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Marketing Basics - Kotler Philip

The organizational structure of the trading apparatus of the company

The basic principles of the trading apparatus include the problems of its structure, designed to ensure maximum efficiency of its activities in the market. This structure is obvious in cases where the company sells one assortment group of goods of the same industry and customers are scattered geographically. In this case, the company will organize its trading apparatus on a territorial basis. If a company sells many different products to many different customers, it may build its trading apparatus on a product basis or by customer. The features of all these organizational structures are described below.

SHOPPING DEVICE, BUILT ON THE TERRITORIAL PRINCIPLE. This is the simplest kind of organizational structure. Each sales agent is assigned a sales territory on the basis of exclusive services, within the boundaries of which it sells the entire range of goods of the company. This structure has several advantages. First, the responsibilities of a sales agent are clearly defined. Being the sole sales representative of the company in this territory, he is fully responsible for all the successes and shortcomings of sales on it. Secondly, this responsibility encourages the sales agent to multiply and strengthen business and personal ties with local market leaders. These connections contribute to both the increase in the efficiency of the trading agent and his personal enrichment. Thirdly, travel expenses are low, as the salesman travels around a relatively small geographical area.

The territorial organization of the sales apparatus is supported by an appropriate hierarchical sales management system. The work in several sales areas is managed by the district sales manager, the work of several sales areas is supervised by the regional sales manager, and the work in several sales regions is supervised by a nationwide manager or vice president of sales.

COMMERCIAL DEVICE, BUILT ON THE PRINCIPLE OF GOODS. Sales agents should be well aware of their products, especially if these products are technically complex, completely heterogeneous, or numerous. This circumstance, coupled with the advent of separate commodity production and the establishment of production management systems for goods, has led many firms to build their trading apparatus on a commodity basis.

However, such an organizational structure can lead to duplication of effort. For example, the American Corporation for the Supply of Hospitals has several branches of goods, each of which has its own trading apparatus. And it may turn out that on the same day in the same hospital several salespeople of the corporation appear at once. This means that several sales representatives of the company travel along the same routes and each one spends time waiting for the reception of purchasing agents from client companies. The appropriateness of the associated additional costs should be weighed against the background of the benefits of a more competent presentation of the product.

TRADING APPARATUS, BUILT BY CLIENTS. Often, firms organize their trading apparatus by customer. This can be a breakdown by industry, by large and ordinary customers, by existing and newly emerging customers. The most obvious advantage of specializing in clients is that each individual group of salespeople can learn much more about the specific needs of their clients. At one time, General Electric Corporation sales agents specialized in goods (fan motors, circuit breakers, etc.). Then they were specialized in markets, such as the air conditioning equipment market and the automotive equipment market, as consumers looked at the problems of motors for fans, circuit breakers and other products from that angle.

The main disadvantage of the trading apparatus, built by customers, is manifested in those cases when it comes to customers of the most diverse types scattered throughout the country. This will mean that each group of sales workers will have to travel a lot.