Improving price management in washing machine business segment at company a

UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business VO THI MY TRANG IMPROVING PRICE MANAGEMENT IN WASHING MACHINE BUSINESS SEGMENT AT COMPANY A MASTER OF BUSINESS ADMINISTRATION Ho Chi Minh City – Year 2020 UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business VO THI MY TRANG IMPROVING PRICE MANAGEMENT IN WASHING MACHINE BUSINESS SEGMENT AT COMPANY A MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: Dr NGUYEN PHONG NGUYEN Ho Chi Minh City – Year 2020 TABLE OF CONTENT Executive Summary Introduction 1.1 Company background 1.2 Problem finding process Symptoms 2.1 Consolidated operating income (C.O.I) decrease 2.2 The immense situation of price dumping of WM products 2.3 The high rate of dealer’s complaint in WM price in the same distribution channel.10 Problem analysis 11 3.1 Problem identification 11 3.1.1 Initial cause and effect map 12 3.1.2 Potential problems 13 3.1.2.1 Lack of Price Management 13 3.1.2.2 High Growth Requirement 15 3.1.2.3 Competitive Market 17 3.1.2.4 Weak Marketing Strategy for WM 18 3.1.3 Updated cause and effect map 19 3.1.4 Updated possible problems 20 3.1.4.1 Lack of Price Management 20 3.1.4.2 High Growth Requirement 21 3.1.4.3 Competitive Market 21 3.1.4.4 Weak Marketing Strategy for WM 22 3.2 Problem validation 23 Problem justification 29 4.1 Main problem definition 29 4.2 Problem existence 29 4.3 Problem importance (consequences) 30 Cause analysis 31 5.1 Potential Cause 31 5.1.1 Delegating Price Decision 32 5.1.2 Dynamic price promotion 34 5.1.3 Lack of price management process and procedure 36 5.2 Cause Validation 39 Alternative solutions 41 6.1 Alternative solution 1: Redesign the price process 43 6.2 Alternative solution 2: Keep the organization to implement process 46 6.3 Alternative solution 3: Re-organization structure and establish Price Team to implement process 48 6.4 Solution Justification 49 Change plan design 50 7.1 Objectives 50 7.2 Target outcomes 50 7.3 Action plan implementation 51 Conclusion 52 Supporting Information 54 9.1 Methodology 54 9.2 Transcripts 54 10 Appendix 61 11 Reference 62 LIST OF TABLES Table 1: Dealer's Complaint Table 2: Cost for alternative solution Table 3: Cost for alternative solution Table 4: Action Plan (Author synthesis) LIST OF FIGURES Figure 1: Company structure of Company A Figure 2: Sales Performance of WM division Figure 3: Detail Sales Performance of WM division and Consolidated Operating Income Figure 4: Initial Cause and effect map Figure 5: Target Requirement of WM Business Segment Figure 6: Updated Cause and effect map Figure 7: The portion of the direct support scheme Figure 8: The pocket price waterfall for example model Figure 9: The contribution and investment ratio for seven typical dealers Figure 10: The margin leakage for one model Figure 11: Correlation between Retail sales and Net Sales Figure 12: Fishbone diagram of main cause in company A (Author synthesis) Figure 13: The net sales ratio of the typical model in company A Figure 14: The net sales ratio range of the typical model in company A Figure 15: The general analysis process for WM division (Author synthesis) Figure 16: Final cause and effect map (Author synthesis) Figure 17: Redesign price management process (Author synthesis) Figure 18: Price control analysis tools List of Abbreviations C.O.I Consolidated operating income BOD: Board of Directors PM: Product Manager WM: Washing Machine Executive Summary Currently, company A has confronted the decline of consolidated operating income when the sales volume still increases The matter is that the development in sales performance did not accompany by profit growth In the other words, the company has surfaced the trouble of revenue leakages, especially, the matter in price management The purpose of finding the issues that company A are challenging, the author conduct meetings as well as in-depth interview with the Operational Head, Product Manager, Sales Managers, and some customers in 2019 Through the interview of company A’s employees, using the figures and data from the organization, relevant literature, and advice from the Operational Head, the main problem was determined as lack of price management In the direction of lacking price management, three possible causes have been discovered are delegating pricing decisions, dynamic price promotion, and lack of price management process and procedure Following investigating and in-depth interviews, the key cause is identified to solve is lack of price management process and procedure This study focuses on identifying the main problem and finding the key cause, whereby proposing solutions to help company A improve the business results Introduction 1.1 Company Background Company A operates in the electronics industry in Vietnam is part of the Asia manufacturer company with approximately 1,000 employees In Vietnam, it comprises four business units: Home Entertainment, Mobile Communications, Home Appliances & Air Solutions, Laptop, Monitor, and Beauty Care Product Its’ headquarter is located in Hanoi and four nationwide offices in HCMC, Da Nang, Nha Trang, and Quang Ninh Company A’s headquarter have many subsidiaries in all primary market worldwide, and