MGMT650B Consulting Skills for Managers

Alan Law: 08933655Angelika Mehta: 09993004

Ivy Wong: 08936487Joanne Wong: 08936712

Rayman Wong: 08930225

PROPOSAL FOR

Dummy Pack

Pyramid

SituationMaxclean has an established market share of 60% of the

cleanroom market in China. Their revenue last year was US$240M worldwide

ComplicationThe US operation’s direct sales strategy is bringing in zero

profit as oppose to the forecasted $2.4M net profit. The revenue was 55% below the forecasted $20M US.

Pyramid

QuestionHow can we increase US revenue from $9M to $20M and

increase profit from zero to $2.4M net profit in the next 18 months?

Answers The Maxclean sales force should shift their focus to spend

70% of their time building relationships with and selling through distributors while spending the remaining time on existing clients

BECAUSE…..

Distributors want to sell Maxclean’s product since it is beneficial for them to do so

Corporate end users prefer to purchase through distributors

Rationale

Going through distributors provides better economics for Maxclean

Wider choice of products therefore minimize

number of suppliers

Going through

distributors will save Maxclean

warehousing &

transportation costs, & therefore increase

gross profit

Going through distributors will allow Maxclean to sell high volumes since distributors order more product than direct customers

Going through

distributors allows

Maxclean to extend its product

reach, since distributors can sell to

larger sales territory

Distributors will receive a higher

profit margin compare to

other brands

Distributors see benefits in

carrying more than one brand of cleanroom

product therefore willing to accept new

partnership

Maxclean offers a better

quality product at a lower price

Distributors are looking for

new suppliers for better pricing

and terms

Distributors can broaden their product

portfolio

Distributors can diversify

vendor capacity risk if there are

products overlapping each other

Better and faster

delivery service as

the distributors

have operations across US

Distributors always

have QC manager to

examine product quality before

shipping to the users

US revenue and profits are under performed in both FY 2007 and 2008

Real Data

Source: Maxclean, 2008

77% of cleanroom products are sold through distributors

Source: Frost & Sullivan - CLEANROOM MARKET USA 2007

Real and Fake Data

Total market size: US$ 5.35 bil

XXX distributors Made up of over XXX end

users composing: Universities/college Government Reseller Laboratories Industrial BioPharma Science education

Current situation Direct sales (50 customers) Maxclean 2008 sales =US$9.3 mil (0.01%) 1% of potential market size = US$ 12.3 mil

Distributors deliver THREE times more sales revenue

New channel strategy Sell via distributors1% of potential market size

= US$ 41.2 mil

Source: 1/ Frost & Sullivan - CLEANROOM MARKET USA 2007, 2/ Maxclean sales data 2008 Real Data

End users prefer distributors because…

Distributor

Source: Company reports of distributors

Real Data

Maxclean benefits from dealing with distributors

Save sales & marketing effort

• Increase of market share• Save logistics arrangement

• Economies of Scale

Save sales & marketing effort

Source: Surveys and interviews with distributors Real Data

More cost effective to use distributors to get larger geographic reach

source: Frost & Sullivan - CLEANROOM MARKET USA 2007

Percentage of Distributors that are located in each state

Real Data

More cost effective to use distributors to lower direct costs therefore increase gross profit

source: Maxclean financial statement

2007 2008 2010 (projected)

Total Revenue (000) 4,134 8,992 20,000

Direct Costs

Material Costs 2,580 5,394 11,400

Warehouse Rent 189 289 0

Freight and logistic Charges

579 1,146 0

Contribution Margin 786 2,163 8,600

CM in % 19% 24.1% 39%

Real Data

43%

Re-organize the sales force to focus on distribution instead of direct sales

Lack of distribution experience in current sales force

Hire a new sales director with solid experience in distributors channel to lead the existing team

70% of sales force time will be spent to build relationships with distributors

30% of time to maintain the revenue from current direct sales

Focus on distributors by allocating 70% of time

Real Data

source: Maxclean, 2009

(based on 250 working days/year/salesperson)

Distributors allow for higher sales volumes

Fake Data

source: XXXX

Potential Sales in Volume

0 50000 100000 150000 200000 250000 300000

one end-user

one distributor

Units of Product

Corporate end-users not aware of Maxclean’s competitive advantage

Quote from Mr. YYY:

“I have never heard of the company Maxclean and I am not aware of what products they sell”

Quote from Ms ZZZ

“I am not aware that Maxclean offers the same quality products as Texwipe but at a lower cost”

source: Quote from interview with potential end-user

Fake Data

X% of distributors and Y% of corporate users are looking for NEW supplier

source: Surveys on corporate user & distributor

Yes

No

Distributors

Yes

No

Corporate users

Fake Data

The top 7 attributes for selection of new supplier

source: Surveys on corporate user & distributor

Fake Data

Percentage of Respondents

Maxclean fulfills the top three attributes

Fake Data

Maxclean has a superior quality product than its competitors

Insert quality report here with details Maxclean’s superior data

Maxclean has better payment terms for their distributors than competitors

Insert comparison payment scheme here

Corporate end-users & distributors are not satisfied with their current suppliers

Quote from Mrs XXX(YY of end user company)

Quote from Mr. XXX(YY of XX distributor)

Quote from Mr. XXX(YY of XX distributor)

source: Quote from interview with corporate user & distributor Fake Data

“We do not feel that our suppliers can meet our current

production demands”

“We are not satisfied with the range of products offered by our current suppliers”

“We feel like we should be able to get a better price for the cleanroom products that we purchase”

