UNIVERSITY OF ECONOMICS HO CHI MINH CITY International School of Business -------------------------------- Truong Hieu Lam INEFFECTIVE MANAGERIAL SUPPORT IN ELECTROLUX VIETNAM AC MASTER OF BUSINESS ADMINISTRATION SUPERVISOR: DR. NGUYEN PHONG NGUYEN Ho Chi Minh City – Year 2019 1 TIEU LUAN MOI download : skknchat@gmail.com Table of Contents Executive summary. First symptom: Low sales. Second symptom: Low customer satisfaction.
Initial cause-effect map. Updated cause-effect map. Ineffective managerial support. Work-life imbalance.
Ineffective managerial support. Main problem validation. Quantitative research findings. Qualitative research findings.
Qualitative research findings. The set of solutions. Training sales manager and supervisor. Developing the performance management system.
Change plan design. 45 2 TIEU LUAN MOI download : skknchat@gmail. Development of an appraisal form. Guideline for effective performance feedback.
Disciplinary procedure for poor performance management. 115 3 TIEU LUAN MOI download : skknchat@gmail.com List of Figures Figure 1: Initial cause-effect map. 17 Figure 2: Updated cause-effect map. 22 Figure 3: Managerial support at sales department.
28 Figure 4: Managerial support at sales department. 28 Figure 5: Employee satisfaction of salespeople at Electrolux Vietnam AC 2014-2018. 33 Figure 6: Final cause-effect map. 40 List of Tables Table 1: Sales growth of Electrolux Vietnam AC, Daikin, Toshiba and Vietnam AC market from 2016 to 2018.
8 Table 2: Results of the survey collected from Electrolux Vietnam AC, Daikin and Toshiba. 11 Table 3: Measurements of managerial support. 27 Table 4: Cost estimation for solution to training sales manager and supervisor. 42 Table 5: Cost estimation for solution to updating the performance management system.
43 Table 6: Organization of actions in implementation of effective performance management system. 51 4 TIEU LUAN MOI download : skknchat@gmail.com Executive summary Customer dissatisfaction undoubtedly imposes a challenge for the organization to maintain consumers’ loyalty and retention 62. Dissatisfied consumers discontinue purchasing the product or service as well as have a high potential to engage in negative word-of-mouth communication about the organization’s product or service 62. The fact that keeping customers satisfied with their product or service does have a positive influence on an organization’s profitability is non-negotiable 63.
Hence, customer defection or discontinuance of purchase from consumers causes Electrolux Vietnam AC to suffer remarkable loss of sales. To investigate the worrisome situation, potential problems which are identified through interviews and subsequently confirmed with theories involve ineffective managerial support and ineffective segmentation. By evaluating and verifying each potential problem, a discussion to focus on ineffective managerial support is determined as the central one. Electrolux Vietnam AC is confronting the ineffective managerial support that makes their employees feel dissatisfied with the job and consequently, has low commitment and intention to leave the company in the future.
Their low productivity causes the organization to experience low performance as well. After further rounds of interviews and the support of literature, the validated and most important cause of ineffective performance evaluation is chosen to build the set of solutions. The possible solutions for improvement of performance evaluation are training sales manager and supervisor on evaluating and giving performance feedbacks to their subordinates effectively or developing the performance management system. Basing on the cost-benefit analysis, the development of the performance management system is feasible to efficiently solve the ineffective managerial support.
The solution is beneficial from available resources that are gained from the cooperation between HR department and sales department, which costs around VND 11,500,000 and takes approximate two months without a break in order for salespeople to keep up with the schedule to promote their work efficiency. By taking an action, this cost-efficient solution can terminate the current problem of Electrolux Vietnam AC. Not only customer satisfaction but also employee satisfaction is expected to enhanced in order to improve the organizational performance. 5 TIEU LUAN MOI download : skknchat@gmail.
Company background Electrolux Group which headquarters in Stockholm, Sweden is a world-leading provider of diverse consumer appliances and electronics with more than 100 years of history. The organization has 54,400 employees in Europe, North America, Latin America, Asia, Africa and Oceania. It is in the company’s DNA to continuously strive to further improve efficiency and quality across the organization, from production to administration. The mission of Electrolux is to provide outstanding products in order to enrich people’s enjoyable and sustainable life.
As a member of Electrolux Group, Electrolux Vietnam which was established in 1999 specializes in distributing thoughtfully designed and innovative products for households and businesses. Electrolux Vietnam has a head office in Ho Chi Minh City and representative offices in Hanoi and Danang. According to the company’s HR report in February 2019, there are 6 departments with a total of 130 employees. There are departments of human resources and general administration (11 headcounts), finance and accounting (23 headcounts), corporate marketing (8 headcounts), customer service (5 headcounts) and consumer electronics (83 headcounts) that conjointly support the company’s operation.
The consumer electronics department has three sub functions which are air conditioning (31 headcounts), kitchen appliances (23 headcounts) and home appliances (29 headcounts). Air conditioning, abbreviated as AC, comprises air conditioners whilst kitchen appliances include cookers, ovens, kettles and food processors, and home appliances consist of refrigerators, washing machines, and vacuum cleaners. In the AC division, each department has their own departments to go along with to support their activities for related products. Specifically, there are 4 departments which belong to AC division.
The head of AC administers not only sales management but also product management, customer service and administration. Product management is in charge of monitoring pricing, inventory, orders and marketing activities. Customer service is accountable for handling consumers’ inquiry in terms of installation, maintenance and reparation. Administration supports administrative tasks.