company A is in charge of Vietnamese customers The company is structured by the business segment such as Home Entertainment (HE), Home Appliances (HA), Air conditioner (AC), Laptop-Monitor (ITP), ect… The Home Appliance (HA) is the most critical business in Company A, accounts for the second-largest share of sales, contributed 31.4% sales performance in 2019 In the Home Appliance business, the Washing Machine (WM) segment plays an important role, account for 25% sales performance in 2019 Therefore, the WM business will be the focus of this research Figure 1: Company structure of Company A Five types of dealers: Key Account Management: Dealer G, the principal account dealer with the direction of coverage expansion and penetration The vital purpose of this kind of dealer is to obtain the No.1 market share North Traditional: Responsibility of selling a product to one wholesaler and then distribute to a small shop in the rural area in North and Middle North Modern: In charge of the dealer, which has a large number of stores in the market, which can deliver the products efficiently to some provinces The chain of stores of this kind of dealer helps company A distribute products to regions and thus provide the consumer information, which is useful for identifying customer needs South Traditional: Responsibility of selling a product to one wholesaler and then distribute to a small shop in the rural area in the South South Modern: In charge of the dealer, which has a large number of stores in the market, which can deliver the products quickly to some province The chain of stores of this kind of dealer helps company A distribute products to regions, and this provides the consumer information which is useful for identifying customer needs 1.2 Problem finding process To find out the main problem at company A with Washing Machine business segment, the author implemented the below steps: - Based on the symptoms of the initial report, “sales profit” and “support rate” from the Sales Department - Conducted an in-depth interview with Sales Manager, Product Manager, Salesperson, and key customers in company A to clarify the symptoms and explore potential problems - Referred to the literature to verify and update the cause-effect relationship between potential problems, variables, and symptoms Furthermore, I rechecked the actual situation at company A to fully understand what has driven - Conducted an in-depth interview again to validate the existence of the main problem - Referred the literature to understand the consequences of the main problem (the essence of solving that problem) and continue using the in-depth interview to validate the practical importance of addressing it Symptoms At the meetings with President, Operational Head, Sales Department Team, Cost and Profitability Management Team, the WM business segment was not good profitability from 2018 up to present Secondary data and primary data will be analyzed and verify the existence of company A’s symptoms and find out negative symptoms There are many symptoms for the problem that the company is confronting include the consolidated operating income (C.O.I) decrease, the immense situation of price dumping of WM products, the high rate of dealer’s complaint in WM price 2.1 Consolidated operating income (C.O.I) decrease As the data of primary sales from the Cost and Profitability Management Team and Operational Head, we can see the general overview of the WM’s business from 2017 to 2019 in Figure and Figure Sales Performance of WM Division 250.000 14.000 12.000 196.705 200.000 180.463 10.000 150.000 134.845 8.000 104.889 104.012 100.000 77.467 6.000 4.000 50.000 2.000 - Year 2017 Year 2018 Year 2019 Retail Sales Net Sales Operating Income Figure 2: Sales Performance of WM division Washing Machine Retail Sales Net Sales Operating Income Net Sales/Retail Sales Support Rate COI/Net Sales The year 2017 134,845 77,467 8,562 57.4% 42.6% 11.1% The year 2018 180,463 104,012 11,678 57.6% 42.4% 11.2% The year 2019 196,705 104,889 5,548 53.3% 46.7% 5.3% Figure 3: Detail Sales Performance of WM division and Consolidated Operating Income The retail sales volume indicates the total amount of sales with the list price in case of without deduction for sales Meanwhile, net sales are the actual revenue that the company gains after reduced by incentive support to customers (Net Sales = Retail Sales – Sales Support Promotion) Company A records the actual performance based on the net sales figures The retail sales indicate the total revenue of product earned by sales The net sales are the yield that the company earns after support promotion to customers The support promotion is used by company A to stimulate selling activities that reduce retail sales Therefore, the support rate indicates the total support in percentage with retail sales WM's retail sales performance has been a good trend in growth from the year 2017 to 2019, even though the growth rate was lower in 2019 compared to 2018 In detail, the growth rate of 34% in 2018 compared to 2017, and sales in 2019 increased by 16% compared with the year 2018 While retail sales were growing in 2019, net sales decreased significantly Furthermore, the consolidated operating income was declined in 2019 That reveals the matter