A Sales function design to serve multi country customers

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Master Thesis

Censored

A Sales function design to serve

multi country customers

Author:

Frank ten Wolde S1337335

Amsterdam, Febraury 2009 Faculty of Economics & Business

Supervisor University: dr. M.A.G. van Offenbeek 2nd_{supervisor University:}

mr. drs H. A. Ritsema

Supervisor TNT Express Benelux:

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Preface

This master thesis is the result of a research conducted for TNT Express Benelux, located in Houten, the Netherlands, in order to complete the final phase of my study International Business and Management at the faculty of Economics and Business of the University of Groningen.

The research was focused on a specific group of customers, the so called multi country customers. These customers have production, warehouse and distribution locations in a wide range of countries and request transport services of TNT Express in multiple countries.

The assignment by my supervisor with TNT Express Benelux, Thomas Morshuis, was to map the demands and characteristics of the multi country customers that are relevant for the business unit TNT Express Benelux, and suggest some recommendations on how to organize and implement the sales function when dealing with these multi country customers.

The complexity of this assignment was to explore the environment of TNT Express and TNT Express Benelux in order to meet the customers requests, taking into account the size of the customers and their subsidiaries that could turn the data collection into a never ending process. Nevertheless, many employees were quite willing to assist me to carry out the research. However, I would like to thank two persons in particular.

First of all, I would like to thank dr. M. van Offenbeek for her full support, advice and comments on the several chapters and draft versions. Secondly, I would like to thank Thomas Morshuis for his confidence and support and for giving me the opportunity to conduct my master thesis with TNT Express Benelux.

Furthermore, I would like to thank all employees with TNT Express Benelux who have been very cooperative and supportive to my research.

Last but not least, I would like to thank my partner Evelien and aunt for their support not only during the writing process of the master thesis, but also during the course of my study, as well as my parents, sister and friends. They have all been very important to me.

Thank you, Frank ten Wolde

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Table of contents

Preface II

Table of contents III

List of figures V

List of tables VI

List of graphs VII

1. Introduction 8 1.1. Background 9 1.2. Problem statement 10 1.3. Research design 11 1.3.1. Research objective 11 1.3.2. Research questions 12 1.3.3. Research model 13 1.3.4. Research methods 15 2. Theoretical framework 17

2.1. Global trends in the transportation sector 17

2.2. Customer demands 18

2.2.1. Customers movements and decision making units 19 2.2.2. Relationship between the sales function and customers 19

2.3. Sales function 20

2.3.1. Multi country network 20

2.3.2. Challenges for a multi country network 23

2.3.3. Business unit and profit and loss structure 23

2.3.4. Global account management 24

2.4. Conclusion 26

2.4.1. Sub-questions and reflection 27

2.4.2. Schematic overview of the theoretical concepts 28

3. Customers 30

3.1. Requirements set for potential multi country customers 30 3.1.1. The process of developing requirements 31

3.2. Data collection 32

3.3. Sources of potential multi country customers 33 3.4. Selection of potential multi country customers 36

3.5. The scorecard 38

3.5.1. A closer look at the criteria 39

3.6. Analysis of multi country nominees 40

3.6.1. Multi country nominees’ characteristics and demands 42

3.7. Answer to sub-question & conclusion 45

4. Sales function design 46

4.1. Design criteria 46

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4.3. Answers to sub-questions & conclusion 51

5. Conclusions 53

5.1. Conclusions 53

5.1.1. Conclusions per sub-question 54

5.1.2. Overall conclusion 55

5.2. Reflection on study’s strengths and limitations 57

5.3. Recommendations 57

5.3.1. Recommendations for TNT Express Benelux 57

5.3.2. Recommendations for further scientific research 58

References 59

Appendices 61

Appendix 1: Top 42 customers TNT Express selected 61 Appendix 2: Top 40 customers TNT Express selected 62 Appendix 3: Top 30 customers TNT Express selected 63

