Ohmeda Boc
Executive Summary
With the transition to exclusively selling medical equipment, Ohmeda must incorporate more direct and specialized selling into its channel mix. Given the aggressive revenue growth targets, the best channeling mix for Ohmeda is 75% direct sales / 25% dealer sales and 75% specialization / 25% geographical. This optimal strategy will allow Ohmeda to increase revenue, meet target customer needs, challenge competition, and capitalize on the strengths of the Ohmeda products.
Business Strategy
Ohmeda's business strategy is to no longer carry medical supplies and gas products, yet to increase equipment sales revenues by an average of 11% each year for 5 years. The current channeling structure consists of 50% Dealers and 50% Direct sales representatives arranged 100% geographically by region (Exhibit 1). This structure is both inefficient and ineffective, and must be adjusted to meet the change in product mix and aggressive sales goals. Deficiencies in the current channel include: overlap of dealer and direct representative sales, a disproportionate number of sales hours spent in rural hospitals, and the inability of sales reps to communicate the specifications of the technologically advanced products to medical specialist decision makers.
Channel Structure
Currently, the dealer and direct sales force are overlapping in their customer sales. Ohmeda's current sales structure is designed for 50% of the revenue to be generated from direct sales and 50% of the revenue to be generated from dealer sales. When the 30% direct/dealer overlap is removed, however, direct sales actually contribute to 72% of the revenue while dealer sales contribute only 28%. In some instances the direct sales representatives are working with dealers in order to reduce the hassle of transporting equipment. Dealers are then able to book the sale, reducing Ohmeda's revenue from an average of 6% below list price to 21% below. This overlap also reduces the efficiency of
With the transition to exclusively selling medical equipment, Ohmeda must incorporate more direct and specialized selling into its channel mix. Given the aggressive revenue growth targets, the best channeling mix for Ohmeda is 75% direct sales / 25% dealer sales and 75% specialization / 25% geographical. This optimal strategy will allow Ohmeda to increase revenue, meet target customer needs, challenge competition, and capitalize on the strengths of the Ohmeda products.
Business Strategy
Ohmeda's business strategy is to no longer carry medical supplies and gas products, yet to increase equipment sales revenues by an average of 11% each year for 5 years. The current channeling structure consists of 50% Dealers and 50% Direct sales representatives arranged 100% geographically by region (Exhibit 1). This structure is both inefficient and ineffective, and must be adjusted to meet the change in product mix and aggressive sales goals. Deficiencies in the current channel include: overlap of dealer and direct representative sales, a disproportionate number of sales hours spent in rural hospitals, and the inability of sales reps to communicate the specifications of the technologically advanced products to medical specialist decision makers.
Channel Structure
Currently, the dealer and direct sales force are overlapping in their customer sales. Ohmeda's current sales structure is designed for 50% of the revenue to be generated from direct sales and 50% of the revenue to be generated from dealer sales. When the 30% direct/dealer overlap is removed, however, direct sales actually contribute to 72% of the revenue while dealer sales contribute only 28%. In some instances the direct sales representatives are working with dealers in order to reduce the hassle of transporting equipment. Dealers are then able to book the sale, reducing Ohmeda's revenue from an average of 6% below list price to 21% below. This overlap also reduces the efficiency of