that the development in sales performance did not accompany by profit growth The fact is the retail sales were inversely proportioned with the operating income One of the factors influencing profit decline when the high-level raise in sales is the enlargement in support budget for company A's retail chains year by year, especially the last three years from 2017 to 2019 The growth in support budgets for the WM business segment is considered to be of the most worry in the Vietnam subsidiary The data is pointed out that the significant increase in the support budget for company A's retail chain In 2017, the support level was 42.6%; in 2018, the support level decreased little to 42.4% and in 2019 reached 53.3% In general, in the WM market situation; currently, no brand has left the market due to the slump and saturation market In other words, the market still has room for many manufactures could increase the product However, the growth rate was not as strong as in previous years Furthermore, the penetration of the new brand AQUA and the most development is that one more factory established for WM product in Vietnam in Jul 2019 Besides, According to market analysts' estimates, the shift in consumer demand from top-load washing machines to front-load WM due to developed by technology that has shown the high demand from end-users In summary, the growth rate in sales of WM products each year is a good signal for the growing company However, the accompanying is a remarkable increase in the support budget for retailers Furthermore, the rate of the support budgets is going out of control in 2018 ~ 2019 and reaching the highest level of the headquarter corporation break-even point of 50% In other words, the more Based on the given solution, the in-depth interview with Mr.NC and Mr.DK was organized to figure out their expected outcomes following the change plan Detail are list up below: - Manage detail by customers/ models within months - Improve dealer margin management: avoid minus marginal after months - Modify and road map for improving the price-quality for 1% after months 7.3 Action plan implementation In the starting 2020, the Board of Directors has conducted surveys about the problem of the decrease in profits that occurred in 2019 After analysis of overall data and processes in the company, the BOD has many questions for the company’s problem The purpose of the survey was to find the outstanding issues of the company then finding the solutions as soon as possible With the direction of long-term change, the plan will be implemented in 2020 No Action Recruit or promotion a member to Price Leader Recruit or move staff from the current dept to Price Team Training and Coaching Define role and KPI for Team Activities Finding pricing talent in the organization Choosing the correct person with Establishing the department Recruit or move staff from current department Training and coaching for team Setting KPI & development path Objectives Person in charge Finding talent in an organization who can recently have a vision of price management such as Market Strategy, Customer Value, and Transaction Operation request HR recruit employee Support Leader to implement the price function Operation request HR recruit employee Basic knowledge & process The Operation Head & Price Team Clear role & responsibility CEO & Price Team Price Team & Sales Department & Product Manager & Operation Head & BOD Price Team & Relevant Department Meeting with Sales & Marketing & General Management Top management involvement in meeting to set up the process with a relevant department * Set dealer margin for each customer following the management of Price Team *Combine relevant department in the process of price management * Build mass awareness of new processes for a price proposal * Make plan achievement transparent & drive sales forces behavior following the plan * Monitoring and reporting steers the behaviors of the sales force Decision-making framework Making the process and framework to approve the price proposal * Define clear process and responsibilities of Team * The price proposal and discount promotion are followed rules 51 Table 4: Action Plan (Author synthesis) Conclusion The demand for product washing machines still is a huge potential growth in the Vietnam market place The research with the topic “Improve price management in Washing Machine Business Segment at company A” has stated some items as below: First, the author shows the situation with the symptoms of the decline consolidated operating income that the company A WM confronted in 2019 Although company A’s WM sales volume has been increased in recent years, the profits are not equivalent Besides, the matter in company A is the immense situation of price dumping of WM products and the high rate of dealer’s complaint in WM price in the same distribution channel Second, through in-depth interview relevant people in the organization, using the figures provided by the company, besides searching the related literature, four possible problems were identified are the lack of price management, high growth requirement, competitive market, and weak marketing strategy Based on the in-depth interview and all related information from the company, the main problem was determined