Read the case carefully and answer the questions.QUESTION :1. Give suggestions to reduce the conflict between the two divisions.2. What in your opinion were the problems faced by Synergy generic division after its bifurcation from the OTC division?3. Do you think restructuring the marketing organization was a wise decision? Justify your answer. 462Human Resource Managementfluctuating sales affected the incentives received by sales staff which was based onthe volume of sales generated by an individual.• The company as a policy matter did not supply products to distributors who hadoutstanding payments to the company, be it on the account of generic division or theOTC division. There was discontentment in the OTC division as they often found thatsupplies were not being made on orders received by them due to the outstanding ofthe generic division. This supply policy affected the performance of the OTC divisionand in turn, their incentives.• When the field staff of generic divisions was transferred to OTC division, the marketingoverheads of the generic division were reduced and to encash on this, the companydecided to reduce the prices of the generic products. The generic division becameextremely price competitive in the market. In spite of the reduced prices genericdivision did not show a considerable positive rise as was expected.This fall in the performance of generic division was observed in the first quarterly reviewsince the restructuring of the organization. The corporate executives of marketing felt concerned.The review showed that OTC division was flourishing and was in a position to double itssales in this period, but the generic division continued to show decline in sales. The genericdivision was the largest contributor of the sales turnover of the company (Annexure II).Though the profit contributor of the generic division was less than OTC but the companycould not afford loss of sales in the generic division any more. On discussion with thedistributors it was realized that the absence of intermediaries between the distributors andtheir bulk customers was leading to loss of goodwill and customers. The channel memberswere of the opinion that the transfer of field staff had been counter productive to the'marketing effort and in the long-term interest of the company, field staff was an essentialelement of the supply chain though they were able to generate only 30% of the total salesin the generic division. They recommended the recruitment of field staff in generic divisionand that the status quo-ante be achieved. The organization hired new junior field staff for'the generic division in October, 1998.The recruitment of field staff led to the increase in the marketing overhead. Since theorganization used cost plus pricing, it was forced to increase its MRP. This increase in priceaffected the sales of generic product adversely as generic are extremely price sensitive.Synergy formulation was now caught in a vicious circle. It neither could reduce prices nordiscontinue the field staff in generic division.Questions1. Give suggestions to reduce the conflict between the two divisions.2. What in your opinion were the problems faced by Synergy generic division after itsbifurcation from the OTC division?3. Do you think restructuring the marketing organization was a wise decision? Justifyyour answer. Cases of Indian Organizations461CASE 10: DILEMMA OF RESTRUCTURINGSynergy Formulations (India) Limited was a public limited company and had been inbusiness of pharmaceuticals and drugs since 1988. The company set up its manufacturingplant at Ghaziabad near Delhi in 1988 having separate units for producing tablets, capsulesand oral liquids.Under its expansion programs an ultra modern state-of-the-art plant was commissionedat Meerut in U.P. The company had its corporate office at Lucknow and registered office atDelhi. Synergy formulations was a premium pharmaceutical company which had anationwide distribution network. The company's annual turnover in 1995 was Rs. 10 crores.In the last three years Synergy had been able to increase its turnover form Rs. 10 crores toRs. 35 crores. Till 1998 the company was organized into two groups; the generic and OTC(over the counter) grouped together and the ethical division which functioned independently.In 1998, the company decided to restructure its marketing orgaand independent divisions in view of its phenomenal growth.Synergy Formulations Limited in late 1997 reviewed its existing marketing organizationstructure with the intention of bifurcating the OTC and generic division. The issue wasdebated at corporate level. While the field staff and majority of managers at corporate levelwere of the opinion that the present arrangement were adequate and other strategies couldbe used to ensure better performance, the MD and one to two per cent of the senior executivesat corporate level were vehemently propagating the reorganization of marketing division.They felt that this would lead to better control of field staff, optimum utilization of marketingresources and the independent groups would function more effectively which in turn wouldimprove the performance of the different divisions.In spite of the prevailing divergent views the MD's decision was implemented and themarketing organization was reorganized into three divisions: generic products, the unbrandedproducts which were sold in bulk to hospitals, bulk buyers and nursing homes; ethicalproducts, the medicines which were sold to users on the prescription of doctors and OTCproducts, those branded products which could be sold without any doctor's prescription.ation into three separatePost RestructuringAs a result of the restructuring exercise all the sales staff of generic divisions were shiftedto OTC division. New zonal and regional managers were hired for generic division. Thecompany decided to discontinue field staff in generic division as it was felt that generic'products were predominantly sold by the distribution channel and the role of field staff waslimited, hence their absence would not affect the sales adversely. The company now maintainedseparate accounts for the different divisions to avoid conflicts. Soon after the reorganization,of the marketing department the corporate office noticed there were frequent clashes anddisputes between the generic and OTC divisions. The causes for the conflicts could beascribed to the following reasons:• The distribution channel (Annexure I) was common for all the three divisions due towhich it was experienced that the OTC and generic were competing with each otherfor orders from channel members who had limited monetary resources. The purchasefrom one división often lead to a cut in purchase from the other division. It appearedthat the divisions were growing at the cost of each other at distributors level. This

Restructuring Restructuring is a type of action taken by a corporate to improve the business by…

1. Give suggestions to reduce the conflict between the two divisions. 2. What in your opinion were the problems faced by Synergy generic division after its bifurcation from the OTC division? 3. Do you think restructuring the marketing organization was a wise decision? Justify your answer.

1. Give suggestions to reduce the conflict between the two divisions. 2. What in your opinion were the problems faced by Synergy generic division after its bifurcation from the OTC division? 3. Do you think restructuring the marketing organization was a wise decision? Justify your answer.

Principles Of Marketing

17th Edition

ISBN:9780134492513

Author:Kotler, Philip, Armstrong, Gary (gary M.)

Publisher:Kotler, Philip, Armstrong, Gary (gary M.)

Chapter1: Marketing: Creating Customer Value And Engagement

Section: Chapter Questions

Problem 1.1DQ

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