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Study of Sales Organization Structure and Its Effectiveness in FMCG Sector
Study of Sales Organization Structure and Its Effectiveness in FMCG Sector
Study of Sales Organization Structure and Its Effectiveness in FMCG Sector
Affiliated to
Guru Gobind Singh Indraprastha University
Kashmere Gate, Delhi - 110006
1
ABSTRACT
Products which have a quick turnover, and relatively low cost are known as Fast Moving
cleaning products, shaving products and detergents, as well as other non-durables such
as glassware, bulbs, batteries, paper products, and plastic goods. FMCG may also
tissue paper, and chocolate bars. A subset of FMCGs is Fast Moving Consumer
Electronics which include innovative electronic products such as mobile phones, MP3
Hindustan Unilever Limited (HUL) is India's largest Fast Moving Consumer Goods
Company, touching the lives of two out of three Indians with over 20 distinct categories
in Home &Personal Care Products and Foods & Beverages. They endow the company
with a scale of combined volumes of about 4 million tonnes and sales of Rs.10, 000
crores. HUL is also one of the country's largest exporters; it has been recognized as a
Sales structure provide framework for sales organization operation by indicating what
specific activities are performed by whom in the sales organization. Designing a sales
organization is difficult many different type of structure might be used, and many
variations are possible within each basic type. Often the resultant structure is complex,
with many boxes and arrows. The basic concept involved specialization, centralization,
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span of control versus management levels, and line versus staff position. An effective
entities in the organization and may improve the working efficiency within the
organizational units.
To define authority.
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TABLE OF CONTENTS
4
3.3.1.1 ORGANIZATIONAL LEVEL OF ANALYSIS 27
3.3.1.2 TYPE OF SALES 28
3.3.1.3 TYPES OF ANALYSIS 28
3.3.2 COST ANALYSIS 29
3.3.2.1 PERCETAGE OF SALES METHOD 30
3.3.2.2 OBJECTIVE AND TASK METHOD 31
3.3.3 PROFITABILITY ANALYSIS 31
3.3.3.1 INCOME STATEMENT ANALYSIS 31
3.3.4 PRODUCTIVE ANALYSIS 31
VI BIBLOIGRAPHY 47
5
LIST OF TABLES
TABLE PAGE NUMBERS
4.1 Types of analysis 40
4.2 Objective and task method 41
4.3 Percentage of sales method 41
4.4 Profitability analysis 42
4.3 Productivity analysis 43
LIST OF FIGURES
6
Chapter – 1
INTRODUCTION
7
1 INTRODUCTION
1.1 OBJECTIVE:
To study the sales organization structure and its effectiveness in Hindustan Unilever
Limited.
1.2 SCOPE:
8
1.3 INTRODUCTION TO FMCG:
Products which have a quick turnover, and relatively low cost are known as Fast Moving
Consumer Goods (FMCG). FMCG products are those that get replaced within a year.
products such as toiletries, soap, cosmetics, tooth cleaning products, shaving products
and detergents, as well as other non-durables such as glassware, bulbs, batteries, paper
products, and plastic goods. FMCG may also include pharmaceuticals, consumer
electronics, packaged food products, soft drinks, tissue paper, and chocolate bars.
The Indian FMCG sector is the fourth largest sector in the economy with a total market
size in excess of US$ 13.1 billion. It has a strong MNC presence and is characterized by
a well established distribution network, intense competition between the organized and
unorganized segments and low operational cost. Availability of key raw materials,
cheaper labor costs and presence across the entire value chain gives India a competitive
advantage. The FMCG market is set to treble from US$ 11.6 billion in 2003 to US$ 33.4
billion in 2015. Penetration level as well as per capita consumption in most product
categories like jams, toothpaste, skin care, hair wash etc in India is low indicating the
untapped market potential. Burgeoning Indian population, particularly the middle class
and the rural segments, presents an opportunity to makers of branded products to convert
'upgrading' in the matured product categories. With 200 million people expected to shift
to processed and packaged food by 2010, India needs around US$ 28 billion of
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1.3.1 SEGMENTS OF FMCG
• Personal care
– Skin care
– Hair care
– Shampoos
• Household care
– Personal wash
– Detergents
– Food segment
– Tea
• Coffee
S. Companies
NO.