as the lack of price management Toward the main problem was identified, there are three possible causes, such as Delegating pricing decision, Dynamic Price Promotion, Lack of price management process In increasing competition, effective pricing is one of the most critical levers to raise the profit margin The author has argued that a company without an effective pricing process may not be able to obtain the appropriate profits After analyzing the process, the key cause was determined as the lack of a price management process, and the best solution is redesigning the price process and re-organization structure to implement the process However, to carry out effectively, a set of principles should be considered such as accuracy to maximize the company's profits and prevent price mismatch; completeness to examine internal, external and overall factors; responsiveness to respond market changes quickly and flexibility to frequently watch market dynamic and adapt new circumstances The study presents a framework to effectively manage the pricing life cycle, step by step from price planning, price execution, and analysis With the give solutions, the process to manage prices is 52 implemented by the independence department (the Price Team), the company expects to control price system and revenue leakages, decision-making framework, implement the effective pricing improvement 53 SUPPORTING INFORMATION The interview methodology To investigate the cause-and-effect map, the author chose informants such as the sales team members, sales managers, Product Manager (PM Head), and the PM department, Control Dept (Cost and Profit) to verify the company issue Their perspective was expressed when conducting the interview Transcript Interview First of all, I would like to express my sincere thanks for your arrangement to join the meeting today Nice to meet you Interviewer: Trang Interviewee: Mr CN Interviewer: Trang The purpose is to work together to find out what problems the company is facing Therefore we could find solutions to improve our company to become better Interviewee: Mr CN Not at all, I will try my best to answer your questions with all my experience And maybe your essay will help us to find out some ideas for our company Interviewer: Trang Interviewee: Mr CN Interviewer: Trang Interviewee: Mr CN Interviewer: Trang Interviewee: Mr CN Interviewer: Trang How is the overall business in the company? As I know that the WM segment business has the problem, what you think about this division? The total sales in 2019 are more developed by 18% than 2018 as well as the consolidated operating income (C.O.I) increases by 3.2% However, it is lower than our company's target at 4.2% Regard to WM division, it developed with a growth rate of 8% compared to 2018 Nevertheless, this business was less effective in the past two years, particularly 2019 We can see as the data below, compared other divisions WM has the lowest C.O.I Could you share the reason why C.O.I reduce in 2019 with the WM division? Reasons for this situation of the high level of support: * The sales promotion for dealers is complex and was a short-term and seasonal response to the market Furthermore, I know that PM is lacked control sales promotions which provide benefits to dealers * We have five sales team in charge of kinds of dealers, the price structure of these dealers is different and not unified, leading to price conflict and uncontrollable sales program The consequences are increasing customer's complaints of price, and then they require compensation * We have dealer G with the key role of gaining No.1 market share, so we almost depend on them in pushing products to market and follow them to support sales program From your point of view, what is the most critical problem that leads to C.O.I reduce in WM segment? In my viewpoint, the reason is lacking in control of sales promotions If we can manage well what the sales promotion and support budget to each dealer, as well as balance dealers support, comprehend the situation of all dealers and bring into line the gap between others, we will receive the better results for our company What are the potential causes that lead to the main problem? 54 Interview Interviewee: Mr CN Interviewer: Trang Interviewee: Mr CN Interviewer: Trang Interviewee: Mr CN Interviewer: Trang Interviewee: Mr CN I think three main causes happened in company A Firstly, we had put the weapon to the sales team by allow the sales team to reference the price in the market In the other words, we delegate limited price authority to the sales team The main reason for this process is that we define the sales team have full information on the price of their dealer and the information comes from the market place fluctuation Secondly, the dynamic price-setting also lead to price erosion within the company A We had managed overall the product line and not focus deeply on each model This means PM & Sales Team can adjust the price-setting to each dealer, the adjustment can be increased or decrease depending on the strategy of PM & Sales Team Thirdly, we don't have established the process of price decisions and procedures yet As I can comment on the price from the Sales Team and PM, and no process to verify, double-check, or intervene in