Section #2

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 Q2. Analysis & Take
Section 2: Analysis & Takeaway
away

Question 4A: Identify Key Cities for Launch

Q4.1) The approach Krypto is following is based on the weighted rank derived from the average
household income and the population of the city. Based on the below data which city should we
recommend for launching the experience stores?

4.1 Ans) Based on the data given in the table, we have completed the Population rank column and
Income rank column.
From the table, we have formulated a linear relation between the Population rank and Income rank.
which is given by,
➔ a*population rank + b*income rank= weighted rank ________ (1)
The above equation on solving for a particular city population and income rank gives us the weighted
rank through which we can calculate each city’s final rank.
The calculated values for weighted rank and final rank are filled up in the given table.

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 Q2. Analysis & Take away

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 Q2. Analysis & Take away

Now, from the table, we can find the 5 key cities in India in which Krypto can launch it’s experience
stores for maximum profit.
The 5 key cities are :-
1. Bangalore
2. Mumbai
3. Hyderabad
4. Surat
5. Chennai

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 Q2. Analysis & Take
Section 2: Analysis & Takeaway
away

Question 4B: Identify the Incentive Budget

Q4.2) Below is the estimated car sales in Q1’2021 for Cities ABC and XYZ. Approx price for Electra is
INR 15 Lakhs.
Q4.2 (a) Calculate the expected incentive payout for City ABC and City XYZ in Q1’2021
Q4.2 (b) What should be the total incentive budget for 2021 for all the 5 stores. You can assume
average of City ABC and City XYZ as average incentive per store.

Ans) Based on the ranks given to the sales Rep in city ABC, we can fill the ranks of sales Rep of city
XYZ as well. Using the Payout Curve, we can find the commission of each sales in Rep according to
their rank. These calculated values are given in the next slide.

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 4.2 (a) Ans) Since the Approx price for Electra is INR 15 Lakhs.
Q2. Analysis & Take away
➔ Incentive Payout is given by formula,
Payout = Number of cars sold*commission%*Car price
Here, commision % is given by rank alloted to sales Rep which can be find out by tables given in
previous slide.

● Consider Sales Reps for City ABC.

➔ Rep A = 8*0.5*1500000= Rs60,000
➔ Rep B = 11*1.5*1500000= Rs2,47,500
➔ Rep C = 9*1*1500000= Rs1,35,000
➔ Rep D = 12*2*1500000= Rs3,60,,000
➔ Rep E = 7*0.25*1500000= Rs26,250
Total incentive payout for city ABC = Rs. 8,28,750

● Consider Sales Reps for City XYZ.

➔ Rep F = 3*0.5*1500000= Rs22,500
➔ Rep G = 2*0.25*1500000= Rs7,500
➔ Rep H = 4*1*1500000= Rs60,000
➔ Rep I = 5*1.5*1500000= Rs1,12,500
➔ Rep J= 7*2*1500000= Rs2,10,000
Total incentive payout for city XYZ = Rs. 4,12,500

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 Q2. Analysis & Take away
4.2 (b) Ans)

● Total incentive payout for city ABC = Rs. 8,28,750

● Total incentive payout for city XYZ = Rs. 4,12,500

● Total incentive payout for city ABC & XYZ = Rs. 8,28,750+4,12,500= Rs. 12,41,250

● Average incentive payout for City ABC & XYZ = Rs. 6,20,625

Total incentive payout budget for 5 stores = Rs. 6,20,625*5= Rs. 31,03,125

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 Section 2: Analysis & Take away

Question 5: Is this the right strategy

5.1) What could be other important parameters in selecting the cities for launching the experience stores? How
will you accommodate these parameters in selection process – how important these parameters will be
compared to each other?

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 Section 2: Analysis & Take away

Question 5
Q5.2) What are the drawbacks of the current compensation plan?

Ans) The major drawback of the current compensation plan is that the ranking of the sales reps is based
only on units of cars sold. Factors like profit earned per sale, customer satisfaction and interaction are
not mentioned. In addition, while approaching differential commission plan in comparison with flat
commission approach the earlier may lead to unhealthy competition as well as the feeling of inferiority
among peers. This can lead to incorporation among the employees when asked to work as a single unit.
On the other hand, the flat commission approach can also be faulty, as it will not motivate
representatives to work harder for a better commission percentage.

Q5.3) What other way can you suggest for calculating the payouts to avoid these drawbacks?

Ans) In order to avoid such conflicts, the company can give additional incentives to the stores with the
highest number of sales and highest profit earned in a financial year. This ensures that all workers come
together to achieve a common goal and this will reduce the unhealthy competition. Incentives like extra
paid leave days or the opportunity of faster promotions can also boost morale and induce a positive
work environment.

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