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List of figures

Figure 1: Responsible actor per customer segment 8

Figure 2: Overview of the problem 11

Figure 3: Systems model of the research object 14

Figure 4: Pressures on the sales system (Piercy, 2006) 18 Figure 5: Dual authorities in the multi country network based on the matrix

organization (Daft, 2001) 21

Figure 6: Relations of the sub-questions 27

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List of tables

Table 1: Lasserre’s (2003) overview of the implementation of global

account management 25

Table 2: Demand for GAM (Montgomery et al, 1999) 26

Table 3: Schematic overview of theoretical concepts 29 Table 4: Requirements set for potential multi country customers 30 Table 5: Potential multi country customers source I 34 Table 6: Potential multi country customers source II 35 Table 7: Filter to select potential multi country accounts 36 Table 8: Characteristics of the top-53 customers of TNT Express 37 Table 9: Characteristics of the selected potential multi country accounts 37

Table 10: Explanation of the scorecard 38

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List of graphs

Graph 1: Distribution of nominees per vertical market 42 Graph 2: Number of listed competitors of TNT Express Benelux in the

nominees market 43

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1. Introduction

This research pays attention to the sales function of a business unit in a multinational environment. In this environment the need for multi country customers is recognized. The characteristics of multi country customers and their demands will be researched in order to determine the structure of the sales function. The research covers one business unit in particular, namely TNT Express Benelux, subsidiary of TNT Express. Some parts of the research can be applicable for other business units of TNT Express as well, this will be mentioned.

For service organizations like TNT Express it is important to have a clear picture of their customer characteristics and needs. Next to that, such organizations should invest in their capabilities to fulfill these needs. Within TNT Express the sales structure, as part of the overall organization design, plays a crucial role in fulfilling customers’ needs. To enable a balanced responsiveness to different kinds of customers TNT Express uses a model that segments the customers in different sales departments (figure 1).

This thesis focuses on the sales department of TNT Express Benelux, which is a business unit of TNT Express. At the beginning of 2008, TNT Express installed a new sales network, the so called multi country network (MCN) which is positioned between the business units and the divisional head office (DHO). This MCN is installed to cope with those current and potential customers that are active in multiple countries and who have desires towards express services in these countries (multiple country customers). The MCN is a virtual network of multi country managers, each of whom represents a business unit in Europe. Currently six business units are involved, respectively the Benelux, Germany, France, Italy, the United Kingdom and the international business unit IBU (other major markets in Europe).

Figure 1: Responsible actor per customer segment

G.A. Majors La rg e Me d iu m Sm al l A d H o c

Central Gam team per vertical market 90 global account managers 30 fte back office support

Multi country Major Accounts

DHO

DHO / BU

BU National major account teams in countries

200+ dedicated account managers

Territory sales teams

1200 sales territories with combined outdoor and indoor sales persons DM and e-mail campaigns

Multi country Accounts MC network / BU

NEW Responsibility Type of accounts Sales team G.A. Majors La rg e Me d iu m Sm al l A d H o c

DHO

DHO / BU

NEW G.A. Majors La rg e Me d iu m Sm al l A d H o c

DHO

DHO / BU

NEW

Responsibility Type of accounts

Sales team Legend

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TNT Express Benelux is confronted with the MCN, wherein a major challenge arises. Namely, how to deal with the MCN in such a way that it increases the revenues for the business unit TNT Express Benelux. A MCN has the characteristics of an intra-organizational network as described by Tsai (2001). The characteristics of the MCN of TNT Express are as follows: it is a network of people that are brought together to share knowledge; the network has an informal character which means it has no formal authority to enforce decisions; it is build on personal relationships. In a multi unit organization, units can learn from each other and benefit from new knowledge developed by other units (Tsai, 2001).

The intended goal of the MCN is to provide business units of TNT Express with knowledge about customers active in multiple countries, according to the multi country manager of TNT Express Benelux. For each business unit it creates an opportunity to use this knowledge in setting up business propositions towards the customers to gain more revenues ultimately. Valuable knowledge is related to the propositions, like prices and services.

For TNT Express Benelux it is interesting to get insight in characteristics and needs of multi country customers and the knowledge available in the MCN. The next step is to share this information across the sales people in the business units and create an advantage in serving the multi country customers.

This thesis reports a design-oriented study that aimed to determine how the sales function of TNT Express Benelux can utilize the MCN to better fulfill the demand of multi country customers. If the study findings show that the intra-organizational network can indeed support the business unit and can overcome the present inter-unit conflicts about multi country customers, this new sales function between national account management and global account management will be a legitimate structural innovation. In that sense the study also had an evaluative goal.