1. Hindustan Unilever Ltd.
2. ITC (Indian Tobacco Company)
3. Nestlé India
4. GCMMF (AMUL)
5. Dabur India
6. Asian Paints (India)
7. Cadbury India
8. Britannia Industries
9. Procter & Gamble Hygiene and
Health Care
10. Marico Industries
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1.4 INTRODUCTION TO HINDUSTAN UNILEVER LIMITED
Hindustan Unilever Limited also called Hindustan Lever Limited (HLL) was
established in 1933 as Lever Brothers India Limited and came into being in 1956
Vanaspati Mfg. Co. Ltd. and United Traders Ltd. The company was renamed in
Hindustan Lever Limited (HLL) is India's largest Fast Moving Consumer Goods
The company has combined volumes of about 4 million tones and sales of Rs.
Unilever Limited. HUL was one of the eight Indian companies to be featured on
The Government of India has recognized HLL as a Golden Super Star Trading
House
It is a mission HUL shares with its parent company, Unilever, which holds
52.10% of the equity. A Fortune 500 transnational, Unilever sells Foods and
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1.4.1 BRANDS
The company has a distribution channel of 6.3 million outlets and owns 35 major
Indian brands.
HOME CARE
FOODS
NUTRITION
WATER
A. HOME CARE
Active wheel
Cif
Comfort
Domex
Rin
Sunlight
Surf Excel
Vim
B. PERSONAL CARE
Aviance
Axe
12
Breeze
Clear
Clinic Plus
Close Up
Dove
Humam
Lakeme
Lifeboy
Liril
Lux
Pears
Pepsodent
Pond’s
Rexona
Sunsilk
vaseline
C. FOOD
13
Annapurna
Brooke bond taza
Bru
Kissan amaze brain food
Kwality’s walls
D. WATER
Purit
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Chapter – 2
METHODOLOGY OF THE
STUDY
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2.1 RESEARCH METHODOLOGY
is carried out by different methodologies which have their own pros and cons. Research
methodology is a way to solve research in studying and solving research problem along
with logic behind them are defined through research methodology. Thus while talking
about research methodology we are not only talking of research methods but also
considered the logic behind the methods. We are in context of our research studies and
explain why it is being used a particular method or technique and why the others are not
used. So that research result is capable of being evaluated either by researcher himself or
by others
Research has its special significance in solving various operational and planning
It is the very important step in the research process accuracy findings depends on
how systematically the study has been carried out in time so that it can make some sense
when required. I have executed the project after prior discussion with the guide and
a. Study about the Indian FMCG sector and Hindustan Unilever limited.
16
e. Analyse the effectiveness of HUL sales organization by doing cost analysis,
1. Internet
2. Books
3. Research paper
organization was
1. Sales analysis
2. Cost analysis
3. Profitability analysis
4. Productivity analysis
17
Chapter – 3
REVIEW OF LITERATURE
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3.1 SALES ORGANIZATIONAL DESIGN
Sales organizational design refers to the formal and coordinated task of assigning
and individuals to serve customers effectively. The developed structure helps the sales
people in the organization to identify their roles, responsibilities and command in the
conflicts, and improves an individual’s quality of work by identifying the contents of the
job, the qualifications and experience required to undertake the job, and rewards
associated with the performance of the job. The organization of the sales department is
based on the nature and size of the organization, market coverage strategy, complexity
of the product offered, and the external condition of the market and the level of
competition.
The sales manager in the organization is the head of sales department and is the
representative of the top management in the chain of command. Divisional, district, and
branch heads are appointed to assist the sales manager in the large organizations. They
report to the sales manager and are accountable to the sales manager for their
relationships among jobs and within the organization. Though organization structures
look rigid, they should respond to the changes in the competitive environment and
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3.2 TYPES OF SALES ORGANIZATION
Sales organizations adopt different kinds of structures starting from the simple
1. Line organization
In a pure line organization, the chief executive does the decision making and
decisions flow down the line for execution. The chief executive has all the authority over
the sales function. Many small sales firms have such a structure. In these organizations,
decisions are made faster, overhead costs are lower, and sales people need to follow the
typical line organization. But, this kind of person-centric organization suffers from the
daily fire fighting operations of the executives, as they have no time to do sales planning
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functions, products, customers, and a combination design. The basic objective is to
increase the sales force effectiveness and enhance productivity and allow sales people to
territory, where every sales person is assigned a specific area for making sales. Several
areas are combined together has a territory for assigning a supervisor and then a number
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This is a very distinct form of design. In this kind of design, the travel times are
limited and the sales force remains close to the customer. The quality of customer
responsibility of serving customer is clearly identified in each area. The new product
demand for each area can also be identified and the necessary product modifications can
be done to suit this need of each customer in the specific territory. The varied marketing
strategy can be developed for each market as a response to the level of competition and a
comparative sales analysis is possible between territories, while sales recruitment can be
conducted as per the requirements of the job, area, demand, and the skills and the
But these kinds of designs are not free from problems. The sales people, for example
have to sell the entire line of the product in a specific area to all types of customers.
