Asia Pacific Electricals

Territory Planning and Management

February 11th 1998 was a great evening and a glorious occasion for the families of G. Ramesh and P.
Muthuswamy, the founders of Asia Pacific Electricals Limited. (APEL), perhaps no less for the dealers
of the company or the work force of its five factories as well. The fortieth anniversary of the companys
founding was a day of thanks giving to customers, vendors, collaborators, well-wishers and the like.
The companys board had met the previous day and adopted a sales target of Rs. 200 crores for FY 03,
a major jump compared to the present turnover of Rs. 85.6 crores.
Two months later the financial year 1997-98 had closed on a happy note. APELs turnover was 18%
higher than its own targets. Its overall profitability target had however gone unmet with a drop of
12% over last year. Sales and marketing expenses had risen disproportionately as had bank interest
obligations. Credit outstanding with dealers had gone up to almost Rs. 6 crores, of which as much as
Rs. 3.2 crores was lying unsettled for over a year and a half.
It was with a view to take stock of the situation as well as to take remedial measures that the meeting
attended by the Executive Director (Marketing and Strategic Planning), General Manager (Sales and
Marketing), Product Manager and four Regional Managers, was in progress. The organisation chart at
Head Office level is shown in Exhibit 1. ED had also invited a marketing consultant to participate in the
meeting. The consultant had carried out a marketing diagnostic study for APEL and submitted his
report a month ago.
The disappointing financial results for the year dampened the mood of the meeting in spite of stellar
sales of 48% above last year and 18% over target. The marketing profitability and cost analysis
uncovered many holes in APELs sales and marketing operations. While Northern Region registered
satisfactory growth both in sales and salesman productivity its outstanding had risen with more than
75% of its outstanding being more than 60 days. Eastern region (at 12% of national sales) had grown
at 16% but the region accounted for outstanding of almost Rs. 1.1 crores out of which almost 86 lakhs
was pending for more than a year. Southern region had grown marginally lower than APELs growth
rate, with an average level of sales productivity per person, but it had incurred an over 50% increase
in sales and marketing expenses and had a 34% increase in outstanding over 60 days. Western region
recorded the highest growth in sales but had the highest outstanding over 90 days.
Nationally Miniature Circuit Breaker (MCB) sales had grown at 26% over the industry growth rate and
had reinforced its leadership position with a 42.6% share of the organised market. They constituted
62% of APEL sales as against 48% last year. The increase was not accompanied by sales of Distribution
Boards. Highly depressing performances was put up by ELCBs, Cubicles and MCCBs. Major shortfall of
these products were noticed in the Southern region.
Geographical analysis revealed that APEL had improved its penetration in the cities of Ahmedabad,
Bangalore, Chandigarh, Chennai, Delhi, Goa, Hyderabad, Indore, Jalandhar, Mumbai and Trivandrum.
APELs sales were much lower in non-metros and it had suffered a major loss in market share in
Anantpur, Belgaum, Cochin, Coimbatore, Kolhapur, Lucknow, Patna, Pune, Ranchi, Surat, Vadodra,
Vijayawada and Vishakhapatnam.
In the discussion on the performance results, V Balachandran, the product manager, pointed to the
inadequate attention being given to non-MCB products by the sales team. As per him, the sales team
was content to sell MCBs because of the dominant position of APEL in the market. GM
(Sales and Marketing) was however quick to intervene and pointed out to the rising potential of MCBs.
According to him MCBs would continue to grow at 40% to 50% for the next three years. He advocated
that MCB sales now deserved a FMCG orientation and hence the development of a proper dealer
network and heavy promotion. The emphasis had to move to brand creation. He suggested a separate
sales cadre of sales officers and sales executives for MCBs. He went on to recommend to the Executive
 APEL Case

