CASE STUDY 8.

1
Videocon International Limited
Mr S an jaf Nigam has recently got an elevation to the manufacturer of consumer electroni c
products.
level ofarea sales manager in Videocon International Ltd. by a passion for innovation, Videocon
One of the important tasks that he has to perform is co wich the changing face of technology,
h kept
Pace
CO5
tStantly
allocate quora among his five divisional sales managers. grading its manufacturing facilities to Mr Sanjay received his quota for 2010 in
s 2009. He has to derermine an equitable allocation of
advanced technology and fiigh standard of
its product range right across
spectrum. that quota. The incentive plan of rhe company is largely to giving consumers the best the
based on the quota allocation system. A portion of Videocon has developed near zero wastage
Mr San )a/' s cornpensarion was also based on rhe level which helps reduce manufacturing costs by
i
ncorp {q$$
to which his divisional sales managers would be able to material inputs. Coupled with quality-Conscioui pt
fl
achieve the quota. ar every stage, be consumer
Mz Sanjay has proved himself to be a successful sales getting premium products at
 ormous}/
benefits en by

affordable prices. The

executive afrer he graduated from one of the leading company currently manufactures colour and sli‹i business
He was heading the refri- and white television and audio systems. At its podttt
gerator business for Videocon and then he was given the plant at Chite aon and Aurangabad, the
;_,
company he responsibility of managing the sales in the area coveri
undertaken complete backward integration to different srates in south India. manufacture
important components of
In 1985, through a technical tie-up with Toshiba its products, such as electronic tuners, FBTs, ATDMi, Corporatio
Videocon International limited and deflection yokes, thereby reducing costs, ensuring launched India’s first wo
television. quality control, and becoming vertically integrated. It Today, Videocon International Ltd., the fla
a unit at Gandhinagar in Gujarat for mane-
company of the Videocon Group, is India’s leading factoring black and white television picture tutted
 ange of home t Rios, recorders, and personal stereos,
›ro‹liices a sophisticated r
ntemporary i
nternational range of
‹
„„.„,s set al hi-fi systems. Continuou
s upgrade
faciuring have been and continue integral part Of the company’s philosophy.
Management of Salg5 Quota À87
The budgeting process begins in June every year. The
management takes into account the economic trends,
industry forecasts, competitors' activity. PoPu a*o° growth
rate, and the rural—urban exodus rate, and then determines the
sales target for the company and hence
for others in each regional offices. The vice president
 „„i.and an field, Videocon has (sales) receives the estimates and makes necessar y Chill-
innovator in its

, h •P by exploring the gC keeping in view the corporate goals decided by the

y exciting firsts S

„. t|d’s rnost Advanced technologies.

0 board of directors and then finalizes the target3-
f
I C qt JV, Videocon was the first Indian com- The appliances division in Videocon is treated
introduce picture-in-picture, turbo sound, an 'investment and grow’ business, which means the
large screen sizes, the full flat square OÊ dÑlization expects the division to generate healthy
pbr, Bazooka
technology, and the Freedom
seri,es sales growrh every year regardless of the industry trends
@ } ng beyond India, Videocon is non a global pli- and
state of the economy. The approved bUdgCt ÎS
 icknowled ged by the world. It is the first Indian
y,r,

