Alfa Networks’ In January 1998, Sukesh Kumar, Marketing Manager of Alfa networks was si jidering how to overcome the problems in the existing distribution channel and achieve the channel objective of focusing on customers’ needs of effective after-sales, and debugging services. He was considering the options of continuing with the existing distributors but ensuring better management of the channel members, setting up the company’s direct sales and service offices, replacing the existing distributors with new distributors, or a combination of the above alternatives. sly cor COMPANY BACKGROUND ‘Alfa networks, which was incorporated in the US in the year 1973, pioneered the development of affordable networking solutions, The company’s products had been saving a lot of money of its customers by integrating voice, data, fax, LAN (Local Area Network) and WAN (Wide Area Network) trafic over a single circuit. The company started its operations in India in 1996 by opening their offices at Mumbai and Bangalore, The focus of Alfa Networks was to provide multimedia access networking solutions to large, medium, and small sized companies with the following benefits: © Substantial cost savings while integrating communication traffic: © Choice of the most economical WAN connection. ‘The companies in virtually all ypes of indusities could benefit from Alfa Netivorks solutions. Some of these industries are indicated in Exhibit 1. Alfa Network customers were located all over the world, which gave the company a tremendous advantage. MARKET GROWTH ‘The total size of the market in 1996 was estimated at $500 million. It was forecasted that the total market would grow substantially over the period 1997 to 2001, as shown in Exhibit 2 ‘The factors that influenced the market growth were indentified as follows: ® Saving in costs by integrating voice/fax traffic with LAN/WAN data. © Establishment of official standards such as G. 729, for improvement of low voice quality. MARKET POSITION Alfa Networks was the leader in the worldwide market of network solutions. Out of the estimated total market demand of Rs 500 million in 1996, Alfa Networks occupied number one position with 37 per cent market “This case was prepared by Prof. Krishna K Havaldar, based'6n the project report submitted by MBA studenis, Mr Sukhendu Ractela and Mr Nilotopal Nayakfie Netwen 9 628 Sales and Dittribution Management Alfa Networks 629 ninating monthly toll charges for inter-company telephone and fax calls, id a ® Allowing economical access o a variety of wide area network service. i Sales Ht. Industries using Networking Solutions from Alfa Networks rea, © Providing a cost-effective path for network expansion. Sofiware Re Telecom 160 DISTRIBUTION CHANNEL 140 Sea ice nae ° Alfa networks had appointed some of the well-known software companies of India as distributors for voice panes: eel and data integration products. Alfa Networks imported the voice and data integration equipment from their SE oe 3 factory at Malaysia and sold them to the four distributors in India. These distributors offered networking ae 64 solutions to their customers, providing the necessary hardware and software support. isttuction ‘ 50 Iron and siee! Pétiochemical 44 MARKET SURVEY in Textlles 204 Alfa Networks conducted a market survey to evaluate the effectiveness of their distributors and the perceptions ‘ Others: ao of the companies using networking solutions, The objectives of the survey were to know. © The prices at which the distributors supplied Alfa Networks equipments aé a part of their total offer. ® The perceptions of the users about the quality of after-sales service provided by the distributors, IEihIBIE Projected Market;Growth Worldwide i © The extent of the software and hardware support provided by the distributors, eee: ‘Market demand (§ milion) ae The major findings of the market survey were as follows: 1. After-sales and debugging services provided by the distributors were generally rated as “poor”, The 500 ‘gs! ly ie time taken to send the engineers after receiving complaints was more than two days, which was not : ane es acceptable to the customers, < aa 2 2. ‘The distributors quoted much higher prices, in comparison to the competitors, for the networking and i ah 133 integration although Alfa networks supplied the integration equipment at much lower prices to the 1360 distributors, 3. The software and hardware support systems provided by the distributors were “highly efficient” 4 tie However, sometimes the distributors supplied lower version of the software to the customers to save a, whi uupied number one position in 1995, had fallen to number two position in 199% fitcoes ' share, Motorola, which had occupied pos with 22 per cent market share. The market position of the major players is indicated in Exhibit 3 4. The distributors did not market Alfa Networks’ equipment as properly as their own products, and their priorities were for their own products, Exhibit) Market shares and Rankings of Major Players in 1996 cae ‘Market share (8) ALBERNATIVES -—-- : i Sukesh Kumar was considering the various options available to him for toning up the marketing channel: If ‘Alfa Networks : Pi ie the company opted for new distributors in place of the existing distributors, would the new distributors have Motorola os adequate hardware and software support system to solve any problems faced by the customers? Would the ETC Telecom. Sia new distributors provide superior debugging and after-sales services that were acceptable or satisfactory to _Ascom Timeptex 2 s customers? Car ui = ‘The marketing manager of Alfa Networking was also considering the costs involved n establishing the = : company’s own direct selling network. These costs should include the salaries, perks, and travelling expenses of new engineers, establishing new offices and the territories to be covered by these offices, training and INTEGRATING COMMUNICATION NETWORK hg other systems to provide adequate hardware and software support. Sukesh Kumar wondered how much time Most companies around the world were discovering that integrating voice, fax, LAN, and legacy data oes it would take to eteblien the direct selling network. ‘a single circuit not only saved money but also simplified management of data and improved corporate Another alternative which Sukesh Kumar thought pertained to improving the management of the existing tion. The objectives of integrating communication network were channel members. He wondered as to what methods would be effective in motivating the channel members? communication. clives of integrating cor z @ Reducing the number of required communication circuits and the associated costs.630 Sales and Distribution Management tHe was not sure whether Alfa Networking had communicated clearly what was expected from the distibutors ‘Would it be possible to plana vertical marketing system: that incomporated the needs ofboth the Alfa Networks ate uistubators? Should he change the compensation package ofthe distributors o provide incentives for superior cusiomer service and sales volume? ‘Another option that was possible was “multi-channel marketing”, Sukesb Kumar thought that instead of depending on the Four distributors only, he should consider diferent channels to effectively reach different segments of the market, particularly because the number of industries using networking solutions were many {Exhibit }, Alternatively, be thought, the allocation of customer organisations could be based on geographic proximity of Alfa Networks as well as that of distributors’ sales and service offices ‘Alfa Networks could fet up a sina direct selling network, and also appoint independent distributors (or agents) with required Gjatfications and experience on commission basis for customers dispersed in far Tung stile, The third seep he concluded, would be the existing distributors (o serve their current customers with whom they had established good relationship. ¥ Mr Sukesh Kumar was not sure which altemative was the most appropriate to meet the company’s bjective, He thought it might be a good idea to involve his marketing executives and to obtain their views, before taking a final decision. Questions 1. What should Sukesh Kumar do with the existing distribution channel to achieve channel objectives? 2. How should the channel members be managed or adm istered effectively?