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Role of Strategic Selling in Company Turnaround Efforts - Essay Example

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This essay "Role of Strategic Selling in Company Turnaround Efforts" is about the description is closely aligned with Brandes and Brege’s definition of company turnaround: “a process that takes a company from a situation of poor performance to a situation of good sustained performance”…
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Role of Strategic Selling in Company Turnaround Efforts
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Role of Strategic Selling in Company Turnaround Efforts Introduction Across the globe, a significant number of businesses fail to sustain and exist. Difficult and depressed economic conditions are a top reason for such failure. But there are numerous other reasons such as lack of consumer proximity, poor internal processes, competition from foreign markets etc. for company failure. Most of these reasons contribute to loss of customers, market share and declining sales and profitability which eventually lead to the failure of the operation. In the face of such factors, companies may experience declining performance. If they are to turnaround and rebound from the brink of failure, strategies targeted at improving performance should be implemented. As per Robbins and Pearce (1992) company turnaround concept is explained and operationalized as “performance decline followed by performance improvement” (Hacker & Hacker 1998, p. 2). This description is closely aligned with Brandes and Brege’s definition of company turnaround: “a process that takes a company from a situation of poor performance to a situation of good sustained performance”. (Brandes and Brege’s 1993, p. 92). It is a combination of practices and procedures driven by sharp and relevant strategies that can initiate and achieve company turnaround process. Role of strategic selling is often neglected or not given its due recognition in most turnaround attempts. This paper will analyse the various practices and methods within strategic selling function which contribute to a company turnaround effort. 2. Overview of turnaround strategies When an organisation attempt to improve performance within a turnaround phase, there is no single strategy that is being deployed. There is often a collection of strategies which is harnessed towards this purpose. As per Haker & Haker (1998) it is often difficult for firms to isolate and identify one single contributing factor or a single player in this rescue mission. But, much of the responsibility lies in the sales and marketing force. Haker & Sharma (1999) identified that “sales policies and procedures were crucial” for a successful turnaround strategy and generating the much needed revenue in the performance improvement. Many scholars identified that firms with marketing orientation driven by a customer focus is more adapt and capable of sustained performance (Slater & Narver 1994; Carson, Cromie, Mcgrowan and Hill, 1995). Successful turnarounds are heavily dependent upon the quality of sales strategies. Strategic selling can be seen as an extension of the marketing concept with elements such as strategic planning, consultative selling practices and relationship managements based on partnering practices (Manning & Reece 1992). The effectiveness of such strategic selling can be attributed to the close proximity to the customers through long term oriented relationship management as well as consultative selling which takes in to account the customer’s requirements. To harness the contributing factors towards success, the turnaround effort also requires strong leadership within the sales function. As per Haker & Sharma (1999) and Jacoby (2004) leadership is a crucial element in the company turnaround process. 3. Importance of Strategic Selling for Turnaround Importance of strategic selling has many facets. One being it gives a strategic focus to the sales activities than merely selling on a functional manner. Most often, in industrial organizations with a strong engineering orientation and mentality, the “centers of excellence” are the engineering departments. They operate with a strictly inward approach, capitalizing on their own internal competencies while forgetting the needs of the customers they are meant to cater. The selling function and the personnel who perform them are often neglected from being included in the strategizing sessions, and their contributions of ideas and suggestions which are reflective of the customers are also disregarded. Such scenarios within organizations are key contributors to the performance decline and loss of market share to competitors operating locally and from foreign markets. This is why; strategic selling can play a crucial role in the performance improvement stage of the turnaround process. By implementing strategic selling strategies, the company can correct some of the internal orientation errors mentioned above which would have contributed in the first place for the decline. By taking a strategic approach to selling, there can be improved focus and alignment of sales function with the overall strategic vision. It can also contribute to improved account management, systems contracts, improved focus on the key account management and relationship development with a long term orientation (Heise & Read 1994). It is only with such strategies within the sales function that the company will be able to clearly establish the needs of the key customers and align the internal value chain to meet and deliver these needs efficiently, effectively and at a profit (Haker & Haker, 1998; Thomson & Strickland, 2002). Study results of Haker & Haker (1998) indicated that those firms which succeeded in the company turnaround process had a strong sales function which was fully involved in improving the company performance. Furthermore, the strategic approach taken by the selling function in these successful firms contributed greatly to developing and implementing revenue generating strategies and market expansion strategies which achieved “market management and insulation.” Market management and insulation process referred to a desired status in which the firms managed their markets in such a manner which insulated their position form competition and decline which contributed to successful sales and profit generation and overall company performance (Haker & Haker 1998). 