p0j-pp;tjjy to win the prestigious CE approval for

‹xporting its COlOUr TV to Europe. Videocon is now
intrring world market with its operations in the Middle 2gt,
Europe, Indonesia, and South Africa.
Competition in the appliances industry is high and so it the scope for business in
different product categories as the Indian middle class is
growing very fase in size. There are different kinds of
players in the appliances industry starting from single
product category myers to companies such as Videocon
who are marketing Suite a widc variety of products in the
Indian market. The major competitors of Indian origin are
Onid2 dfld BPL, whereas Korean majors such as LG and
Samsung are also spending a huge amount of money ro
establish lemselves as the leading brands in the Indian
market.
Videocon mzikets a ftill range of app1ianc-.s includ-
always expressed as a desired percentage increase in sales
over the previous year’s sales. Once the figure is decided, it
is not subject to change.
The quota is communicated back to the employees at
different levels and is available for the divisional managers
by end of November. Each division is then required to meet
an overall growth figure, but the assumption is that each
division will not get the same quota and may not achieve the
same level of sales. So, Mr Sanjay is expected to assess the
situation in each division, determine where the gromh
potential is the highest, and allocate the quota accordingly.
The total sales budget for the year 2010 for Videocon
is 15000 crore, an increase of 15 per cent in sales over the
year 2009. The quota for Mr Sanjay's region was 12é8.52 crore
and it also had a 15 per cent increase over last year’s sales
target. Mr Sanjay has
three weeks time to allocate the quota among his five
ing refrigerators, cooking ware, dishwashers, diyers,
divisions. He was expected to consider factors such as
and televisions. They have made many /ariants in the
historical allocations, economic outlooks, tax structure
market and are helling at the midAe end of the market.
of the srates covered by his divisional managers, dealer
Piayers such as Som in television and Kelvinator and
changes, personnel changes in divisions and subsequent
tCt£0ltix in refrigerators are playing at the high en ds
territories, the market potential of the new territories
 such as rural markets, scope for new and additional
!! Ü 0 mä fket
. Videocon internation£ is one of the
 dealerships in respective territories and new territories,
*ading companies in the sales budgeting process zs it
' 8Sti bllSh
ed itselfin the majority of the tcrritories as a
and aIso the intelligence on competitor’s strategic
'°/ playcr. B udgeting is done by careful analysis and in
intentions.
8m0cratic prricess at each le vel of the organizatioils.
*8geting is dont by taking into account the changing
o
hdbQ , and also the probabili ry b 1]ic la u mm Ol UIF
S
 Mr Sanjay heads rare region coYering a large dari of
son‹h India, which had five divisions covering the t.ur
T’amil Nadu, Andhra Pradesh, KarH:it,]ta, Ktj.t].t, . ; t|
" MOdÛlS Ûy the fi rm.
 basicall y dfä Wff
rrc
from the
located in these
states and
cac|j mar|ccr scgfLlC£l t. Ac«r›unr q jij
depending uPon the st ze of zach buyer. For example, the military
.. ve.1 ren s ' nes sel ools depending onThese
their sales the local
t }ac
c.indi8a tes were selecred market.
egment for the company and es1
s
basis of the levels of sales gro
the h
 knowledge about
.iptitude
and

that they can take over

md the projected growth rates were
people sx'ere given training so
the
than be other retail sales outlets disperse
higher managerial functions after a few years in
d
i
parts of the country.
organ fzation. The company also
hired career
salespeople
C ity-wise retail sales outlets an;j
lysis
with experience in the sales force
and the ability IO q„
contribu te to deciding about dealer relations, managing
to find out the contribution Of the categories
At
local advertising campaigns, and also undertaki*lg lock
to the overall sales and
also the gt h rate
 hired from
sales promotion prograrnmes. They were
category. In this way small aCcounts were
the competing firms
with a higher salarJy
p§ *S .
e The
the end and then the segments were Added to COpjp
 broadly the prodtiCt End
training programme covered
company knowledge, the helling skills, and
applications
with the
budgeted figures. Usu zlly the growth were always below the budgeted figures.
of informarion technology for the salespeople.
The next step was ro gather morepi
t1for „
Mr Sanjay had a policy document explaining the method used to allocate quota
in the past. The procedure was as per the following. The quota was received in
October in the form of a desired percentage in sales. The first step
of increase

was to project current sales to che end of the year. This provided a base
to which the expected sales increase was added for an estimation
of the next year’s quota. From this quota, the values
of institutional sales were allocated. The institutional sales were
allocated firsr because this market was easy to predict and estimate
for future growrh. The amount of institutional sales in the sales mix
was constrained by che lower profit margin due to discounts on
bulk purchase.
The next step is to mance a preliminary allocation by simply adding
the budgeted percentages increase to the year-end estimates for each
division. Although this allocation looks uniform and fair on the face
of it, it did not take into account the differing situations in the
divisions or rhe difficulty levels in attaining such an
increase.
the macro level. the salespeople were consulted IO gq.
sure thar all po tenm al areas and troublin
included in the pro’ection. The
continued to revise and update the targets till i , close to the
budgeted numbers. these projections ttt then added by divisions and
compared te the budg„ figures calculated at de division level.
Frequently, there were huge differences in mr levels of
allocations. historical allOCations were ten analysed from the
legacy systems and the mangt used his judgement in adjusting
the figures until ht was satisfied rhat the allocations were
equitable and attainable. Factors considered at this stage include
trim experience of the salespeople, level of competitive acti- vities
in each division, and potential problems in ph;'- sical distributions
and retail management.
the completed allocations by the divisional mm*D°* were passed on to the
( .
general manager sales) for h** approval The process took one week or longer at th**
stage. Once
the allocation was approved , the di isioru
sales manager allocated them on the basis of in iV‹ 8!•'
The nexc step was the examination of the sales data
product lines. Often the resulting ä V e rage f*CC "'
cr>mpiJed b the weeks y' sees reports from £l divi-
sions saved in rhe company data warehouse. This
.en1cs la ta for each P rod uct line and all
/fOUj‹jCtj