Director that APEL should seriously look at diversification into lighting, switches and electric fans once
the dealership network was in place. This was welcomed by the Regional Manager (West) with
guarded assent from the North. South and East however tended to agree with the product manager.
Executive Director pointed out the wide disparity in sales performance amongst the regions. He
attributed it to the failure of some regional managers not being able to motivate and control their
sales team and their territory performance rather than varying potential or geographic size of
territories. Regional Managers were quick to point out the increasing competition especially in the
South. The disparity in the sales tax structure between Delhi and the other states also resulted in a
high degree of territorial infringement by the Delhi dealers especially in Southern and Eastern
states.RM North was quick to point out that the main effect of this was actually felt in Haryana,
Rajasthan and Uttar Pradesh. RM West and South also pointed out the slowdown in new project
activity in their areas. RMs also pointed out the use of unethical practices by competitors especially
in institutional business.
RM South also complained of the growing number of quality complaints especially in ELCBs and
MCCBs. He even complained that there were persistent complaints of dolly free and continuity of
circuits in MCBs. The sales staff had to spend much more time looking into these complaints and lost
out on productive sales calls. He also felt that the prices of non-MCB products were not competitive
and they had lost a lot of institutional sales to new competition.
RM West welcomed the new targets and was confident that APELs dream of meeting the Rs. 200
crores target would be easily met. He however pointed out that the dealers played a very big role in
the sales of APEL products. They would have to be given higher incentives both in terms of discounts
and liberal credit terms to go all out for this target. He indicated that the sales team would have to be
increased by at least 20% since the team was already stretched at these levels.
RM North tended to agree largely with his West and South counterpart. He also added that the sales
staff tended to concentrate most of their efforts on the metros and Class I towns. While this was partly
due to the high potential in these areas, another reason was the poor TA and DA rates offered by APEL
to meet travel, boarding and lodging expenses. He also felt the need to create healthy competition
amongst sales staff through properly designed sales contests.
RM East complained largely of a sense of neglect from Head Office in terms of communication and
actual visits to the region. He felt that the area was developing at a reasonable rate especially in West
Bengal and Orissa. Head Office was not recognising this fact and reacted rather slowly on competitive
rates for tenders resulting in loss of sales.
ED sympathised with the problems being faced by the RMs in the field. He however asked them to
think positively. After all, APEL had been growing at a faster rate than the industry. This was a clear
reflection on the growing customer and channel confidence in APEL. He also pointed out to the RMs
that their responsibility was not limited to an increase in the top line. They were actually profit centre
heads for their respective regions and had to pay much greater attention to the bottom-line and
marketing productivity. He asked them to pay attention to the diagnosis made by the consultant and
sought the RMS help in bringing down the outstanding and expenses in the regions. He also felt that
a lot of the existing dealers were stretching the terms offered to them and were responsible for the
drop in profitability.
He asked the marketing consultant to look into the fact whether APEL should consider restructuring
the sales territories on the lines of geographic contiguity or equal demand potential or any other
suitable method in line with the changing market conditions. The present territorial allocation was
strictly on the basis of political state boundaries. This was largely due to historical reasons with the
major customers being state electricity boards and state government departments in the past.
ED also saw some merits in the GMs proposal. He, however, felt that APEL had a very high brand
equity and market share in MCBs. He therefore recommended that dealer margins be reduced from

