Deepak's Distribution Distress*

Deepak's Distribution Distress

Sagar India Ltd.

Sagar India Limited (Sagar), an affiliate of a multinational U.S.A. based pharmaceutical company, established in the year 1983 had its operations all over India and was known for their dermatological products like creams and ointments; general products like anti-allergics, injectable antibiotics, oral steroids, and painkillers. Deepak joined Sagar in December 1992, as a medical representative for the newly opened company Headquarters (HQ) at Satara. All products at Sagar were research-based and the prices were two to three times higher than its competitors. The company’s customers were predominantly dermatologists, general practitioners (GP), physicians, otolaryngologist (ENT specialists) and pediatricians. The new HQ at Satara covered markets like local Satara, Phaltan, Lonand, Wai, Koregaon, Vaduz and Mhaswad as ex-station markets and Karad, Patan, Dhebewadi and Umbraj as outstation markets (Exhibit I). Being a research-based company, Sagar used premium pricing strategy. Markets like Satara, Karad, Phaltan, Lonand and Wai were considered to have high potential............

Deepak’s Distribution Distress

Sagar’s new headquarters Satara had only two distributors M/s. Satyam (at Satara) and M/s. Sunil medicals (at Karad) clocking a revenue of INR40,000 per month. Deepak covered Satara’s local markets for fifteen days and outstation markets for ten days. M/s. Satyam, the lone distributor at local Satara city, had good market coverage. Its founder Mr. Satyam maintained a good relationship with chemists, delivered goods on time and used to keep a good inventory of the product range. He was always supportive of sales people. He had good market coverage except for Phaltan, Lonand, Wai, Panchgani and Mahabaleshwar as these territories were catered more by Pune-based distributors.............

Deepak’s Expansion Plan for HQ Satara

Later in1997 Deepak approached SDCDA to get permission to appoint fourth distributors at Phaltan. The SDCDA rejected the application giving reason that the company’s district sales do not fulfill the minimum monthly sales criteria. Deepak was upset when SDCDA rejected permission for another distributor because he was losing sales of Phaltan, Lonand and Wai to Pune-based distributors. During joint work, he requested his area manager, Mr. Kalpesh to allow him to cover Baramati from Satara (Exhibit III). Mr. Kalpesh was happy to hear this but asked Deepak to not get into additional outstation touring since Deepak was doing well in his current territory and advised him to continue the good work here. Deepak did not agree and convinced Mr. Kalpesh to get Baramati in order to not loose sales, incentives and increments by protecting Phaltan, Lonand and Wai territory.............

Assignment Questions

I. Can you justify the title of the case?
II. Do you think Deepak was an aggressive salesman? Justify.
III. .................

Exhibits

Exhibit I: Satara District Map

Exhibit II: Pune District Map

Exhibit III: Distances by Road

Exhibit IV: Territory Covered

Exhibit V: Name of Distributor and Location

Exhibit VI: Distribution Channel Members

Exhibit VII: Hierarchies in Sagar (India) Ltd. Pharmaceutical Sales Department

Deepak's Distribution Distress

Synopsis

Deepak, a young pharmacy graduate was vibrant, a dynamic sales person and a consistent performer. Deepak started his career in 1992 at newly formed Headquarter (HQ) – Satara. He excelled new product performance and received many awards at Sagar India Limited (Sagar) for the same. Over the years as sales increased, the company faced problems with distribution due to which Deepak suffered setbacks in earning incentives and was also fighting with his own competencies to come off full potential. For the first four years, he was able to perform with the existing distribution system. As the sales base had grown since 1996, he started facing infiltration problems (goods purchased by chemists from nearby territory distributors for which sales credit were not given to Deepak). Distributors from HQ Pune used to send goods to Phaltan, Lonand and Wai which were the most potential market of his territory. Thus, most of the chemists started buying stock from the Pune distributors either while transiting to Pune or by placing an order against the demands. This was hampering the sales growth for HQ Satara. Deepak managed these back-breaking situations by appointing undercutting distributors (unauthorized distributor who work at low margins by buying goods from company authorized distributors) and then authorized them as company distributors. This strategy made Deepak win the star performance award twice........................