*' °t rñ icvaii r information. T)iis information helped

not match the expected mix between higher Afl

priced units. Once the break down

the nu
mbers were printed in a briclget sheer
to the divisional managers. He SCH!*"*
 n the basis
„„tø ¡;iv‹ n t:uț;cts íor the year o

|¡iic. 4’liese figures were used at the

,ø|cspeople for the next year.
ÿj¡jJdy iS
facing a more difficult ‹Dİt. He feels the experience in fixing the quota.
Due to Experience in sales, he has some exposure
of
btldgeting and quota setting, but this is
do the job presently at hand. He has the aİ 0C8tjOR and quota
attainment records with him hi exercise (Table 8.4), as
well as the help of
whO Was likely to get the level of a divisional manager in a
few Mr Sanjay’s first task was to project the
,q¡¡ øt ,dp figures to end of the year. This was c i« btpøse
the former divisional manager had been making
,øtcessive projecuons since June 2009. Mr Sanjay made i 2r
limi«ary quota allocation by adding the budgeted
¡øøt e of 15 per cent to each division’s total sales
could cat for changes in ‹8a«l1ocati‹›n
The general economic outlook was very gr r d. ’f‘he
economy was taking a turn and the middle ° ° was a happier
d
lot due to the merger of earness allowance with the basics by the
Government of f flCÌİã. ’the
growths in rural markets were also positive as India had an above-average
f
monsoon in the last ew years. T ßbl

8.6 explains
the preliminary allocations of projectío£l S

Well as budget for south Indian states.

However, the competition was
intensifying as «å C h
player was fighting hard to gain a larger share of the
problems. Many of the
consumer’s expenditure. There were aİso a few inteffl
experienced
salespeop le had shifted to the competing brands in the
appliances cate-
gory. So Sanjay had to allocate quota in some territories where the salespeople were
new to
the market and aJsO to the process of selling appliances as they
were picked
up from across the categories.
TABLE 8.4 2007 Allocation and guota Attainment
 2007 budget Percent of actual (in
2007

(in lakh) total budget lakh)

Tami( Nadu 4,880 2ó .5 4,534

śrdhra Pradesh 3,580 19.4 3,648
Karnataka 3,248 17.7 2,866
4,222 23 4,728
2,262 t2.3 2,352
168 1.1 47
18,3ó 0 100 18,598
Territory 2008 budget Percent of ctual
2008 a

(in lakh) total budget (in lakh)

Tü mil Nadu 5,174 26.2 5,690

Å fłdhFa Pradesh 4,010 20.3 4,330
Karnataka 2,930 14.8 2,900
Kerala 2,810 24.4 4,716
Goa 2,668 13.5 2,988
8St1tUtÏ0FI ą[ 104 0.8 12
Totat 19,696 100 20,796
 Variance ftom
quota ( in '/›)

(7)
2
(11)
12
4

1
Variance/rom
q«at« ( i» •z)

No
g
(j)
(¿)
12
TABLE 8.5 Sales Projections and üuotas 2009-2010
lerritory october
2009 tD 2009 projected
Tamil Nadu {in Imkh)
date
toto/ iit takh)
(
ç,gg 6,004
2009 budget °/‹ o/ toto/
(in lakh) budget //Om
5,718 25 5
Andhra Pradesh 4,114 5,090
Karnataka 2,636 3,246
Kerala 4,248 5,250
Goa 2,788 3,440
Institutional 264 324
Total 18,948 23,354
 4,802 21 6
3,454 15.1 (6)
5,468 23.9 (ç)
3,156 13.8 g
278 1.2
22,876 100 2
TABLE 8.6 Preliminary Allocation 2010
Territory 2009 projections (in takh) 2010 budget (in
Tamil Nadu s,004 6,904
Andhra Pradesh s,090 5,852
Karnataka 3,246 3,732
Kerala 5,250 6,036
Goa 3,440 3,956
Institutional 324 372
Total 23,354 26,852
lakh) % of total budget
25.7
21.8
13.9
22.5
14.7
1.4
100
Note: 2010 budget = 2009 territory projections + 15% - £268.52 Crore
Question
with all this in mind, Mr Sanjay was very concerned that die should
allocate quota properly so that the salespeople were able to achieve the
target at the end
of the yeaf 2010. How should tte proceedî What more
informatio n
does he need? How shoiild he use ° QHO£à ÀloCätion
process to motivate the sales forCe nt ro a 15 per cent increase
bof the additional commitme
in
the revised target level?