Ingersoll Rand: Case Analysis

INGERSOLL RAND
CASE ANALYSIS
Submitted by-
Sumit Anand
STATIONARY AIR COMPRESSOR MARKET
 IR has a market share of 30% of $660 million market others at 10% to 12% market share.
 IR is the leading supplier in all segments except small recips for DIY market.
 Performance and Operations:
 Company level sales, 1985: $2.6 Billion
 Manufacturing: 16 Countries
 Sales offices: 40 Countries selling in total to 120 countries
THE DISTRIBUTION SYSTEM
 Direct sales force
 Responsible for sales of Recips > 250 hp, Rotaries > 450 hp and all centrifugal
 Manufacturer’s Representatives (for retails)

 Responsible for selling Do-It-Yourself products
 5 MRs catering to retail chain stores and catalogue houses
 Independent Distributors
 Responsible for sales of Recips < 250 hp and Rotaries < 450 hp
 Air Centers
 Responsible for sales of Recips < 250 hp and Rotaries < 450 hp
 Distributed Ingersoll-Rand products only
CENTAC-200
 Product Specifications:
 200 hp centrifugal machine (Medium range)
 Provides “oil-free” air unlike recips and rotaries
Channel Options
Independent
Direct Sales Force Air Centers
Distributors
Recips > 250 hp,

Recips < 250 hp & Recips < 250 hp &
Product Type rotaries > 450 hp & all
rotaries < 450 hp rotaries <450 hp
centrifugals
Sales revenue
30% 35% 20%
generated (%)
Cost to company 11% 21% 19%

Experience with
High technical support none none
Centrifugals
COMPARISON OF CHANNELS FOR CENTAC-200
Independent
Direct Sales Force Air Centers
Distributors
1.Increased revenues and

1.Minimal sales cost 1.Increase in revenue and
profits
2.Better service capability profits of distributor
2.Higher profit margins for I-
Advantages 3.No training required 2.Established network
R compared to independent
4.Addition to shrinking 3.Attention to Centac-200
dist.
product line 4.Easy accessibility
3.Attention to Centac-200
1.Low profit margins for I-R

1.Only 19 air centers
2.Intensive technical training
1.Partial attention to 2. Less penetration in
required
Centac-200 market compared to
Disadvantages 3. Lack of attention to other
2.More time to deliver and independent dist.
compressors
service 3.Intensive technical training
4.Less I-R control over
required
distribution
RECOMMENDATIONS-1
 Direct Sales category

 It can be inferred that previously only sales force has the experience of selling centrifugal type of air compressor
and hence Centac-200, which belongs to the same category can be served best only by direct sales force.
 For Centac-200, technical support is a must. Direct sales representatives are already technically trained. This will
save time, cost and provide faster results when compared to training the distributors.
 As Centac-200 will be the first oil free machine of Ingersoll-Rand, it makes more sense to use sales force channel
so as to provide better services to this new segment as it is more preferred by industries like food processing,
electronic assembly and pharmaceuticals where other channels won’t be effective
RECOMMENDATIONS-2
How would distributors benefit from Centac-200
 Full Partner Program the distributor could earn commissions for referring enquiries to the direct sales rep and
on conversion they could earn a 2% commission on a lead and 5% in case of active involvement in sales.
 New product with new market segment to penetrate with 200 hp category,
 Main advantage of Independent Distributor is that they are very high in number, vast reach.
RECOMMENDATIONS-3
 Yes nature of the product and buying behaviour are the reason of filtrations of channels and is done to
minimize overall cost
 Uneconomical to sell machines worth below $5,000 through a direct sales force
 Complexity due to the differences between compression technologies
 Buying behaviour
 Large compressors
 Medium and Small compressors
 Small compressors (< 5 hp)
RECOMMENDATIONS-3
 Buying behaviour
 Large compressors
 Detailed specs, high technical expertise
 Complex service requirements
 Medium and Small compressors
 Less demanding specifications, less complex behaviour
 Off-the shelf availability a priority to meet tight delivery deadlines
 Locally available spare parts and service for customers without maintenance teams
 Small compressors (< 5 hp)
 Used for small jobs
 Reached through retail outlets

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INGERSOLL RAND

 Manufacturer’s Representatives (for retails)

Recips > 250 hp,

Cost to company 11% 21% 19%

1.Increased revenues and

1.Low profit margins for I-R

 Direct Sales category

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