leveraging distribution channel

Atlas Copco

Leveraging Distribution Channels

All materials, contents used are purely for academic discussion purpose & has no intended harm to any identity specifically

By: Smit Dave

Business View

1.25 billion $ worldwide – 1984

40 % from compressors division

Focus on Recip & Rotary technology compressors

Market trend moving towards Rotary & Oil free compressors (Dry air)

3 – 6 Months average sales cycle - Involves engg, manager & technical guys @ buying unit

All materials, contents used are purely for academic discussion purpose & has no intended harm to any identity specifically

Business View

Worldwide share as equal as Ingersoll Rand – A benchmark competitor

But "US" – Atlas is far from target - 4th rank

Traditional buying process

Strive to be major threat to Ingersoll Rand

All materials, contents used are purely for academic discussion purpose & has no intended harm to any identity specifically

Good in European territory

Adaptability issue for US market & its needs – Solved

Reciprocating nature of installed machines

Distributors earn in regular servicing & maintenance (30-35 %)

Less installed base of Atlas Copco product – Distributor's economic viability?

Hesitation towards new entrant compared with 25-30 years old companies in market

All materials, contents used are purely for academic discussion purpose & has no intended harm to any identity specifically

Make loss good by leveraging topline product

Oil free rotary screw compressors – High precision

THE best design engg in US – Broad range & low cost in competition

15 % margin offered – Compared to 8-10 % by other products

Competitors approached directly – Chance for Atlas to transfer benefit to preferred distributors

Maintenance contracts ensured good economy of distributors

Flexibility – To choose & pick products they wanted to market

Soon merged Worthington (Distribution benefit) & acquired Turbonetics.Inc (Centrifugal Mfg)

All materials, contents used are purely for academic discussion purpose & has no intended harm to any identity specifically

Intensive dist. by 100 dist

Intrabrand competition – Ex: Levis Jeans

Overlapping in territories – Segregating dist. – Still some dist. Overlapped

Exclusive marketing rights to dist. (Brand & Territory)

Exceptional cases were treated separately

Finally 85 distributors – Manageable network now

Regular conferences & meetings with the distributors to ensure:

Services – Surety of spares, stock & supply

Display – Attractive display of products – Display Merchandising

Direct Accounts – Avoid conflict of accounts between sales forces

Training – Training, communication & technical support

Market share raised from 2 % to 7 %

All materials, contents used are purely for academic discussion purpose & has no intended harm to any identity specifically

Distributors categorization in "A" "B" & "C"

A (80 % sales) B (10-80 % sales) C (Less)

28 – A, 18 – B & 39 – C

C category a major concern

C category – To be provided more resources, & focus - technical support by Atlas

Training C category sales people & supported them with necessities

This phase witnessed good marketing activities too

Shows management commitment to develop not distributors, but partners

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C Category came out to be bottleneck

Distributor audit conducted

A & B were performing good – But not selling all broad product line

They had to even sell low margin & small size compressors too

GA series lubricated rotary compressor had intense competition

This was area where distributors can contribute

How to make it possible?

How to induce & motivate them to sell such goods?

Now ???

All materials, contents used are purely for academic discussion purpose & has no intended harm to any identity specifically

All materials, contents used are purely for academic discussion purpose & has no intended harm to

any identity specifically

Basic Franchise

Maintain inventory (Prime Equip & Spares)

Responsive supply behaviour

Attain goals & qualify for next stage franchise

Enhanced Distributor Franchise:

No inventory of Prime Equip

Maintain inventory of Spares to serve quickly

Provision for capable distributor with less credit history with Atlas – Agency agreement (Principal-Agent terms)

Types of Franchise

All materials, contents used are purely for academic discussion purpose & has no intended harm to any identity specifically

Promoted Franchise:

Distributors promoted from Basic & Enhanced Franchise

Agency agreement – To provide sales & mktg expertise to dist.

Access to company's marketing arm – To support sales

Agents not required to keep inventory of prime

Quotations & PO's to be in name of Atlas-Copco

Authorized Service Center Program:

Address to warranty & post-warranty issues & revenues from spares

Focus to convert the distributors as authorized partners

Continued. . . . . . .

All materials, contents used are purely for academic discussion purpose & has no intended harm to any identity specifically

Lets Discuss

Decision on Franchise model right?

How easy or difficult for big companies to buy small compressors?

Time & economical efforts for spent by small compressor buyers to find Basic Franchise

Geographical proximity of Authorized service center?

What about customer who wants to buy Small & Big compressors together?

How should be the distributors support for 4 level franchise?

Where would you fit the distributor currently selling big compressors?

All materials, contents used are purely for academic discussion purpose & has no intended harm to any identity specifically

All materials, contents used are purely for academic discussion purpose & has no intended harm to

any identity specifically