There is a tendency to become mere order takers, when sales people have to sell entire
range of products in a specific area over the same period, and in the process, brands too
turn into commodities. The sales people spend too much time with the customers for
products that are easy to sell but may not be profitable or provide high growth
opportunity.
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Fig 3.2 Organization Design by Territory
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3.2.3 ORGANIZATION DESIGN BY MANAGEMENT FUNCTION
An organization based on the management function is also called a line and staff
authority means that people in the management positions have formal authority to direct
and control immediate subordinates. Here, staff authority is narrower and includes the
right to advice, recommend, and counsel the staff. Firms need special expertise for
which the divide the selling activities according to the functions to be performed like
advertising function, sales promotion, and other functions like sales analysis and
marketing research.
This type of organizational design is used for organizations having single product lines.
It is very difficult for any single executive in charge of sales to handle all the sales
activities in large and complex organizations. The line function runs from the head of
sales force to the company sales people, where the same sales staff report directly to the
HR head or the regional sales manager. The staff authority adds the line managers in the
decreased depending upon the organizational requirements and business success. The
line and staff design is less expensive in comparison to other designs but the attention
needed on specific product lines is affective by this design. The Functions across the
departments slow down due to their dependence on each other for the final delivery of
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customer service. The integration of the function happens at higher level, making the job
Interdepartmental rivalry and non cooperation are issues that immerged in such
organizations and the inefficiency in one department effects the functions of other
department. However, such organizations are suitable when the size of the organization
is small, there are limited products, and there is a single line of operation in the
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3.2.4 ORGANIZATIONAL DESIGN BY PRODUCT
basis of the type of product. So, organizations are designed on the basis of products so
that one can recruit sales people specializing on each product line. These types of
organizations are expensive because separate sales staffs are required for each product
line. Product specialization is necessary when the product are technical and complex,
more-or-less commodities, and relatively simple but completely different from one
another, when the product lines are distributed through the entire trade channel, and
when different products are sold to similar markets. When any combination of such
factors exists for the firm, the companies follow a product design. A General Manager
(Sales) is appointed for the overall supervision, control, and coordination of the product
line.
There are advantages of such a design, which include close attention to each
product in the product portfolio. The sales person can master all the relevant product
information and gather the required product knowledge to market complex products.
The interference by other functions is avoided but this design and it is easier to assign
comparative evaluation of sale personnel. The satisfaction level of customers in this kind
the sales function across product category. Sales people from the same organization
often make calls to the same customer for a sale leading to the duplication of efforts and
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an increase cost in surveying customers. The operational costs are higher because of the
Organizations with several and distinct markets are designed on the basis of
customer profile. Modern sales firms are shifting from a product-based structure to a
delivery product mix for each customer. This is also referred to as vertical marketing.
Each sales person sells the entire product line to the same customer. This design is more
customers driven and is successful when the customers are geographically concentrated.
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This kind of design helps in building successful customer relationships where trust and
corporation are the fundamental values of business. Sales and market planning can be
developed depending upon the customer requirements and behaviour. These kinds of
organizations are also expensive and there is also a duplication of efforts, as controlling
and coordinating sales activity across the customers is difficult to undertake in large
firms.
Sales organizations design on the basis of the customer help in buyer and supplier
integration and in co-creating products and services for end users in a business-to-
business market. This develops increased buyer loyalty. Sales managers create multiple
linkages with customers through cross-selling, up-selling, and training the customers to
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3.2.6 COMBINED ORGANIZATIONAL DESIGN
Many organizations those are large in size and complex in product offering prefer a
The combination can be made on the basis of the product, function, geography, or the
customer, depending on the market coverage and scope of business. Such a setup is
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3.3 ORGANIZATIONAL EFFECTIVENESS
would be the organization and vice versa. You must be aware that some organizations
perform better and grow more rapidly than other. On the extreme side some
organizations perform badly and within a short period of time go out of business.
organization has multiple goals and objectives and thus multiple factor must be assessed.