the price decision The lack of deliberating with the dependence department makes the price decision arbitrary What is the main cause that leads to the main problem? I believe the main cause of the problem is lacking in the process of analysis I mention the analysis not only for the product line but also for each model in this division Analysis for each customer, actually discount rate for each customer, and we need to analyze by the model to find out the flexibility in our Sales Team The purpose is to limit the price authority of the Sales Team who implement the arbitrary power in pricing Do you have any suggestions to solve the main cause? I think it is essential for our company to carry out the structural framework for the analysis of price management The control system and instrument need to be used, combine it into the price management process to reduce the target discrepancies and information mismatches between management and sales force In your opinion, which is the best solution to the problem in company A Set up the price management process and procedure, limit the arbitrary in price decision-making Also, to control well, we need to dependence the department to implement the process Company A intends to implement the project to deeply focus on the process of price management to improve C.O.I, not just this business segment Interview Interviewer: Trang Interviewee: Mr.DK Interviewer: Trang Interviewee: Mr.DK Interviewer: Trang First of all, I would like to express my sincere thanks for your arrangement to join the meeting today Glad to meet you The purpose is to work together to find out what problems the company is facing Therefore we could find solutions to improve our company to become better I hope we can have a solution for our division to solve the problem I know that the WM segment business (your division) has a problem in C.O.I reduced, what you think about that problem? Interviewee: Mr.DK As the report of our business, we have increased the total revenue and gain an 8% development compared to 2018, but we still face difficulties in business To maintain position No.1 in market share, we also confront the C.O.I reduction $3.9M compared to 2018 In 2019, we raised the budget to support dealers to push products to end-users Interviewer: Trang Could you share the reason why C.O.I reduce in 2019 with the WM division? 55 Interview Interviewee: Mr.DK Interviewer: Trang Interviewee: Mr.DK Interviewer: Trang Interviewee: Mr.DK Interviewer: Trang I think it has many reasons for that situation * With my division, the first reason is the pressure of high growth rate and the mission to secure the No.1 market share For example, we focus especially on dealer G, which has over 1,000 stores, and that helps us to maintain and develop the coverage of our product in the market The growth rate was 175% and 205% in the year 2019 and 2018 As you know, the higher the growth rate, the more budget we spent and the higher level we depend on them * In the competitive market, We’d rather focus on a competitive price strategy Our product has many advantages of benefits However, we positioned price not equivalent because we are afraid of losing end-users * We lack control and deeply analyze the sales promotion and price structure of our dealers We apply the different policies for each dealer, and sometimes we could not control all, and we act the support scheme case by case Furthermore, we have depended on the sales team, which has knowledge and experience in the market The fact is that the sales team makes market research and then we follow the price in the market Also, we feel confused and challenging to manage market price and price positioning From your point of view, what is the most important problem that leads to C.O.I reduce in WM segment? It seems that our lack of price control and sales promotion directs to the reduction in C.O.I, also the pressure of high growth rate requirement What are the potential causes that lead to the main problem? I think it has causes that lead to this matter: (1) we focus deeply on key dealer especially lower price to expand the market share as our business orientation and keeping the advantages in the market place, (2) we don’t have time and effort to analyze all price and sales promotion support to the customer with the complicated discount and the low accuracy in forecast sell out quantity, sometimes, we could not estimate and the uncertainty happened in the period of supporting (3) although we can be flexible in sales promotion support customer, however, in many cases we could lose control What is the main cause that leads to the main problem? I am thinking of the standard for price decisions and procedures that can analyze the dealer margin and P&L by customers and dealers This will help us to observe and control the sales promotion applied for each dealer Besides, price management is especially important for B2B organizations to remain profitable I'm responsible for the division, however, in some respects, I could only control the overall sales budget for my division In some cases, we could not deeply analyze the support for all customers, because of the complicated discount scheme We had targeted different policies for each customer, and it is so fluctuated by each