CASE 4-1 TELIN, INC Outsourcing Sales through Manufacturers\' Reps elin is one o

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CASE 4-1 TELIN, INC Outsourcing Sales through Manufacturers' Reps elin is one of the world's largest manufacturers employees. They're independent agents working of semiconductors, also known as computer for themselves-not us. To me, it's no different chips. Telin is an international company with than outsourcing our payroll process or janitorial service, except that salespeople are much more over $30 billion in annual sales revenue, just under 100,000 employees, and a ranking of about 50 in the Fortune 500. Since its start in 1980, Telin has sold its semiconductors to the leading manufacturers of personal computers (PCs). Telin has sold these prod ucts through its own employee salespeople, who are highly educated and trained electrical engineers. important to our success. Pam Mudge: You can call it "outsourcing" or whatever you want, but I still think it's the best - idea Jim Pierce: Well, I think it's a terrible idea. Our salespeople are our link to the customers. These members of the Telin sales force pride thenm selves on the close relationship they have built with Cstomers form their impres their customers, the PC makers. e salespeople. I would hate to leave that to some manufacturers' rep who does not even work for us However, after years of phenomenal growth, the PC market has begun to level off. This has led Telin to develop new lines of more specialized products. These products still use the same tech Pam Mudge: What do you think we should Jim Pierce: I think we should hire 20 salespeo exclusively on the new product lines nology found in Telin's computer chips, but they pl to focus are much more versatile. In other words, they can be integrated into a wide range of products other than PCs. The new Telin chips can be used in cell phones, video game machines, toys, and a variety Our own captive product-specialized sales force is what we need. They could focus on developin relationships with our new set of clients. Buildin and maintaining those relationships was the key to our success with the PC makers. of Internet data processing products Pam Mudge: Yes, but it took a long timet The following exchange is between two Telin sales executives: Jim Pierce and Pam Mudge. These executives disagree as to how to organize the sales develop those relationships with IBM, Dell, and all the other PC manufacturers. Our brand nam means next to nothing in these new markets, an we need to move fast. There are manufacturers reps that have already established relationshi with the companies in this new market. We hav very little time. Hiring and training a whole nev force that will be selling these new products. Jim Pierce believes Telin should sell the new line of products through its own product-specialized sales force (i.e, he wants Telin to hire a separate roup of 20 salespeople that would exclusively sales force could take a couple of years. sell the new product line to the manufacturers of cell phones, etc.). Pam Mudge, on the other hand Jim Pierce: We'd hire salespeople with back the new line could be sold more elffec- catch on pretty quickly grounds in electrical engineering-they shoul tively and efficiently through manufacturers' reps Jim Pierce: You want to outsource the sales Pam Mudge: Did you ever think about hov much it would cost to hire and then train all thos function? You're crazy! Pam Mudge: Well, I think we should use engineers? I mean, they'd probably each expect ufacturers' reps to sell our new products-I compensation package worth well over $100,00 man didn't really think of that as "outsourcing" sales apiece! Training them would cost tens of thou ' reps an ed sands of dollars more. Manufacturers Jim Pierce: But that's exactly what you're proposing. Manufacturers' reps are not our experienced salespeople that are already train

Explanation / Answer

Telin using its own specialized sales force

Strengths:

1. Telin is a $30 billion company with a highly specialized and trained workforce. While 20 new salesmen would require training, being in the company and witnessing the product development would equip Telin salesforce to market the products better.

2. If the new sales-force is successful in penetrating the market, a specialized team will be created within the organization that becomes the point of contact for new clients/customers. Associated with the company's payroll would gives clients more confidence and a dedicated sales-team also ensures after sales support, which is critical in the long-term.

Weakness:

1. Telin is no longer a high growth company and it needs to control spending. The recruitment of 20 employees in the sales force would incur substantial cost besides the cost of training the employees.

2. Telin still needs to see the response for its new product in the market. If the response is positive, the recruitment of new employees might look like a good decision. However, if the response is lukewarm, the strategy will backfire.

Telin using Manufacturers' Reps

Strengths:

1. The company has a new product and the new product brand has no reputation in the markets. To make early inroads in the industry is critical for the brand to gain traction. The manufacturers' reps have established contacts with companies and they can leverage on those contacts to sell the new product.

2. The manufacturers' reps are selling several prroducts to the same client and other products are not competitors. They are rather complements to the company's products. This might enable the reps to sell the products a a bundle and help Telin make inroads.

Weakness

1. Manufacturers' reps are selling the company's products with several other products. They will probably not be in a position to explain the strength of the products as compaared to someone from the company who has witnessed product development or received extensive training on the product.

My View:

I believe that Manufacturers' reps can be initially used for selling the products. The key factor is the cost and time involved to recruit a new sales force and provide intensive training. It also remains to be seen if the product is aaccepted in the market and the potential revenue it can generate. In these uncertain circumstances and at a time when the company's growth has stagnated, it makes sense to try something different and outsource.

Further, Manufacturers' reps is not a risky experiment considering the fact that they have established customer relations and can potentially sell the company's products as a bundle with other products. End customers might see more value in this as compared to the company's product being offered on a standalone basis.

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