10%)
Scooter/auto
Car
Customer



TRADE MARKETING:

NEGOTIATION:

As Lava works on a push strategy, distributors and retail partners have an upper
hand in negotiations. Lava has to entice distributors by giving extended credit if
necessary, and discounts based on slab of stocks are pretty common.

INITIATIVES TO INCREASE JOINT PARTNERSHIP:

Direct contact and communication with distributors.
Salesmen look at developing a long-term relationship and can do so by
increasing margins, even at the expense of the profit of the company.

TRADE CONFLICTS:

Conflicts arise in cases of money, money and money, or in technical terms
sales revenue, profits, and collections.
Timely delivery and fill rates are not a point of conflict except for in
emergency cases due to unprecedented factors.