In total, there are 3 managers and 28 employees. Every department in AC collaborates with each other towards a shared vision with the goal of achieving excellent business outcomes and outstanding customer experience. In today’s ever changing business environment, Electrolux is proud of being one of the leaders in the air conditioning industry that foresees the future and continuously innovates to 6 TIEU LUAN MOI download : skknchat@gmail.com develop future-proof air-conditioning solutions. The product line of air conditioning contains residential air conditioner and system air conditioner.
The compatible models can be single-split, multi-split, single-split packaged, multi-split packaged air conditioners and VRF system. For the residential air conditioners, air conditioners are used when an outdoor unit connects to an indoor unit, which are best suited to houses with a number of floors and rooms with little space for an outdoor unit. For the system air conditioner, they are ideal for installation in larger areas such as larger-scale residential houses, commercial buildings, condominiums, etc. A single or multiple outdoor units serving various indoor units and allows for a mixture of system types.
Driven by a never-ending quest for product innovation, their goal is to deliver products with superior quality and reliability and provide experience of true comfort for businesses and homes. The proportion of sales for product type is shown that residential air conditioner constitutes 65 percent of total sales which is higher than that of system air conditioner accounting for 35 percent. Electrolux Vietnam AC division’s competitors are Daikin, Panasonic, LG and others. They target B2B customers that a distribution network is applied through modern trade and traditional trade to attract customers and sell their products.
Regarding modern trade, ecommerce such as Tiki, Lazada, etc. and supermarkets such as Dien may Xanh, Nguyen Kim, Cho Lon, Tu Do, etc. Concerning traditional trade, retailers are Truc Mai, Thien Nam Hoa, etc. The proportion of sales for consumer type is shown that modern trade constitutes 40 percent in which 15 percent for ecommerce and 25 percent for supermarkets which is lower than that of traditional trade accounting for 60 percent.
Sales department has a total of 15 members including a sales manager, a sales supervisor, 11 sales representatives and a sales administrator. The role of a sales admin is to assist sales force with daily sales administration activities. Sales reps are in charge of developing customer intimacy and establishing new sales opportunities. Sales supervisor is responsible for ensuring customer satisfaction, increasing sales for the company, consistently monitors the sales activity of the team and tracks the results.
Sales manager participates in strategic and tactic planning and managing for the department. Because of increasing competition between air conditioning manufacturers, it is crucial for Electrolux to foster a motivated and committed sales force which plays an important role in generating revenue for the company. 7 TIEU LUAN MOI download : skknchat@gmail. Symptoms To indicate something abnormal in the current business operation of Electrolux Vietnam AC, the source of internal data was examined such as reports of HR department, customer report which was published by management team so that employees are aware of their performance level.
These internal data was found to be advantageous due to its ease to approach and availability, together with cost efficiency and useful time series data. Moreover, depth interviews with sales manager and sales supervisor were carried out in order to have a better understanding about what the division is struggling with and any necessary improvements. First symptom: Low sales According to the company’s internal data, Electrolux Vietnam AC experienced an increase in sales over the last three years. Nevertheless, sales growth rates declined markedly, falling from the high 17 percent to the low 11 percent in 2017 and 9 percent in 2018, even as the company added approximately USD 3.5 million of additional revenues in each of the past three years.
As declared by head of AC in the company’s annual meeting, Daikin has continued sales growth exceeding 25 percent from 2015 to 2018. Another Japanese-based air conditioning provider, Toshiba has achieved over 18 percent of sales growth in the same period. What is more, it is reported by Nikkei Asian Review that sales of Vietnam AC market is forecasted to grow over 14.5 percent from 2015 to 2021. In general, Electrolux Vietnam AC suffered progressive slowdown in sales growth.
From 2015 to 2018, its sales also experienced a slower growth rate than that of their biggest rivals, Daikin and Toshiba and local AC market. Table 1: Sales growth of Electrolux Vietnam AC, Daikin, Toshiba and Vietnam AC market from 2016 to 2018 Unit: million USD Year 2014 2015 2016 2017 2018 Sales revenue – Electrolux Vietnam 24.5 AC Sales growth – Electrolux Vietnam AC 10.1% Sales growth – Daikin 25.0% Sales growth – Toshiba 18.0% Sales growth – Vietnam AC market 14.5% Source: Nikkei Asian Review43, internal meeting 8 TIEU LUAN MOI download : skknchat@gmail. Second symptom: Low customer satisfaction Customer satisfaction is defined as a consumer’s response to the assessment of their consciousness of inconsistency between preceding expectations and actual exhibition of the product or service as discerned in the time following its consumption 1. The measure of satisfaction can be economic satisfaction in terms of financial returns derived from the sales of the supplier’s products or non-economic satisfaction in terms of satisfaction that could be derived from interpersonal relationships with the supplier’s sales representatives 2.
In today’s highly competitive market, customer satisfaction is regarded as a major contribution for organizations to not only retain customers but also assist in recognizing economic goals like sales turnover and profitability 3; 4; 5. It is shown that there is a positive relationship between customer satisfaction and customer loyalty 6. The higher level of customer satisfaction leads to the greater customer loyalty 6; 7; 8. Otherwise, as a result of customer dissatisfaction, they will not hold commitment to re-buy or re-patronize product or service 9; 10 in the future and have a potential to cause switching behavior and negative word of mouth 11; 12.
It was reported that sales representatives at Electrolux Vietnam AC did not take good care of their customers. As a consequence, the number of customers who either ceased repurchasing products or left the company is noticeable. In accordance with Mr.