4. Elements of an Effective Sales Strategy Haker & Haker (1998) identifies 4 key elements of strategic selling which needs to be given consideration in order to achieve effectiveness of selling function. These include environmental comprehension, market selection, innovative market offers and managed relationships. By developing, implementing and managing these four elements and its included activities, sales function can spearhead a company turnaround effort, as proven by some of the companies that successfully improved their performance from the brink of disaster. 4.1 Environmental Comprehension Environmental comprehension is the key to any company that wishes to be ahead of competitor in terms of anticipating and meeting customer needs as well as capitalizing on new business opportunities. It also allows for building competencies and safeguards to circumvent emerging threats from the environment. Such comprehension can be achieved through information collection and systematic environmental scans to facilitate the strategic direction of the company. Sales people can play a key role in the information collection as they are constantly in touch with the customer and the market. What is important is that the organizations stay receptive to the information which the field sales personnel bring in to the company. Often it is the case that customer suggestions, customer complaints and various other market information brought in to the company by the field sales personnel is overlooked with a scant consideration. But those companies which succeeded at improving their performance ensured to listen to the messages conveyed by the sales staff. These organizations sought in-depth industry knowledge, as well as market information to enhance their environmental comprehension. Such information searches focused on identifying market needs, market mechanisms and the developing needs of potential customers; some of which were yet to be uncovered by any one in the industry. It also allows for being comprehensively aware of markets, their potential and to select priority markets based on their revenue and profitability potentials (Haker & Haker 1998). In the Haker’s study on company turnaround and strategic selling, it was found that those firms who succeeded “let the light in” instead of choosing to operate in the dark. There were increase number of field visits and engineers and production staff worked side by side with sales personnel in the field, “listening and learning” what the customer needed (Haker & Haker 1998). “Market information collected by service men, design engineers, sales people, distributors, executives and directors included changing customer needs, changing buyer behavior, complaints and suggestions for improvements on own and competitor equipment, developing and dead markets and pertinent and timely tip offs on contract sales opportunities” (Haker & Sharma 1999) Benefits form implementing and managing the “environmental comprehension” strategy promoted through strategic selling is many folds. Some of the key benefits included changes in outdated mindset, opening up to new thinking throughout the company, identifying customer needs and involving many personnel from all over the company. As per the study of Haker & Haker (1998) this helped to communicate the customer needs throughout the company and make it the core mission of the whole operation. This allowed the companies to exert a cohesive and coordinated effort towards achieving its targets of meeting customer needs profitably. This cohesiveness and coordinated synergy is similar to what is advocated by strategic management theory of value chain management (Porter, 1996). 4.2 Market Selection Selecting markets in which to operate in and to expand to is a key decision within a firm’s strategic planning. Heavy dependence on one or few markets for a substantial share of the overall sales is a high risk strategy. In today’s volatile market conditions, changes in consumer needs competition from foreign firms and obsolesce of current products can all lead to rapid loss of markets which can place companies in major crisis situations. Under a strategic selling approach, professional sales force will “develop a balanced portfolio of markets in order to provide stable and growing revenue streams for the company turnaround effort” (Haker & Haker 1998). Under the requirement of managing a balanced portfolio of markets, there are few considerations which need to be addressed. These include: Striking a balance between domestic and foreign markets Market selection and development process Innovative Market offers 4.2.1 Domestic vs. Foreign Markets With the globalization, the markets around the world have opened up and the foreign trade has escalated. This has been facilitated by lifting of quota and duty restrictions as well as relaxed FDI policies. Countries such as China and India have large domestic markets to give vast economies of scale allowing them to compete fiercely in foreign markets. In such scenarios, domestic markets are no longer insulated from competition. Reliance on a slice of the domestic market is therefore a very precarious decision for any company today. Expansion of profitable, high potential foreign markets will provide firms with not only new income streams but also increased volumes to bring down cost of productions and spreading out of overhead expenses (Thomson & Strickland 2002). However, losing sight of profitable local market in the euphoria of developing foreign markets was not what the successful firms did in their turnaround effort. While the expansion process in to new markets abroad continued, the local market was sustained through committed and focused strategic sales efforts of seasoned and well experienced sales staff (Haker & Haker 1998). 