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the present 25% to 20%. The resultant savings should be used on advertising, sales promotion and
retail merchandising campaigns. The marketing consultant was asked to look at this aspect also.
The company
Two friends, G. Ramesh, an electrical engineer and P. Muthuswamy, a commerce graduate with a flair
of selling and marketing joined hands to start Asia Pacific Electricals on 11th February, 1958. They
aimed at developing and marketing import substitutes as well as innovative switchgear products with
state electricity boards and electric contractors being their major customers. They commenced
operations with production of switches and fuses from a rented shed in the T Nagar SSI complex of
Chennai. Good quality of their products as well as the focus of the government to build a modern
industrial state provided APEL an encouraging response. It resulted in capacity expansion,
enlargement of the product mix and setting up of offices all over India. APEL was converted to a
private limited company in 1963. A year later it set up a modern factory in Chennai. The company
went public as Asia Pacific Electricals Limited in 1975. Starting with a modest turnover of Rs. 30,000,
the turnover grew to Rs. 10 crores in 1975, Rs 25 crores in FY 1985. The turnover in FY 1998 was Rs.
85.6 crores.
The launch of Miniature Circuit Breakers with German collaboration in 1992 was the turning point in
the evolution of APEL. In 198, it was the largest manufacturer of MCBs in India and offered the widest
range incorporating many innovations in design, breaking capacity, mounting and installation ease
and safety. MCBs were also being supplied to various consumer durable companies including two
MNCs.
APEL had two factories each in Tamil Nadu and Karnataka and one in Andhra Pradesh. Four of them
had state of the art machinery and assembly lines and also ISO 9001 certification. These factories
produced a wide range of sophisticated electrical products which included MCBs, MCCBs, ELCBs,
Cubicles, Fuse links, Motor starters, Distribution boards, push button starters, ballasts, electrical
switches, fittings and accessories.
The founders had believed in joining hands with the best players in the world to provide Indian
consumers with higher value for money through superior quality of products and services. APEL
enjoyed successful and cordial relationships with seven global names in the switchgear industry. It
had two R&D centres which facilitated technology absorption and adaptation of imported
products to Indian needs. APEL had won numerous Export awards and regularly participated in all
major international trade fairs. Exports constituted 10% of turnover.
Marketing and Sales
APELs approach from inception has been to obtain product certifications, approvals and
recommendations. The major thrust has been on brand pull through presentations, seminars, and
customer and electrician education combined with trade push. The role of the sales team
concentrates mainly on demand generation while the distribution network consisting dealers, sub-
dealers and retailers provide order servicing. The APEL organisation structure at the regional and the
branch level is shown in Exhibits 2 and 3.
APELs products found extensive applications in households, factories, railways, electricity boards and
buildings. The primary responsibility of promoting sales amongst all the segments except household
was with the APEL sales team. It was due to this that APEL employed the largest sales and marketing
team in the LT switchgear industry in India.
Government departments, PWD, MES, P&T, Railways and electricity boards contributed to 30% of
APELs sales. A reasonable portion of this was against a DGS&D contract which was signed annually
by APEL through an open tender process. Each of the departments however floated regular tenders

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for their requirements of electrical products. APEL encouraged its local dealers to quote against these
as per company guidelines to take advantage of local supplies to these departments.
Project sales which included clients like NTPC, EIL, BHEL, NIDC contributed to 20% of APEL sales. The
sales process was against tenders which were serviced both by APEL and its dealers. OEM sales were
met directly by APEL. This segment contributed to only 15% of APEL sales.
Nearly 35% of APEL sales came from the household and builder segments. The former contributed to
60% of this and their demand was met totally through the dealer and retailer network. The larger
builders, however, insisted on preferential rates and expected supplies directly from APEL or its
dealers. Smaller builders drew their supplies from dealers/retailers.
Dealer Network
By 1998 APEL had built up a network of 46 dealers, 85 sub-dealers and 24 authorised retailers all over
the country. Almost all the states had 1 dealer with the bigger states having 2 to 4 dealers. These were
supplied material directly from APEL factories. The dealers and sub-dealers in turn also serviced a
large number of electrical goods retailers especially for MCBs and distribution boards. APEL sales staff
did not support the dealers in booking orders from the retailers. Their major role was to ensure
supplies, motivate local electricians and responding to customer complaints. In the last two years
APEL had started subsidising retailer meets by dealers to build a rapport with the trade. APEL provided
dealers with shop boards, glow signs and attractive posters to be displayed at retail outlets. APEL had
very attractive packaging and believed that proper display itself would encourage purchase of their
products. APEL gave total replacement for all defective products.
The commercial package for the dealer included basic discount of 25% on all the products and they
were expected to retain 10% and pass on the balance to retailers. The retention for supplies to sub-
dealers was 5%. In addition, they were eligible to quantity discounts ranging from 2.5% to 7.5%. Most
of the dealers met the 5% slab with only a handful meeting the highest slab. The company also offered
a cash discount of 1.5% for payment on receipt of material and 1% if payment was received within 10
days of receipt of material. The company also ran special schemes for different products at different
times to get rid of slow moving stocks. Its regular and top performing dealers were invited to join the
prestigious APEL Chairmans Club and APEL Executive Director Club, which entitled them to a few
profit enhancing commercial privileges.
The turnover through the dealer network for FY 98 was Rs. 58.5 crores. Although the company did not
keep any exact track of the business done by the dealers with bulk buyers, it was estimated that the
figure was around Rs. 24 crores. The dealers were allowed 5% retention on institutional business to
provide local support in terms of order booking and after sales service. Dealers were also given 2.5%
commission for providing leads which were forwarded to the company and were converted
successfully.
Sales Operation and Management
APELs sales team comprised of 45 persons: 16 sales engineers, 10 resident sales engineers, 8 sales
officers, 4 sales executives and 7 Assistant Managers (1 in East and 2 each in the other regions. The
sales engineer or sales officer was the key link of the company with its dealers and customers. They
were responsible for meeting their own targets as well as dealer targets by calling on consultants,
electrical contractors, architects, builders and panel fabricators. He also coordinated with dealers on
supplies, displays and handling of replacements. The job responsibilities included conducting plant
seminars, electrician meets and training programmes, and participation in exhibitions. Regular
reporting of the fast changing market and competitive intelligence was also a part of their job
responsibility. In recent years there was pressure for development of retailers through dealers
especially for MCBs but there was resistance to this especially amongst the old timers who gave more
importance to the technical side rather than the market development side. They felt that this was