1. Sales analysis
2. Cost analysis
3. Profitability analysis
4. Productive analysis
Conducting analyses in each of this area is a complex task for two reasons
1. Many types of analyses can be performed to evaluate sales, cost profitability, and
productive result for example a sales analysis might focus on total sales, sales of specific
product sales to specific customer or other type of sales and might include sales
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comparisons to sales quotas, to previous periods, to sales of competitor ,or other type of
analyses.
2. Separate sales analyses need to be performed for different levels in sales organization.
Thus a typical evaluation would include separate sales analyses for sales zone, regions,
Now we will discuss how sales, cost, profitability and productivity analyses can be
31
3.3.1 SALES ANALYSIS:-
sales, sales analysis is an obvious and important element of evaluating sales organization
Definitions include a placed order, a shipped order, and a paid order, defining a sale by
when an order is shipped is probably most common. Regardless of the definition used,
the sales organization must be consistent and develop an information system to track
Another consideration is whether to focus on sales dollars or sales unit this can be
extremely important during times spanning price increase or when sales people have
2. Type of sales
3. Type of analysis
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Fig 3.8 Types of sales analysis
First sales managers needs at each level sales analysis at their level and the next level
below for evaluation and control purposes. For example, a regional sales manager
should have sales analyses for all regions as well as for all districts within his or her
region this makes it possible to assess the sales effectiveness of the region and to
throughout the sales organization from a top-down perspective essentially the analysis
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begins with total sales for the sales organization and proceeds through each successively
categories.
4. Order size.
management ability to detect and define problem areas in sales performance. However,
incorporating different sales types into the analysis complicates the evaluation process
and requires an information system capable of providing sales data concerning the
desired breakdowns.
The discussion to this point as focus on the actual sales results for
different organizational levels and type of sales however the use of actual sales results
limit the analysis to comparison across organizational level or sales type these with in
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organizational comparison provide some useful information but are insufficient
Comparing actual sales with sales results with sales forecasts and quotas is extremely
revealing. A sales forecast represents an expected level of firm sales for defined
products, markets, and time periods for a specified strategy. Based on this definition a
sales forecast provide a basis for establishing a specific sales quota and the reasonable
sales objective for a territory And effectiveness index can be computed by dividing
actual sales results by the sales quota and multiplying by hundred. The sales
Another type of useful analysis is the comparison of actual results to previous periods.
This type of analysis is used to determine the sales growth rate for different
achieved by competitors this type of analysis is used to determine the sales growth rate
A second major element in the evaluation of the sales organization of sales organization
effectiveness is cost analysis. The emphasis here is on assessing the costs incurred by the
sales organization to generate the achieve level of sales the general approach is to
compare the cost incurred with planned costs as defined by selling budgets.
Corporate resource earmarked for personal selling expenses for a designated period
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Selling budgets are developed at all level of the sales organization and for all key
expenditure categories.
Both the total expenditure for each of these categories and sales management budget
more centralized sales organization will place budget responsibility at higher sales
higher sales management levels. For example, if sales force recruitment and selection
take place at the regional level, then the regional sales managers will have responsibility
The basic objective in budgeting for each category is to determine the lowest
Determining expenditure levels for each selling expense category is extremely difficult.
Although there is no perfect way to arrive at these expenditure levels, two approaches
warrant attention
for each category by multiplying an expenditure percentage times forecasted sales. The
forecasts and the appropriateness of the expenditure percentage. If the sales forecasts are
36
not accurate, the selling budget will be incorrect, regardless of the expenditure
percentages used. If the sales forecasts are accurate, the key is determining the
manager prepare a separate budget request that stipulates the objective to be achieved,
the task required to achieve these objective, and the costs associated with performing the
necessary tasks.
different types of sales. The profitability analysis is done by Income statement analysis
The different levels in a sales organization and different types of sales can be
profitability analysis. One of the major difficulties in income statements analysis is that
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Two approaches for dealing with the shared costs are
2. Contribution approached
type of cost allocation procedure. This result in a net profit figure for each unit.
contribution calculated from this approach represents the profit contribution of the unit
being analyzed. This profit contribution must be sufficient must be sufficient to cover
indirect costs and other overhead and to provide the net profit for the firm.
output and inputs. A major advantage of productivity ratio is that they can be compared
directly across the entire sales organization and with other sales organization. This direct
comparison is possible because all the ratios are expressed in terms of the same units.
