Consider the sales process in each market (low-end residential, high-end residential and industrial)
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Question 1: Consider the sales process in each market (low-end residential, high-end residential and industrial). How effective are Jindi’s sales and sales management practices in the first two markets? What should they do to be effective in the industrial market? There are two main ways of sales process regarding this kind of product: 1. The Direct Walk-in
2. The Targeted Promotions
The first one (the Direct Walk-in) consists in patrolling on the street to identify new constructions projects. Once recognized the sales lead, the sales engineer walks in and introduces himself and the product to sell. In most cases the potential buyer is an experienced worker without much technical knowledge about HVAC products. In fact, their primary concerns aren’t technical features but, rather, the price, the delivery time and the service. This sales approach is best suited to the low-end residential market. On the low-end market, the accessibility is much easier, since projects are executed by small firms or individuals, whose main concerns are, as mentioned, the price, the delivery time and the geographical proximity (because it’s a regional market). These are the Key Success Factors in this market from which comes the 80% of Jindi’s revenues. Besides, these contractors are free to choose the HVAC vendors, often still during construction or almost near its end. The firm does mostly “Direct Walk-ins” instead of “Targeted Promotions”. The Targeted Promotion is a sales process focused on giving more technical presentations to selected design firms, architecture firms and contractors. This approach is best suited to the high-end residential market in which usually the architectural design firms choose the HVAC vendors during designing projects, before the actual construction. HVAC products are included on the design from the beginning, so delivery time is not a big issue, since there is much time to schedule the manufacture.
The key factors in this market are the connections and credibility, which Jindi lacks, rendering this market very difficult to access. Only 20 percent of Jini’s sales are in this market because Ma is the only person assigned to the “target promotions” and the stronger tief with architectural firms are need. The industrial market is the market that Mu wants to pursue and enter. In comparison with the residential and commercial market, the industrial market is less competitive but at the same time there are higher technical barriers.In this market sales leads are less visible and it involves more technical and sophisticated knowledge. Industrial applications are more complex and hidden throughout the factory. To be effective in this market Jindi should concentrate its production on a very high technical profile (that would mean having its own production facilities). Besides, a good approach to the sales process in this market should be more oriented to “the target promotion”.
3- Regarding the question about the strategic choices of Jindi, we will start by analysing the diferent markets and stating several arguments which will corroborate our final decision, that Jindi should strongly consider moving into the industrial market. First of all we will review why Ma Rui, the managing director of Jindi Enterprises was considering entering into the industrial market. The main reason mentioned in the case study for this change was the fact that the industrial market was known for being more profitable than the residential/commercial one, where the Jindi Enterprises previously focused their products. In the mid-1990s, the government’ startegy allowed more favorable tax incentives, reduced labor costs and an increase in the purchasing power of local residents which stimulated foreign investors to invest in northwest China. Those measures raised investment and led to significant increases in the demand for industrial heat exchange units in the area. So there was a great potential for growth in this specific market.
The industrial market had higher technical barriers since it required more sophisticated and customized engineering and manufacturing. This helps to explain why the industrial market is much less competitive and was dominated mainly by large national players. Another reason why Jindi should move into the industrial market is the higher margin that is possible to obtain in this market since the price of an industrial unit with identical output was roughly more than two times the price of a residential/commercial unit, as stated in the case study. Plus not only would the company be able to assure around 20% to 30% premium over the existing residential units but also the payment cycle time of the industrial units was on average 30 days shorter. Ma considers as well that his company would present an advantage due to his background in engineering and to his vasts abilities. This would allow Jindi Enterprises to offer solutions more efficient and economical. And his sales team could also be considered an advantage due to its highly technical capabilities. Finally the last argument that our group considers that can became an advantage for Jindi in the Industrial market is the solid partnership between Jindi Enterprises and XPVF. The companies have worked with each other for some time and this can be a benefit and it helps the sustainablity and credibility of the Jindi Enterprises.
On the other hand Jindi would face a problem due to the fact that the companies usually stick with vendors of industrial heat exchanger units with whom they already have bonds. We can call this first mover advantage since the existing vendors have already established their connections and the companies rather work with firms that they already know and trust. If any firm like Jindi tries to enter this market they would have to present an advantage either with connections, price or quality in order to attract clients. As stated in the case study, in the residential/comercial market, Jindi Enterprises did not practice a low price strategy, Ma rather stand out due to their efficiency, connections and delivery time. Besides if Jindi shows efficiency and quality, which according with Ma they are able to provide due to his bakground and to his highly technical team, they will be able to increase the companie’ credibility and improve their reputation in this new market. And by doing so they may have a chance to be successful.
There is also a problema regarding the increase in costs, they would face higher incremental cost for raw materials and reengineering the production process plus the cost of the new equipment. This could then be compesated by the increase in the revenues expected by entering this profitable market. Considering the projections of growth at the time and the rise in investments is predictable that the demand will grow at a higher rate for the industrial heat exchanger units than for the residential/comercial units which makes the first one a more attractive market. Ma’s idea was to abandon the existing residential/comercial product lines and to focus only in the industrial heat exchanger units. But Li, the managing director of the XPVF was in favor of having both product lines. The final agreement stated that if XPVF succeed in getting a bank loan to invest in the new production equipment then they would produce the industrial heat exchanger units but they would also produce the residential/comercial ones. Otherwise Jindi would buy the new equipment and they would produce only for the industrial market.
Our suggestion is to produce products for both markets in order to increase revenues by moving into a more profitable market and also mantain the connections and good margins that they already have in the residential/comercial market. If they find that this won’t be possible due to the bank decision about providing a loan or not, then Ma should move into the industrial market anyway due to the several reasons mentioned above. And in this case they would leave the low-end sector with lower growth than the industrial one which looks much more promising. To conclude the managing director of Jindi Enterprises should analyze carefully all the different aspects in this new market in order to be able to know if they would be able to succeed and growing by changing their strategy.