Sales Team Interviewee: Mr.DK Interviewer: Trang Interviewee: Mr.DK Interviewer: Trang Do you have any suggestions to solve the main cause? I think we need the process for price management process and the effects of price change to each customer It helps us orient pricing, manage our sales budget effectively, and make sales more profitable In your opinion, which is the best solution to the problem in company A Interviewee: Mr.DK I think the good way to set up the process for overall product price due to the current erosion Interview Interviewer: Trang Interviewee: Mr TV First of all, I would like to express my sincere thanks for your arrangement to join the meeting today I am feeling good to help you and join the conversation today and try my best to answer your questions with all my experience 56 Interview Interviewer: Trang The purpose is to work together to find out what problems the company is facing Therefore we could find solutions to improve our company to become better Interviewee: Mr TV Hope to have the ideas for company solutions Interviewer: Trang As I know that the WM segment business has the problem, what you think about your division? Interviewee: Mr TV With the dealers under my administration, we found that the difficulty in achieving the target Our business struggles with many hardcore; for instance, we fail target for many months with performance juts 80% to 90%, one customer we handle 50% target However, to sum up, all WM division in the company, it still got accomplishment Interviewer: Trang Could you share the reason why C.O.I reduce in 2019 with the WM division? Interviewee: Mr TV I think many reasons: * Our company focuses on one dealer to gain market share, which leads to the budget we spend so high The bigger the dealer is, the higher the requirement they need, particularly, dealer G We become to depend on them too much Furthermore, our company is lacking in the control price and sales program We provide a budget to customers differently, which makes the gap between them The higher the gap, the higher the level the customers complain We encountered when dealing with the fact of instability price in the market For example, for the same product, we apply a selling price to our dealers that is higher than the prices of other dealers in the same market They responded to us that they had the price list of that product They also asked us for the new price list, and more importantly, when the new price applied, we had to protect their inventory At that time, we must use more budget for those factors if this happens many times a year, the decline of C.O.I will be inevitable Interviewer: Trang From your point of view, what is the most important problem that leads to C.O.I reduce in WM segment? Interviewee: Mr TV It seems that our unbalanced selling price and support policy to dealers and the shortage of control dealers support leads to price complexity in the market and the reduction in C.O.I Interviewer: Trang What are the potential causes that lead to the main problem? Interviewee: Mr TV To my mind, there have many causes for our company such as an imbalance of sales budget for each customer, lack of long-term orientation, lack of price controlling system First, the price of each customer was requested by each Sales Team The unclear discount rate and price setting for customers making the Sales Team confused Second, the fluctuation in price setting and discount rate for products is so high and the change takes place monthly Customers could not follow up and make a long-term direction in securing transactions Third, poor price management and a lack of price control can affect the negative to profit Interviewer: Trang What is the main cause that leads to the main problem? Interviewee: Mr TV In my point of view, the unclear process and procedure for price management is the main cause of this problem of company A Lacking of analysis, lack of control, and flexibility in our company make the loss of this division, in the long-term without control That will happen the same problem in other divisions Interviewer: Trang Do you have any suggestions to solve the main cause? Interviewee: Mr TV I think a good way to improve is a clear process of price setting We should establish the standard for price and limit the dynamic in deduction promotion Interviewer: Trang In your opinion, which is the best solution to the problem in company A 57 Interview Interviewee: Mr TV The best solution is to set the framework to decide the price and balance dealer discount The strategy for the price is needed in company A, not just react to the single price for each dealer Interview Interviewer: Trang Interviewee: Mr VT Interviewer: Trang Interviewee: Mr VT Interviewer: Trang Interviewee: Mr VT Interviewer: Trang Interviewee: Mr VT Interviewer: Trang Interviewee: Mr VT Interviewer: Trang First of all, I would like to express my sincere thanks for your arrangement to join the meeting today Glad to see you The purpose is to work together to find out what problems the company is facing Therefore we could find solutions to improve our company to become better We hope there will be ideas for this issue As I know that the WM segment business has the problem, what you think about your division? We have the