Because the basic job of sales managers is to manage sales people, the most useful input
unit for productivity analysis is the sales person. Therefore various types of productivity
ratios are calculated on a per sales person basis. The specific ratios depends on the
38
characteristics of a particular selling situation but often include important output such as
The productivity analysis provides useful evaluative and diagnostic information that is
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Chapter – 4
ANALYSES AND TOOLS
40
4.1 HINDUSTAN UNILEVER SALES ORGANIZATION
STRUCTURE
(FMCG) Company. HUL and Group companies have about 15,000 employees, including
1200 managers.
For this, HUL is organized into two self-sufficient divisions - Home & Personal Care
and Foods & Beverages - supported by certain central functions and resources to
Board is headed by the Chairman, and comprising 5 whole time Directors and 5
independent non-executive Directors. The day to day operations are supervised by the
Divisions each division is self-sufficient with dedicated resources and assets in sales,
marketing, commercial, and manufacturing. The two divisions are further reorganized
into categories.
headed by a Vice President. They with their respective Managing Director comprise that
41
For managing sales operations, HUL divides the country into four regions, with regional
branches in Delhi, Kolkata, Chennai and Mumbai. Headed by a Regional Manager, they
comprise Regional Sales Managers and Area Sales Managers, assisted by dedicated field
In Marketing, each category has a Marketing Manager who heads a team of Brand
The commercial team of a Division is responsible for its supply chain management.
Each Division has a nationwide manufacturing base, with each factory peopled by teams
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Fig 4.1 Hindustan Unilever sales organization structure
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4.2 SALES ORGANIZATION EFFECTIVENESS OF HINDUSTAN
UNILEVER LIMITED
To measure the sales organization effectiveness of Hindustan Unilever limited we apply
1. Sales analysis
2. Cost analysis
3. Profitability analysis
4. Productive analysis
44
Sales for west region appear to be lower than those for other regions, so the analysis
proceeds to investigate the sale for all the districts on west region. Low sales are
identified for Orissa district, then district Orissa sales are analyzed by territory. The
result of this analysis suggest potential sales problem within konark territory.
It shows low sales volume for product Lipton tea. Additional analysis within this
product is needed to determine why sale are low in these areas and what to be done to
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4.2.1.3 TYPE OF ANALYSIS
Growth 5% 3% 6%
An effectiveness index can be computed by dividing actual sales result by sales quota
So here sales growth of orissa region is less, additional analysis will be done to identify
the problem and what need to be done to improve sales organization effectiveness.
46
4.2.2 COST ANALYSIS
47
The first type of analysis calculates the variance between actual costs and budgeted costs
for the regions in a sales organization. Regions with the largest variation, especially
when actual costs far exceed budgeted costs, should be highlighted for further analysis.
Large variations are not necessarily bad, but the reason for variations should be
determined.
The full cost approach for accessing sales region profitability and the contribution
48
4.2.4 PRODUCTIVITY ANALYSIS
Above table shows how productivity analysis provides a different and useful perspective
Take information concerning district Bihar. Although sales per person are reasonable
and expenses per person is relatively low, both calls per sales person and proposals per
sales person are much lower than those for the other districts. This may explain why
selling expenses are low, but is also suggest the sales people in this district may not be
covering the district adequately. The high sales may be due to a few large customers.
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Chapter – 5
CONCLUSION
50
CONCLUSION
The organization should be based on certain principles like the principles of unity of
A good sales organization always aims at achieving the sales target at the minimum
Careful attention to organizational design and costs in serving the customer helps in
Each type of sales organization structure has certain advantage and disadvantages
and, so HUL use combined structure that combine the feature of several types.
There is no one best way to structure a sales organization. The appropriate way to
identify problem area and use this information to improve future sales organization
effectiveness.
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Conducting analyses for sales organization effectiveness is complex task for two
reasons
1. Many types of analyses can be performed to evaluate sales, cost profitability, and
productive result for example a sales analysis might focus on total sales, sales of specific
product sales to specific customer or other type of sales and might include sales
comparisons to sales quotas, to previous periods, to sales of competitor ,or other type of
analyses.
2. Separate sales analyses need to be performed for different levels in sales organization.
Thus a typical evaluation would include separate sales analyses for sales zone, regions,
52
BIBLIOGRAPHY
Books
90, 245-278
Research paper
53