1.1 Background

TNT Express is a world-wide operating company and a division of TNT N.V. The Express company is serving over 200 countries using their network of nearly 900 depots, hubs and sorting centers. The company employs 48,000 employees worldwide and has a fleet of 47 aircraft and operates over 19,000 road vehicles. In this international context TNT Express’ mission is to exceed customers' expectations in the transfer of their

goods and documents around the world (www.tntExpress.com).

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noticed are the declining borders in Europe and the growing markets in the BRIC countries (Brazil, Russia, India & China). The declining borders in Europe and a shift towards the East European countries forces TNT Express to respond to the changing customers’ needs on the European continent. Customers of TNT Express have production plants, warehouses, suppliers and customers in different countries on the European continent, and in the rest of the world. An efficient supply chain can be of great value to the customer and TNT Express can be an important player in the distribution of their goods and documents.

Currently, separate business units do not have an overview of the customer characteristics and demands that crosses borders. From the perspective of the changed customer market, however, it is necessary to have people inside the organization who do have this overview. To some extent TNT Express deals with this increased complexity by using global account managers. “These account managers serve customers with a global need directly” (the multi country director). These often large customers are served by one TNT Express location, the divisional head office. The so-called global accounts are mainly selected by the revenues they create for TNT Express and their presence in different continents. There are also customers with a multi country request. These customers are also selected on revenues, although the number of origin shipping countries, complexity of the flow of goods and documents are selection criteria too (multi country director). These customers are still served by one TNT Express location, which is the divisional head office.

The two groups, namely global accounts and global multi country accounts, described above are, however, just a small percentage of TNT Express customers. Yet they do account for large revenues. TNT Express Benelux‘s multi country manager claims that it is currently necessary to have a derivative of the global account management for smaller European multi country customers. These relative smaller customers also require a multi country approach to serve them in a more satisfying way. From this perspective it is necessary to find out how TNT Express can adapt to the increasing complexity in the globalizing world in order to meet changing customers’ requests.

1.2 Problem Statement

Currently, there is an opportunity for TNT Express Benelux to serve multi country customers. Nowadays, a European or global orientation in production and distribution is a common practice in many companies. Therefore business-to-business service providers, such as TNT Express, can only compete by responding fast and thoroughly on customers’ multi country requests.

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customers. Finally, Business Development Managers (BDM) or Contract Managers do not have time and the means to develop multi country opportunities [presentation Director TNT Express Benelux].

At the start of this research three issues where not clear to the TNT Express Benelux organization. Firstly, the boundaries of the customer segment “multi country accounts” were undefined. Secondly, the multi country customer needs were not familiar to the sales organization. And finally, it was unclear how and which knowledge of the MCN could be utilized by the sales organization in fulfilling customers’ needs.

Underlying the above mentioned issues are the changes in customer needs over the time. The increasing international environment is asking for service providers that have adapted their services to the changes in customers’ needs (figure 2).

Figure 2: Overview of the problem

In the case of TNT Express Benelux, this research is only focused on the sales function and tries to give answers on how the sales function of TNT Express Benelux should cooperate with and invest in the implemented intra-organizational network to cope with the increased international environment and fulfill the changed and changing multi country customers’ needs.

1.3 Research design 1.3.1 Research objective

In collaboration with the multi country accounts’ responsible manager of TNT Express Benelux the following research objective was formulated:

To advice the business unit TNT Express Benelux on ways to increase multi country revenues through cooperation with the multi country network

After considering organizational performance indicators like revenue growth and profit maximization the decision was made to focus on building structural capabilities that will

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support revenue growth of the multi country accounts. This was necessary to make the research more specific and to diminish the risk of unintended outcomes related to operations functions or other not related sales department functions.

This research is focused on the business unit TNT Express Benelux only and not on the whole of TNT Express. The MCN is therefore researched from this perspective and the customers’ needs are for the same reason mapped for customers relevant for the business unit TNT Express Benelux. Next to that, the business unit structure and the profit and loss account driven organization implemented by TNT Express DHO, is assumed to be unchangeable, because it falls outside the scope of this research.