4.2.2 Market Selection and Development Market selection and development is the next important consideration in the market selection strategy. Here, the need for organizational discipline in selection and prioritization of target markets from. Companies can not act in ad-hoc manner when selecting and developing potential markets. The alignment of these markets with the overall strategic intent of the company and the resource allocation implications of the choices must be considered. Some of the failed firms left this decision to ride on outside forces such as foreign currency fluctuations which added to their fatalistic approach to business (Haker & Haker 1998). Market immersion was another critical contributing factor to successful market selection and development strategy. Having selected a foreign market, the strategic selling approach identifies the need for total immersion of the sales force in the market in order to understand its customers, their needs as well as market conditions. Haker & Haker’s (1998) study cited that “flying” visits and opportunistic sales approaches were not fruitful in foreign markets. Having company representatives in the foreign markets on full time basis and supporting the expansion process is one of the key contributing factors for proper market development. Market commitment is another critical contributing factor needed in selecting and managing markets. Only a committed sales force cannot manage new market expansions. All personnel, from the CEO to the senior managers and to middle managers and staff must be committed towards supporting the market development process. The business secured by sales force must be served with total quality and satisfaction and supported by field service personnel for after sales support. 4.2.3 Innovative Market Offers To win new markets and sustain them, companies need to serve their customer needs better than competitors. The key to success here lay in finding innovative, creative and effective market offers for the customers. Haker & Haker (1993) study found out three important components of ensuring the ability to offer innovative solutions to customers. These included customer proximity, company commitment and skilful selling. Customer proximity is an extension of the marketing orientation where companies operate to cater to what the customer needs (Armstrong & Kotler 2000). Companies which are close to their customers, listen to their customers’ problems, their issues, their needs and their future plans. Then based on this information the company can not only identify the customer needs which require to be fulfilled but even anticipate their future needs. Company Commitment is also a prerequisite if companies are to make innovative market offers ahead of competition. To embark on innovation, a firm and its entire team must be committed to understanding the customer needs. They must not only listen to what the sales personnel convey to them but be involved in the understanding process as well as innovation process themselves. As per the Haker & Haker (1998) study, the companies which succeeded in the turnaround efforts were totally committed to offering innovative market solutions to its customers. Finance people worked closely with customers to establish feasibility of projects and targeted production costs while engineers worked on site with customer to identify their individual needs. Trouble shooting and after sales services had top priority commitment of the company. Such involvement of personnel gave valuable insights in to customer needs and problems, new product opportunities as well as contributed to strengthening the confidence, customer placed upon the company. Skillful selling was another important component of the innovative market solution strategy. Even if the company selected the right market and was fully committed and developed innovative market solutions, these had to be sold to the customers skillfully. This is where the caliber and capabilities of the sales force comes to the forefront within the company turnaround process. This is the clinching point of the entire operation and involved few key elements to make it successful. Haker & Haker (1998) identifies some of the elements involved in skillful selling to include “hurting for the customer”, thinking like customer and finally reaching agreements through discussions and negotiations. In order to ensure that the sales force engaged in skill full selling, it was necessary that more autonomy and authority was given in the sales contract negotiation process to the hand of the sales force. CEO of Mitsubishi Europe, Stephane Jacoby too reiterates the need for allowing such autonomy and empowerment in a company turnaround process stating “ I never could handle a 3 billion euro or 4 billion euro enterprise just being the leader on the top and making every decision. It is all about delegation and empowering people” (Jacoby, 2004). By signing long term supply contracts, the skillful selling strategy not only ensured current sales revenue but insulated future sales as well. This lays a vital foundation for further company commitment on customer support and relationship building investments within a framework of assured sales through supply contracts. 