(er Footwear (India) Ltd.” 9 "Your primary task is to stop the downward movement of the company’s market share in the footwear market India”, said Michael S Williams, chief cxccutive officer, Footwear (India) Ltd. to Rakesh Tandon, newly ‘appointed national sales manager. “Our market share was 60 per cent in early 1990s and it has come down to 40 per cent in the year 2005-06. You review our distribution channel structure, salesforce management, and any other marketing area and come up with your suggestions on how to reverse the market share movement from going down to moving up", Williams added further details to clarify his viewpoint to Tandon, Tandon thought, after meeting his CEO, that he should first ry to understand the existing distribution channel system and also how the salesforce was managed. Only after that he would consider other alternatives and decide the best alternative(s) to achieve the objective of improving the company's market share. THE COMPANY AND ITS COMPETITORS Footwear (India) Lid, was a leader in footwear industry in India with five factories dnd two tanneries located in eastern, northern, and southern parts of India. The unorganised, small-scale footwear makers had a market share of 20 per cent, The foreign brands like Nike, Reebok, and Adidas had captured a market share of 30 per Cent in a short span of time. The balance 50 per cent market share was shared between the three players in the ‘organised sector — Footwear India (40 per cent), Liberty (6 per cent), and Paragon (4 per cent). ‘The company sold foowear products of different designs and sizes of shoes, chappals, sandals, sports shoes, sports sandals, and hawai chappals. In addition, the retail stores sold accessories like socks, shoe leather belt, wallet. school-bag, t-shirts, and trousers. Although accessories contributed only about & ‘o 10 per cent ofthe total sales, the profit margins were high at about 30 per cent. To give customers more choices and to improve its top line, the company started selling footwears of other brands like Nike, Lotto, Reebok, and Lee Cooper. This strategy was implemented from the year 2003-04 DISTRIBUTION CHANNEL SYSTEMS ‘The objective of the distribution channel was to make the company products available to consumers in every town across India. For achieving this objective, the company had adopted a strategy of vertical marketing system (VMS). The company had two types of VMS : corporate vertical marketing, system with both Production and distribution under the company's ownership, and contractual vertieal marketing system by ‘appointing retailers as the company’s franchisees. The company called its VMS, consisting of company ‘owned retail stores and franchise retailers, as distribution network “A’, as shown in Exhibit 1 © was develope by Prof. Krishna KHavadar for clasroom discussion, based on te case data provided by Navendra Saxena, MBA suadent of Alliance Business Academy, Bangaloreand Distribution Management istribution Network A Itconsisted of 1500 retail outlets, franchise stores, which were 150 Company-owned Retail Stores These stores were classified into four ‘pes of retail stores: (a) main stores, (b) commercial stores, () family stores, and (d) discount stores, Distribution Distribution Network 8 eres <1 |_Raates eae | een 4 Commercial Stores ‘These were similar to main stores, except that they were located in commercial locations in ‘metro and seri metro cities.Fooswear (India) Lrd. 613 se non-airconditioned retail stores were located in metro and semi-metro cities in high traffic locations. ‘These stores satisfied the basic footwear needs of middie income families with local brands and unbranded footwear products from small manufactures, priced at medium to high levels, Discount Stores ‘These stores were located in thickly populated arcas. satisfying the footwear needs of low and middle income segments. These footwears had basic and discounted prices. including old and sub-standard quality stocks, Distibution Network B ‘This network contributed 40 per cent of the company’s total sales, and balance 60 per cent came from distribution network A. Network B was built around the wholesalers and independent retailers (called 2s dealers). The wholesalers were independent traders. who purchased merchandise from the company’s ‘wholesale depots to resell to independent retailers (or dealers), who were located in rural areas, and markets ‘of major cites and towns, These dealers sod footwear products of all brands, as required by customers. Organisation Structure and Salespeople at Retail Stores Except for large retail stores, other stores owned by the company. had an organisation structure as shown in Exhibit 2. For a Large retail store, an additional position of floor manager, reporting to the stores manager, ‘was provided, The stores managers reported to the regional managers located at the company’s regional sales offices, situated at the four retail distribution centres, Exhibit2 Retail Stores Organisation Suucture (Rasa [stores Manager) Stores Salespeople ‘The company recruited salespeople for their retail stores with minimum qualification of secondary school leaving certificates (SSLC). These sales people were initially recruited as temporary staff for about 6 to 12 ‘months after which they were asked to take product and selling skills tests, and the personal interview by the regional manager and the stores manager. Only when the temporary salesperson performed wel inthe tests andthe personal interview. he was given the permanent position ofa salesperson and was paid 2 salary, inthe scale of Rs. 3000-150-10,000-300-15,000. In addition, 2 commission at the rte of 2.25 per cent of sales ofthe retail store was paid equally to all the permanent salespeople and shop assistants. The company