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Q2. List the major differences between Formal and informal organizations

Formal and informal organizations
Every firm has a formal and an informal organization. The formal organization is a fixed set of rules of intra organization procedure and structure that of the management whereas the informal organization is often developed from the informal relationships existing within the organization.
Also called the grapevine, informal organization is basically a communications pattern that emerges to facilitate the operation of its formal counterpart. Most formal organizations would be totally ineffective if it were not for a supportive informal organization.
Figure 1.4 shows an informal communications pattern that might exist in a marketing organization. Actual communications do not usually follow the formal organizational lines. This allows the formal structure to operate efficiently.
Consider the case of a field salesperson who is responsible for collecting certain competitive information such as prices and trade discounts. If this information were forwarded through the formal organization  the data would be so backdated that it would be useless to the management.
The informal communication system, however, allows the information to be transmitted directly to the director of marketing research. Similarly, consumer complaints over delays in correcting billing errors can be mitigated when the district sales manager directly contacts the head of accounts.
The development of an effective sales organization requires that informal relationships and communication patterns be recognised as being equally useful in accomplishing sales objectives. They should be encouraged to the extent that they improve organizational efficiency.

Q3. Explain the various steps involved in the formulation of sales strategies

Formulation of Sales Strategy
Strategy formulation in case of sales would involve identification of the sales goals and designing of a game plan, using the organizational resources at hand, to achieve those goals.
The strategy formulation process can be shown as:
 Let us study the sequential stages of this process.

1 Assessment of competitive situation and corporate goals
The sales objective is directly affected by the corporate mission or goal which in turn identifies the specific set of common needs and wants the company would like to satisfy. Another input in objective setting is the macro business environment. Variables in the political, economic, social and technological environment have significant bearing on what and how much the company would be able to sell. The environmental scan thus provides pointer to a company's specific opportunities and threats, strengths and weaknesses.
Under conditions of pure competition, each seller is too small to be able to influence prevailing market price. Identical undifferentiated products make it difficult to specialise sales effort. Under this sort of competitive situation, sales effort is usually limited to maintenance of adequate market supplies.

2 Setting sales objectives
Sales objectives are intended to direct the available sales resources to their most productive use. The sales objectives are stated in quantitative and qualitative terms. The qualitative sales objectives reflect the expectations the top management regarding the contribution of sales function to the total marketing effort. For example, when a company selling high value, technical household products relies only upon its own sales personnel to carry out the entire sales function and take up part of promotional responsibility too, the quality and the size of the sales personnel it requires would be significantly different from that of a company where sales personnel are, only required to coordinate with and service channels. The qualitative sales objectives are relatively long term one and emanate out of the marketing policy of the company.
Quantitative objectives on the other hand relate to the operating results that the company would like to achieve. They, like the qualitative objectives are heavily dependent on a keen analysis of competitive situation and corporate goals, and obviously would vary over operating periods.

3 Determination of the type and size of sales force needed
Specifically, it would depend upon the role that the salesmen are expected to perform. Recruiting more than optimum number would mean that the company is bearing unnecessary costs at the expense of its net profits.
Recruiting less than optimum would mean losing opportunities for exploiting sales prospects. It is not easy to prescribe an ideal sales force size as the important determinants of sales force size-market size, and potential, competitive activity, allocation of sales task between the channel and corporate organization differ from company to company. With respect to their own set of variables, companies do try to arrive at an ideal figure by using various methods such as (a) the incremental method, (b) the workload method and the (c) sales potential method. The incremental method utilizes incremental reasoning in that it suggests that salesmen should be added to the sales force if incremental margins exceed incremental sales costs. In the workload method, through the computation using total market size, sales, volume potential and volume of non-selling activities like travelling the company arrives at the total workload. Dividing this by the work it expects one individual salesman to carryout, gives the sales force size.

4 Organizing the sales effort – territory design
While creating territories sales managers can choose from different type of bases:
Geographical basis which utilizes the existing geographical boundaries and assigns them to the sales personnel.
Sales potential basis which consists of splitting up a company's customer base according to the dispersion of its sales potential.
Servicing requirement basis where the company splits up its total market according to servicing requirements of its current and prospective customers (servicing here means maintaining and developing the account).
Workload basis: This approach considers both account potential and servicing requirements and in addition reflects the difference in workload created by topographical, locational and competitive factors.
5 Establishing and managing channels support and coordination
The channels of distribution usually act as the only point of contact the final buyer has with the manufacturer. They together with the sales organization of the manufacturers collectively bear the responsibility, of consummating exchanges with the final buyers. When indirect distribution is adopted, it is imperative that the sales organization initiates dealer cooperation programmes. Dealer support typically has to be, ensured in the area of maintenance of adequate stocks of the products and local promotion in the form of point purchase displays and local advertising. Another key area of support is the provision of market feedback the norms of which must be decided between the dealer network and the manufacturing organization.


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