Chapter 1: Challenges Facing Today’s Sales Organizations
Challenges confronting the modern sales organization cross multiple lines; sometimes they’re externally driven, sometimes internally driven, and other times the result of both inside and outside influences. External “macro” challenges include those market forces, such as changes in industry structure, global prices, demand, regulations, and the like, that impact the way organizations sell and conduct business. For example, consolidation in an industry resulting from merger and acquisition activity reduces the number of customers available to suppliers, thus forcing a reassessment of sales strategies. One organization in our study had their customer base reduced from nearly a dozen to just three as a result of mergers and acquisitions. In addition, a decline in global prices may require suppliers to differentiate themselves in new and unique ways. World prices for paper and other forestry products, for example, have been pushed so low that manufacturers now have to create new and innovative value-added services to set them apart from competitors.
Organizations also face external challenges that are derived from changes in the buying behavior of their customers. These more “micro” trends, such as a more demanding and knowledgeable customer base, impact the way sales organizations interact with customers. Because customers are savvier and more knowledgeable about pricing and product features, salespeople need to rethink their approach to selling. Such challenges increase over time as suppliers continue to advance their capabilities (in search of differentiation), which ultimately increases the expectations of customers and encourages competitive response, thus eliminating the differentiation and resulting in the need for a new product or service innovation. It’s a never-ending cycle.
Finally, there are those challenges internal to the sales organization that companies must confront, such as internal pressures to reduce costs, turnover, and mergers and acquisitions to name a few. These challenges are not necessarily “bad,” and with the right strategy in place they provide organizations with real opportunities for improvement and growth.
Although each organization we interviewed operates in a different industry with individual circumstances (e.g., some were fragmented, some consolidated), all organizations in the study were facing similar challenges with regard to the markets they operated in. These challenges for many were the key drivers in deciding what strategies to pursue and how to operate their sales organizations.
Globalization, mergers and acquisitions, declining prices, and stiffer competition are just a few of the challenges faced by businesses today, and the organizations we studied are no different. Some trends are newer on the scene, such as recent advancements in sales technology, new channels to market including e-commerce, and more knowledgeable customers resulting from information available on the Internet, while others, such as globalization and price pressures, have been around for a while. In response, organizations are pursuing both new and old strategies. This book examines the best practices of sales organizations in developing and implementing these strategies in light of the challenges discussed in the following sections.
Globalization can refer, from a demand standpoint, to the process of converging preferences across different markets, and simply the availability of more customers to sell to. From a supply perspective, globalization offers opportunities to source the cheapest materials worldwide and to locate production in the most favorable locations. Both of these facets of globalization present challenges and opportunities to organizations, especially those that are becoming more global in scope.
Although the terms are often used interchangeably, a global company and a multinational company are not the same. Multi-national indicates that an organization has some presence in more than one country; as opposed to adapting standards or processes to a multitude of local preferences, they’re just simply there. For example, a local manufacturer of furniture may sell to regions throughout Asia, but the company is operating as a multinational company and not as a global company. A true global company, on the other hand, has more rigorous requirements as it goes worldwide with the customer, adopting the same standards, languages, networks, and processes for each location, each step of the way. The major global organizations are well known, such as Coca-Cola, but often times they are so global in scope that the location of their headquarters is not apparent.
The globalization of markets and operations represents both challenges and opportunities for sales organizations. While globalization offers bigger markets, along with that comes competition, price pressures, delivery and logistic challenges, local requirements, and cultural adaptation to name a few. According to one company we met with, “Globalization means inter-personal skills must become intercultural skills.”
In addition, globalization creates issues for many newly merged organizations as they struggle to leverage their new global capabilities even when products, resources, cultures, and infrastructure are yet to be integrated. These organizations need to represent one face to a global customer, a critical but difficult feat to accomplish. Customer and prospect organizations that have true global reach can be a real challenge for the sales organization.
For many of the organizations we studied, globalization means that their customers have more choices; it means that it may cost more to serve a broader base of customers; it means new competitors on the scene; it means finding and coordinating salespeople across markets; but it also means new revenue opportunities. One company representative commented, “You have to assume a global approach and that means knowing how your big customer’s business works in North America, in Europe, and in Asia, for example.”
Not all organizations we studied are global companies; indeed, some only operate in one or two markets. But all of the organizations are challenged in one way or another by the forces of globalization. Take, for instance, the global transparency of pricing and product resulting from the Internet presence that organizations must have, or the increase of foreign competitors as multinational and global organizations enter home markets. Globalization, rather than being a passing fancy, has only continued to become a more influential and significant factor sales organizations must take into account when developing their strategies.