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Bridging The Gap Between Theory & Practice
Dept of Business Economics, DU
Sep 14th, 2013
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Agenda
• Why This Session ?
• Why Does A Business Exist ?
• What Is A Manager Supposed To Do ?
• Q/A | Feedback
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Why This Session ?
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Our Coursework Spans Multiple Subjects Chosen To Help Build Analytical Skills
MBE Curriculum – 2012 - 14
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Real Life, However Is Vastly Different…
10%
25%
40%
65%
80%
90%
Manager Senior Mgr Gen Mgr VP Director EVP / CEO
0-3 3-6 6-9 9 + 12 + 15 +
"Do"
"Think"
Exp (Yrs)
Designation
Estimates for FMCG Industry Basis Own Experience / Hierarchy / Career Progressions
“Think” v “Do” : How Roles Define Operating Priorities
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Creating A Disconnect Between The Real World & What We’ve Been Trained For
• Actual Usage of B-School Skills Starts 3-5 yrs down the line
• Initial exposure largely operational in nature
– Lack of big picture perspective
• Understanding “business” not a part of business school curricula
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Why Does A Business Exist ?
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Any Business Exists
To Design / Create Goods / Services
Which Can Be Sold To Consumers
At a reasonable Profit
A Constantly Ongoing Cycle…
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An Organization Accomplishes This Through Various “Sub Organizations”
• Sales
• Marketing
• Finance
• Production / Operations
• Supply Chain
• R & D
• H R
Consumer
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So What Do Sales & Marketing Really Do ?
Sales
• Ensures Product availability across markets
• At a reasonable cost
• Generates Revenue
Marketing
• Creates Consumer Mindspace
• Understands Trends
• Drives Innovation & product development
• Owns the bottomline
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This Is How The FMCG Sales System Moves Goods From Factory To Outlets
Factory
Outlet Outlet Outlet
CFA CFA CFA
Distributor Distributor
Typical FMCG Structure : Varies By Industry
Component Financial Reward
CFA % commission on turnover
Distributor% margin on MRP
Outlet
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Its Priorities Being…
• Increasing Distribution – Urban / Rural
– At the right outlets
• Ensuring Product Availability – Through regular market servicing
• Creating Sustainable, Long Term Partners
• Reducing Cost of Operations
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• Measures of Reach : – Numeric Distribution (ND%) : No of outlets reached v/s outlet universe
– Weighted Distribution (WD%) : Reach within high salience outlets of the universe (AC Nielsen)
• Volume Growth (%)
• Market Share (%) (AC Nielsen)
• Revenue Growth (%)
• S & D Cost (% to Sales)
Which Are Measured By The Following Parameters
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What Does Marketing Really Do ?
Sales
• Ensures Product availability across markets
• At a reasonable cost
• Generates Revenue
Marketing
• Creates Consumer Connect
• Understands Trends
• Drives Innovation & product development
• Owns the bottomline
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Marketing Tries To Understand The Consumer, & Helps Create Demand
Consumer Connect
Understand Trends
Drive Innovation
Media : TV, Print , Internet, Social
Consumer Research, Macro Economics, Surveys
New Product Development, Packaging Innovation
Ad AgenciesMedia Agencies
Research Agencies
R & D, Packaging, Operations
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Marketing Evaluates Its Communications Through
–Coverage Measures : • Reach
• Frequency
• TRP
• GRP
– Effectiveness Measures: • Recall Scores
• Affinity Scores
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• 360 ⁰ Engagement With Business Functions
– Sales
– Production
– Packaging
– Quality Control
– Advertising
– Media
• Responsible for delivering the “bottom line”
Marketing Relies On Various Functions To Deliver Its Agenda
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Gross Sales
a MRP 10
b Units Sold 100
c Gross Sales 1000 a x b
Net Sales
d Retailer Margin 10% 100 d x c
e Distributor Margin 6% 54 e x (c-d)
f Net Sales 846 c – d - e
Gross Profit
g Prodn + Dist cost per unit 6 600 g x f
h Gross Profit 246 f - g
Net Profit
i Mktng Expense 100
j Tax 10% 15 (h-i) x j
Net Profit 131 h – i - j
Marketing Delivers The Brand P & L
Ref : “What They Don’t Teach You About Marketing” : Ketan Joshi
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So, How Does this “bridge the gap” ??
• Requirement for Better Business Decisions
• Business Expectation : B- School Graduates should help take “better decisions”
• Better Decisions are similar to scientific experiments – Fact Based
– Repeatable
– Scalable
– Are not Opinions !!
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Better Decisions can result when skills and business understanding go hand in hand
• Data Analysis : – Pareto
• “Should we focus on growing my larger towns, or should I expand distribution in rural areas ?”
– Correlation : • “Is there a strong case to increase price offs during winter to drive sales basis historical
data ? “
• Financial Analysis : – Return on Investment
• “Is my distributor earning the committed ROI ? – What can I do increase it ? ”
– Contribution Margin : • “ Will discounting this low CM product result in higher volume and hence higher NR, or
should we discount the high CM product ?”
“How do all the actions taken by me affect my territory’s P& L ?
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Summing Up
• Current Theoretical Models Explain Business Reality Partially
• “Big Picture” Business Sensitivity Needed To : – Perform current role effectively– Accelerate career progression
• Overview of Sales and Marketing Functions– Similar Concepts underlie other functions
• Marrying Theoretical Skill Sets To Business Expectations Leads to Better Decisions
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What Does A Manager Do ?
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Can we classify these as :
• Establishing Objectives
• Organizing
• Motivating
• Developing People
• Communicating
• Measurement & Analysis
Ref : Winnie The Pooh On Management : R.E. Allen
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Leveraging the B- School Environment To Hone Operational Skills• Approaching Group Projects with the managerial mindset
– Appoint Project Leads– Swap roles – Work with different groups
• Sharpening Communication Skills– Powerpoint presentations :
• Andrew E Abela• Nancy Duarte• Garr Reynolds
• MS Excel : Your Best Friend – Advanced excel usage
• Juice Analytics• www.chandoo.org
• Management By Wandering Around
• Read, Read, Read !
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References
• “What They Do Not Teach You About Marketing” – Ketan Joshi – Macmillan – 2009
• “Winnie – the – Pooh on Management” –Roger E. Allen – Penguin – 1994
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Suggested Reading
The Effective Executive : Peter DruckerHarperBusiness; Revised edition (2006)
Managing Oneself : Peter Druckerhttp://hbr.org/2005/01/managing-oneself/
The Checklist Manifesto : Atul GawandePenguin – 2009
Romancing the Balance Sheet : Anil LambaNetwork 18 Publications – 2010
My Years With General Motors : Alfred P SloanCrown Business - 1990