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Ingersoll Rand Case Study
Ingersoll Rand Case Study
The Problem
Which channel should the newly developed 200 hp centrifugal model, Centac-200 should be sold? Ingersoll Rand (I-R) Sales Force The distributor network Air centres
The Situation
Direct Sales Force:
Advantages: Well established service capabilities Good addition to the shrinking line Disadvantages: Sales force tend to become elephant hunters
The Situation
Distributor network:
Advantages: Well established network. Consistent with the hp portfolio. Good reward to the loyal distributors Disadvantages: Attention away from the smaller compressors. Distributor training is required. Channel not completely under control
The Situation
Air Centers:
Advantages: Useful in areas where distributors were not successful. Inventory Transfer Facility. Centralized Order Entry System.
Cost Analysis
Cost of Centac- 200 =$225*200= $45000 (19 Mill/200 Units=$45000) Installation Cost = 12% of $45000 = $5400 Spare Parts and Maintenance Cost = 2% of $45000 =$900 Gross Margin on Compressors = 15% of $45000 = $6750 Gross Margin on Spare Parts = 30% of 900 = $270
Air Centre:
Gross Margin per unit
Sales Force:
Gross Margin per unit Sales of direct Sales force Ex Factory price of product (60 units) Sales Total sales Cost to Company = $6750+$270-$5400 = $1620 = 30% of 200 = 60 = 60*$1620 =$97200 = 200*0.22=44 Units = 44*45000=$1980000 =0.11*1980000=$217800
Distributor Network:
Gross Margin per unit = $6750-$5400 = $1350 Sales of Distributor Network= 35% of 200 = 70 Gross Margin for market = 70*$1350 (70 units) =$94500 Sales = 200*0.32=64 Total sales = 64*45000=$2880000 Cost to Company =0.21*2880000=$604800
Recommendations
Distributor Network
Why?
Distributor Networks earn higher profits than air centres. Distribution centres have a better chance of earning profits due to the reach. The distributor network is bigger compared to any of the channels. Distributor centres have better structure than Air Centres and
Distributors may push the products better than the sales force.