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Weiking

The document summarizes a case analysis of Weikang Pharmaceutical Co. Ltd., which operates using a direct supply model to distributors in designated regions. However, one distributor, Liuzhou, made sales in the territory of another distributor, Nanning, violating the agreement. This caused conflict between the distributors. The company called a meeting to get opinions on how to address the issue, weighing options of either a peaceful settlement or severe punishment of Liuzhou.

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Vamsi Gunturu
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448 views11 pages

Weiking

The document summarizes a case analysis of Weikang Pharmaceutical Co. Ltd., which operates using a direct supply model to distributors in designated regions. However, one distributor, Liuzhou, made sales in the territory of another distributor, Nanning, violating the agreement. This caused conflict between the distributors. The company called a meeting to get opinions on how to address the issue, weighing options of either a peaceful settlement or severe punishment of Liuzhou.

Uploaded by

Vamsi Gunturu
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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Weikang Team Members

Mayank Kumar

Pharmaceutical
Ashish Aggarwal
Vamshi Krishna
Sudheer Kumar

Co. Ltd. Case Smita Singh


Ruhi Nikose
Piyushi Prabha

Analysis Divya R.
Introduction
 Weikang Pharmaceuticals was established in
2005
 Products include high technology biomaterials
like TISTAT
 Has achieved rapid growth with over 300
employees and Operating income of 85.88
Million RMB
 Products are sold all over China and exported
as well
 Main customers are hospitals who use Weikang
products in surgeries
Distribution Channel and Case Scenario
 Company operated acc. to principles of direct supply to distributors
 Each distributor was given a particular region to operate in
 Distributors were incentivised depending on sales performance

Liuzhou (Li Nanning • Zhong made sales to Nanning Second


People’s Hospital
Zhong) (Sun Qiang) • This was violation of distribution
agreement
• Qiang approached the company for
More than double action against Zhong
Annual sales of 13 no. of hospitals as • Meeting of all regional managers and
M RMB achieved compared to
Liuzhou sales managers was called
• Survey for opinions of all distributors
and salespersons was conducted

Market was Many potential


saturated customers existed
ISSUE: How to deal with
cross border operations
Few Facts of Channel Conflict

 Lack of any channel conflict in a marketing strategy usually indicates gaps in


market coverage
 Conflict cannot be eliminated.
 The goal of marketing management must be to optimize market coverage and
manage a healthy level of channel conflict so that it does not become
destructive
 Market share erosion and declining street prices are evidence that channel
conflict is becoming destructive.
 As markets evolve and mature, many manufacturers will be required to add
new, lower-cost channels in order to cover all major market segments.
Structural
Controls(alternative 1)
 Structural controls are only as
effective as their enforcement.
 At 3 levels: Accounts products and
geography.
 no value unless –
1. spell out the controls
2. enforce the stated penalties to
all channel members.
Piggyback Distribution strategy

 Piggyback is a form of distribution in foreign markets in which a SME company (the “rider”),
deals with a larger company (the “carrier”) which already operates in certain foreign markets
and is willing to act on behalf of the rider that whishes to export to those markets.
 This enables the carrier to utilize fully its established export facilities (sales subsidiaries) and
foreign distribution.
 A special norm will be applied in case of a territory reaching saturation point.
 The distributor needs to take permission from the head office to enter into other territory.
 In the case, Liuzhou province reached a saturation point.
 The distributor can request the Head office for a special permission to enter into Nanning
province.
 Head office can analyze the market scenario and take decision.
 The distributors will co-ordinate together to approach the prospects and will do the sale
 Once, the sale is done the profit earned will be shared among them.
 By this, they will conquer the market share
as well as earn profits without conflict.
Alternative 2(Economic Punishment)
Why?

01 Violated the agreement the company


had signed with distributors

Can cause huge damage to both


02 company’s pricing and sales systems

If behavior of distributor as unpunished,


03 it would sharpen conflicts between
both distributors

Some hospitals in Nanning had begun to


04 bargain for lower prices; Bargaining
power could become overstretched

Lesson for others


05
Issue

 Direct supply to distributors – responsible for particular


regions
 Incentives on sales performance

•Cross boundary sales made to Nanning Second People’s Hospital

Violation of distribution agreement

Qiang approached the company for action against Zhong

Meeting of all regional managers and sales managers called

Survey conducted for opinions of all distributors and salespersons


Support for Peaceful Support for Severe
Settlement Punishment

Increased market share – more sales Cross boundary sales breach of


volume contract

Dilemma
Driven and enthusiastic – example for Can start a precedence among other
other distributors as dedicated to distributors
Weikang development Can start a price war
Severe action can intimidate other Degrade company market share and
distributors and limit ambition reputation
Nanning distributor not active or Make distributor network difficult to
tenacious enough manage
Client not a current client
Cannot lose or deter dedicated and
high performing distributors like
Zhang
Thank You

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