successful year 2019, with the achievement of a 175% increase in 2018 Our role is to expand the products to market, especially to gain the No.1 market share, and the excellent way to is to focus on selling to dealer G Now, dealer G has a good coverage store nationwide with over 1,000 stores That is a good channel to provide our product to end-users with increasing product awareness Furthermore, we based on the negotiation with dealer G to support and to exchange in increasing sales performance The increase in sales inquires the higher support rate, our team and PM has accepted that situation for our role in market share Could you share the reason why C.O.I reduce in 2019 with the WM division? I can give you some possible problems: * PM gives sales promotion in the short-term period and changes them frequently * I give you an example of a lack of management and balance dealers' support scheme PM focuses on monthly achievement and supports special promotion to one customer for maybe one or two models The consequence is that customers reduce the price to sell out those products Our customer raises the complaint to me and requires compensation for their inventory I need to solve the problem and response part of their demand to keep the relationship * On the other hand, we depend on the largest dealer to push the product to the end-user To overtake the rivals, the relationship and corporation with them are necessary In some cases, we depend on them and accept their rule to achieve our target Besides the relations, we also use many methods to push sell out, sometimes, setting the price lower than competitors to attract endusers * Another point is that we have a weak marketing strategy and low brand awareness of WM products We can see the advertisement for WM products Our company does not focus on that As you know, we have an advertisement on television broadcast for a TV segment and the KOL for TV, but we not see it for the WM division in some public communication Our relationship directly to end-user is the Facebook advertisement, and it targets to the high-class product such as high-end WM or Twin-wash, not mention the value of premium or basic products which contributes majority to sales performance Therefore, weak marketing and low brand positioning also cause sales less favorable, and we could not set up the right market price * With the advertisement, we choose another way to by ourselves in supporting dealer A to it for us to promote our products and our campaign to end-users Besides, one disadvantage is that dealer A does it for us, but they would rather focus on their brand, not prioritize our product or sales promotion In other words, we give them to budget more than we receive, that is the truth Comparing with competitors, they it by themselves and less rely greatly on dealers From your point of view, what is the most important problem that leads to C.O.I reduce in WM segment? In my opinion, the main reason for the sales problem is the weak marketing process and low brand awareness What are the potential causes that lead to the main problem? 58 Interview Interviewee: Mr VT Interviewer: Trang Interviewee: Mr VT Interviewer: Trang Interviewee: Mr VT Interviewer: Interviewee: Trang Mr VT In my opinion, the cause is the flexibility of our promotion to dealers With some dealers could not achieve the target, we keep supporting them, why don't we cut off or reduce the budget for them According to my key dealer, the more the sales volume achieve and the higher discount rate customer require When we need them to purchase more to cover other dealers, the demand for more benefits besides the existing one In addition, we have complicated selling policies that allow the sales team to fend off difficult periods, but it also has side effects Furthermore, we don't have the clear process and procedure to keep the development stable not only the product line but also each model in this division What is the main cause that leads to the main problem? I think of the flexibility in the discount rate which affects significantly to price range The dynamic dealer support without controlling is the key cause of the problem which the company is facing Do you have any suggestions to solve the main cause? In my opinion, the first solution, we should divide the support rate to each dealer and the rate needs to balance between these dealers Then we control by themselves for the dealers which we follow up In other solution, we could have the process of price management to balance the discount rate, limit the additional support for each dealer In your opinion, which is the best solution to the problem in company A The best way in long-term direction is by implementing the price decision-making process Interview Interviewer: Trang First of all, I would like to express my sincere thanks for your arrangement to join the meeting today Interviewee: Mr QH Nice to see and join with you Interviewer: Trang The purpose is to work together to find out what problems the company is facing Therefore we could find solutions to improve our company to become better Interviewee: Mr QH I hope our company will have the idea of changing better Interviewer: Trang As I know that the WM segment business has the problem, what you think about your division? Interviewee: Mr QH I am in charge of one team that business WM products Regarding our customers, we have gained the last two-year achievement Before me, we had not focused deeply on this customer due to the different channels (wholesales channel) However, now, it has developed significantly Interviewer: Trang Could you share the reason why C.O.I reduce in 2019 with the WM division? 