Value proposition for Maxclean

Fake Data

Appendix 1 – Interview schedule

  NAME POSITION   RELATION TO MAXCLEAN DATE TIME Interviewer

1 Mr. Christopher Simos Sourcing Manager 1 Potential Client (distributor) Sept 28 8am (US)Angelika, Ivy

2 Mr. Nicolas Freinze Manager 2 Potential Client (distributor) Oct 710am

(US)Angelika, IVy

3 Mr. Shawn Yoon General Manager 3 Maxclean Korea Branch Sept 29 2pm (HK)Angelika, Rayman

4 Mr. Nick Rosens General Manager 4 Maxclean USA Branch Sept 29 9am (US)Angelika, Rayman

5 Mr. Kim Yun Sourcing Manager 5 Existing Client (End-users) Sept 28 4pm (HK)Alan, Rayman

6 Mr. Douglas Cwiertina CEO 6 Existing Client (Distributor) Oct 9 9am (US)Alan, Rayman

7 TBD

End user or potential user in US

7 TBD TBD TBDAngelika, Joanne

Appendix 2 – Action plan

Issue Hypothesis AnalysisData Sources Who Deadline Data received Status

Would attending tradeshow in related industries increase sales in later months?

Attending tradeshows in targeted industries can increase brand awareness and thus lead to more sales.

Review what tradeshow that Maxclean had participated in the past and the chance of getting new business.

Maxclean's marketing data

Joanne 25-Sep tradeshow attendedsample distributedsuccessful deals received

Complete

Would distributing samples in every major medical supplies retail store increase sales?

Distributing samples can increase Maxclean's brand awareness and encourage product trial and thus, lead to more sales

Review Maxclean's history of distributing samples to medical supplies retail store.Refine the budget cost for sampling.

Maxclean's sales information in US

Joanne 2-Oct no. of sample distributed from China office and US office

Complete

Would advertising on internet more effective to reach our designated distributors and end users ?

With more effective advertising on internet to reach our designated distributors and end users would increase sales by 15%.

Review historical performance with degree of advertising

Sales data from Maxclean Group

Joanne 13-Oct Type of internet media used in China, US

80% complete

Would adverting on TV, newspaper and specialty magazines more effective to reach our designated distributors and end users ?

With more effective advertising on TV, newspaper and specialty magazines to reach our designated distributors and end users would increase sales by 5%.

Review historical performance with degree of advertising

Sales data from Maxclean Group

Joanne 15-Oct 80% complete

Would sales increase if country of origin is in US ?

Sales will increase by 10% if Maxclean made their products in U.S

Interview Maxclean US Sales Manager

Joanne & Ivy

8-Oct Complete

Sales are lower that expected

Forecasted sales & profit are much higher than actuals

Review 2008 data Maxclean US records Joanne & Alan

9-Oct Complete

Targeting end-users is not resulting in sufficient sales

One distributor can bring in much higher volumes than one end user

Review industry data: look at total sales volume and breakdown of distributor volume vs. one end-user volume

Industry report Angelika 13-Oct In progress

Action plan - continue

Issue Hypothesis Analysis Data Sources Who Deadline Data received Status

Would sales increase if Maxclean offer price is more than 30% cheaper than the competitors ?

Sales will increase by 5% if Maxclean offer price is more than 30% cheaper than the competitors.

Interview Maxclean US Sales Manager

Joanne 15-Oct In progress

Would sales increase if we do co-branding with distributors ?

Sales will increase by 10% if we do co-branding with the distributors

Is it important from the distributors' perspective to include their brand name on our product ? Would distributor brand add value to our own brand ?

Create questionnaire and conduct telephone interview with the distributors and end users

Rayman 13-Oct

In progress

Would stock rotation program encourage distributors to carry additional inventory ?

Sales will increase by 15% if we develop Stock Rotation program

Would our distributors be interested in this program, what are their concerns in regards to inventory carrying, have they done this before with other suppliers ? What can Maxclean do to lower their risks of carrying some inventory ?

Create questionnaire and conduct telephone interview with the distributors

Rayman 13-Oct Yes Completed

Would higher discount rate encourage distributors to carry additional inventory ?

Sales will increase by 5% if we give volume discount

What are the other suppliers do when they want to boost sales when close to quarter end? How much inventory and risk would distributors willing to take considering the extra discount they will get during quarter end period ?

Create questionnaire and conduct telephone interview with the distributors

Rayman 13-Oct Yes Completed

Action plan - continue

Issue Hypothesis Analysis Data Sources Who Deadline Data received Status

Would extending the payment term to distributors increase sales?

Extending the payment term to distributors from X 2 to X2, sales revenue will increase

Look at historical data of Maxclean, i.e. Is this something they have done in the past with positive results?Interview with distributor in US to ask "would this be incentive for you?"Interview with US salesforce: "has this been a question you were approached with?"

Maxclean historical dataDistributor of cleanroom products in US: contact info from MaxcleanSales force from Maxclean office in US

Joanne & Angelika

15-Oct In progress

Would increasing individual sales commission increase sales ?

Sales revenue increase by 5 % if commission increase to 5%

Study past years of financial reports to determine the correlation between commission and sales revenue Use current commission scheme as benchmark to study the overhead cost

Maxclean historical data

Alan 13-Oct Yes Complete

Would sales increase if sales force in US has a better understanding of Maxclean’s competitive advantage ?

Sales team understands its product competitive advantage can boost the sales revenue

Compare the sales before and after the training on sales team

Alan 13-Oct Yes Complete

Appendix 3 - US market share in different states

source: Frost & Sullivan - CLEANROOM MARKET USA 2007

Texas