4.3 Relationship Management Finally, having got the customers to buy the products and services, this needs to be sustained over long-term. This can only be achieved through managing relationships effectively. There has been much focus on relationship marketing approach (Armstrong & Kotler, 2000) over the last decade due to the importance of sustaining sales through well managed customer relationships. Relationship management involves few key steps which include following: Committed relationship management of overseas markets with reciprocal visits between customer and company at different levels of organizational hierarchy. Total customer support where all functions synergizing towards serving customer needs. Departmental and individual accountability for company performance where it is taken up as a leaning process and a challenge to achieve organizational performance targets. Relationship management process being spearheaded by a team of high caliber Key account management team. 5. Managerial Implications Haker & Haker (1998) identified several managerial implications of strategic selling approach and following is an analysis of the relevance of these. There is the need for sales force to develop skills in collection, analysis and dissemination of market data. This has much relevance for the companies as such skills in data and information management adds value to the information collected and also facilitates the market awareness and environmental comprehension needed. By providing the sales force with proper training, equipment and facilities such as wireless connectivity, lap tops, palm tops and black berries the information gathering and dissemination process can be improved. Training them in the use of data management systems which the company can implement such as Enterprise Resource Planning (ERP) systems, Intelligent Systems, Management Information Systems etc. sales personnel can update the information from various markets they are based in. Secondly, the reliability of the sales team information should be very high in order to maintain the senior management trust in their information and their suggestions. New market opportunities should be responded to speedily but the ability to trust the sales force plays a crucial role in this response process. High caliber sales personnel are strategic as they represent two sides of the vision of being preferred supplier position. While they should have the power to make the CEO’s listen to what they hear from the market, ensuring the information accuracy is a key responsibility of the sales force. New overseas market development needs effort, commitment and investments which are heavy. The selected personnel should have proper cultural adaptation skills in addition to their sales skills so that they can settle in to new markets and concentrate on the development process without having to consider their inabilities to adapt to cultural differences in new markets. The sales teams needs multi skills and well horned abilities in account development and relationship management. The relevance of this managerial implication is very high for turnaround companies. Their decline may be partially attributed to lack of skilled sales personnel in their organizations supported by the fact that these companies did not give room for improvement and development of caliber within sales forces. To facilitate the turnaround effort, CEO’s may need to revamp their key personnel as done by the Mitsubishi Europe CEO in his turnaround revamp. The fact that the turnaround CEO requiring the complete commitment of the sales team indicate how important it is to have a well motivated and dedicated sales force in order to propel and drive the turnaround effort. If the turnaround task has been entrusted to a new CEO, he or she may need to make changes and appoint new personnel to spear head the turnaround process which the CEO can place trust in. The team should back the leader’s efforts and vision completely with total commitment to achieve the targets. Lastly the proposed strategies indicate the need for embracing customer centric approach. While such customer orientation had become a survival essential for consumer goods markets, the engineering and industrial businesses are yet to realize this in some cases. The findings by the studies cited indicates the need for moving away from industrial, engineering and production orientations and embrace a customer orientation for survival and development in the new market conditions with intensified global competition and market pressures. References: Armstrong, G. & Kotler, P. (2000). Marketing: An Introduction. 5th ed. Singapore: Person Education Inc. Brandes, O. and S. Brege (1993), "Strategic Turnaround and Top Management Involvement: The Case of ASEA and ABB," in Implementing Strategic Processes: Change, Learning and Co-operation, P. Lorange, B. Chakravarthy, J.Roos and A. Van de En (eds), Oxford, UK:Blackwell Business, 91-114. Carson, David, Stanley Cromie, Pauric Mcgowan, and Jimmy Hill (1995), Marketing and Entrepreneurship in SMEs, Herts:Prentice Hall. Harker, M. & Harker, D. (1998) “The Role of Strategic Selling in the Company Turnaround Process.” Journal of Personal Selling & Sales Management, Spring 98, Vol. 18, Issue 2 Harker, M. & Sharma, B. (1999) “Leadership and the company turnaround process” November. Hise, R. T. and Reid, E.T. (1994), "Improving Performance of the Industrial Sales Force in the 1990s," Industrial Marketing Management Vol. 23, p. 273-279. “Implementing a turnaround at Mitsubishi.” (2004) Interview with, President and CEO of Mitsubishi Motors, Europe. Stephan, Jacoby. Strategic Direction Volume: 20 Number: 4 Manning, G. L. and Reece, B. L. (1992), Selling Today: An Extension of the Marketing Concept, Needham Heights, MA:Allyn and Bacon. Porter, M. E. (1996). “What is strategy?” Harvard Business Review, November-December, p.61-78. Robbins, D. K. and J. A. Pearce II (1992), "Turnaround: Retrenchment and Recovery," Strategic Management Journal, 13,287-309. Slater, Stanley F. and John C. Narver (1995), "Market Orientation and the Learning Organisation," Journal of Marketing 59, (July), 3, 63-74. Thomson, A. A. Jr. & Strikland, A. J. (2003). Strategic Management Concepts and Cases. 13th ed. New York: McGraw-Hill Publishing Company Ltd. Read More
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