59 Interview Interviewee: Mr QH I think I can give you some reason for that situation: * With the WM division, we not have a proper concentration for this kind of product while we have many benefits for customers The benefits which cannot be conveyed to the consumer for gaining awareness of the company product line In other words, we not position our product well For example, we have many advertisements for the Tivi division on the media, expensive media such as ads in Television broadcast in golden time, whereas we not have any social media ads like that, we have billboards or Facebook only * Furthermore, we focus on premium products such as high-end WM with the highest price and adapt so little consumer needs When I interview our customers, I think that we have not reminded our customers of our products by remembering our advantages benefits In my channel, I have to set up many kinds of ads by supporting small stores to display our products in their space frequently * Besides, as you know, in case we could not build up the awareness of the product to the customer mind, and we need to increase the target pushing product to market, we need to make the price lower than competitors Besides, we can gain and achieve the No.1 market share, a part of the reason for our competitive price in the market * One of the reasons I can mention that our company has a fluctuation scheme for selling products We can imagine something changes quickly in selling price As I know that many brands have a scheme or sales promotion each quarter, we have a sales program for months Sometimes, we could not manage the price in the market and could not follow the changes in our company Interviewer: Trang From your point of view, what is the most important problem that leads to C.O.I reduce in WM segment? Interviewee: Mr QH Interviewer: Trang Interviewee: Mr QH Interviewer: Trang Interviewee: Mr QH Interviewer: Trang Interviewee: Mr QH Interviewer: Trang Interviewee: Mr QH To me, weak marketing and lack of price management are the most important part leads to this situation What are the potential causes that lead to the main problem? In my point of view, there are main causes as follows First, we not have consistent management of prices and level of dealer support, while we have one retail price Second, the support programs depend on a short period, although it reacts efficiently to the market demand and meets customers' requirements, on the other hand, if we could not control well, it leads to the difficulty to track and follow Currently, many customers have different applied time and different policies that lead to imbalances and loss of control What is the main cause that leads to the main problem? The main cause is lacking the price management process and procedure We could not balance the dealer discount that leads to the conflict support rate between the key dealer and others Do you have any suggestions to solve the main cause? The first solution, fix dealer margin to each dealer and control by ourselves The second solution, we need a clear process of price management, balance dealers discount rate In your opinion, which is the best solution to the problem in company A The best solution in the long-term direction is to build a clear process in price setting and price decision 60 Appendix Income statement (Short form) Items Retail Sales DFI Gross Sales Sales Deduction Net Sales 2017 Amt 2018 % Amt 2019 % Amt 134,845 (45,249) 180,463 (59,914) 196,705 (67,863) 89,596 (12,129) 120,549 (16,537) 128,842 (23,953) % COGS 77,467 57,403 57.4% 74.1% 104,012 77,489 57.6% 74.5% 104,889 78,883 53.3% 75.2% SG&A Exp 11,502 14.8% 14,846 14.3% 20,457 19.5% Consolidated Operating Income 8,562 11.1% 11,678 11.2% 5,548 5.3% 61 References [1] Dutta, S., Zbaracki, M J., & Bergen, M (2003) Pricing process as a capability: a resourcebased perspective Strategic Management Journal, 24(7), 615 [2] Frenzen, H., Hansen, A.-K., Krafft, M., Mantrala, M K., & Schmidt, S (2010) Delegation of pricing authority to the sales force: An agency-theoretic perspective of its determinants and impact on performance International Journal of Research in Marketing, 27(1), 58–68 [3] Homburg, C., Jensen, O., & Hahn, A (2012) How to Organize Pricing? 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HO CHI MINH CITY International School of Business VO THI MY TRANG IMPROVING PRICE MANAGEMENT IN WASHING MACHINE BUSINESS SEGMENT AT COMPANY A MASTER OF BUSINESS ADMINISTRATION SUPERVISOR:... matter in price management The purpose of finding the issues that company A are challenging, the author conduct meetings as well as in- depth interview with the Operational Head, Product Manager,... manage the price in the market and could not follow the changes in our company In terms of lack of price management, company A managed the C.O.I according to the business segment, lack of managing