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 APEL Case

mainly the responsibility of the dealers while their job was to promote the usage of APEL products
with bulk buyers. They preferred appointing dealers who had good contacts with institutional buyers
rather than a reputation in the retail market.
APEL believed that only a well-educated and trained sales force could truly serve customers in a
professional manner. It therefore had an eight weeks induction programme for all its inductees. This
included visit to the factories to get proper product knowledge and gain confidence on the quality of
APEL products. This was followed by 1 week of commercial knowledge on tender process, dealer
network, after sales service and commercial terms. A 4 weeks on the job training was then provided
in an area which away from the final area of posting.
The territorial allocation of the engineers was one for each major state with the smaller states being
clubbed. The major reason for this was the emphasis on electricity boards, state government
departments either directly or through the dealer network. The Executive Director also felt that this
provided more or less an equal sales opportunity to all the engineers. The marketing consultant
wanted APEL to look at the changes in the market environment before taking a final decision.
Discussion Questions
1. What are the corporate, marketing and sales strategies which should be drawn up by APEL? What
steps, if any, would you take for increasing the sales of Non-MCB products?
2. What increase would you suggest for number of sales force to achieve the high target? Would you
use the breakdown method or the workload method? Would you suggest market driven sales
organisation or a product driven one?
3. Examine the relative merits and demerits of deploying sales engineers on a state wise territories
versus territories carved out of consideration of:
a. Geographical contiguity of towns of adjoining states
b. Equal demand potential
4. What expertise would you inculcate in your sales force in the changing consumer environment?
Suggest changes in the compensation structure to improve morale of the sales team.
5. What is your reaction to the suggestion of reducing dealer margins for MCBs and diverting the
funds towards advertising and brand building? How would you communicate this to the dealers
and what safeguards would you build into the system to adverse dealer reaction?
6. What changes would you suggest in terms of having a separate sales force for dealer network and
for institutional/OEM business?

This case has been adapted from a case prepared by Dr. J D Singh, Professor of Marketing, International Management Institute, New Delhi.
This case is purely for class discussions and is not meant to illustrate the effective or ineffective handling of an administrative situation.

Exhibit 1
APEL Organisation Chart Head Office

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 APEL Case

CMD
Joint Managing
Director
Executive Director
(Marketing and
Strategic Planning)

Commercial Regional Sales Planning

Product Market Marketing Manager
Sales Heads and
Management Development and (Advertising Publicity
(North, Coordination
Manager Institutional South, West
and Market
Manager Research)
and East)

Exhibit 2
Organisation Chart APEL Regional Offices

Regional Manager

Asst. Manager Asst. Manager

Regional Asst. Manager
(Institutions (Sales Branches
Accounts (Dealer Sales)
and Market Coordination)
Manager
Development) Branch
Branch Branch Branch
Manager Manager Manager
Manager
Chennai Bangalore Hyderaba
Cochin
d

Exhibit 3
Organisation Chart APEL Branch Offices

Branch Manager

Assistant Managers (2)

Sales
Sales Executive Accounts and Resident Sales Subordinate
Engineers/Offic
(1) Admn. Asst. (2) Engineer Staff (1)
ers (4 to 6)

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