Nevertheless it is worth mentioning that the environment of other business units of TNT Express is similar in terms of the business unit structure and the profit and loss account structure. Therefore the conclusions of this study can be relevant for other business units as well and perhaps even for other companies with the same organizational structure. Of course the outcomes of the customer demands are only relevant for TNT Express Benelux.

The research had to be executed in this context with the aim to present an advice on what items would increase the multi country revenues. The sales department and the customers’ needs play a central role in this research to advice TNT Express Benelux on designing its sales function, taking into account the opportunities offered by an MCN, in order to support an increase in multi country revenues.

1.3.2 Research questions

The research question that has been formulated for this study is the following:

What organization design for the sales function at the business unit level will enable optimal cooperation with the multi country network in order to fulfill multi country customers’ needs?

If the multi country customers’ needs are clear to the organization, TNT Express Benelux can accelerate to fulfill these demands for the benefits of the own organization. However, the sales function has to be in the possession of a design that makes it possible for the people inside the organization to deal with the customers’ needs. Therefore the research question focuses on the sales function design in cooperation with the MCN towards the needs of multi country customers.

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1. What are the multi country customer characteristics and demands?

2. What are the design criteria for the sales function in terms of facilitating the revenue growth in fulfilling the multi country customers’ needs?

3. Which structuring of the sales function of TNT Express Benelux in cooperation with the multi country network is able to fulfill the multi country customers’ needs? The answers to these sub-questions will be supportive to the answer of the research question.

1.3.3 Research model

The general goal of this system model is to systemize the search process when looking for relations. Therefore the environment of the research is also included, which has advantages in placing this research in a broader context simultaneously. The environment of TNT Express Benelux is defined as the influences on the customers’ needs, the global influences. In addition, TNT Express Benelux has to cope with the organization environment of TNT Express DHO. Three important factors: the business unit structure, the profit and loss account driven organization and the MCN are in this research considered as unchangeable and therefore included to hence the influences on and limitations for the sales function of TNT Express Benelux. The MCN distinct itself from the other two factors because it can be used by TNT Express Benelux on occasional basis, while the others can not. As indicated in figure 3 by the accolade, the scope of the research includes the customers’ needs and the sales function. However, there are two elements left out. At first, global trends are assumed to have influence on the customer needs and the change in customer needs and logically the characteristics. A complete research on influences on customer needs would be very time-consuming and distract the attention on the sales function design problem. The second element concerns, the implementation of changes in sales function design to fulfill customers’ needs. It was impossible to carry out the research in the certain time-frame set.

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Figure 3: Systems model of the research object

In order to get a clear understanding of the system model of the research object, further explanation of the relations between the different boxes is necessary. The boxes presented in this research design are based on the (sub-) questions formulated earlier. The research design is developed to structure this research. I have tried to link theoretical concepts to the opportunity for the sales function to answer customer demands. The theoretical concepts are related to the business unit structure, profit & loss account driven organizations and intra-organizational networks, which will be dealt with in chapter 2, together with theoretical concepts about the sales function and customer demands.

The system model focuses on TNT Express Benelux, and not on TNT Express as a whole. The aggregation level is even lower, because it focuses on the sales function of TNT Express Benelux only . Ramondt (1996) argues that this type of research can be classified as an aspect research and is less holistic than a research that focuses on the entire organization. Ramondt (1996) reasoned that aspects of an organization are closely related and therefore require a more holistic approach. Nevertheless, De Leeuw (2002) focuses on different aspect- and subsystems and combinations thereof. This research model is closest related to a research of a sub-aspect-system. This means that the focus lies firstly on the aspect (customer demands) and secondly on the subsystem (the sales function). It is also an open system approach (De Leeuw, 2002) because of the relations with the environment, in terms of task dependencies, communication, influences etceteras. The internal environment is presented by the dotted boxes and initiated by

Global trends

Scope of research Multi country customers’ needs

Sales function

Implementation of changes in sales function design to fulfill customers’ needs Business unit structure

Profit & loss account

driven Multi country network

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research only a sub-aspect-system is because of the limitations in researching the whole system, which are information availability, the research client and the size of a certain research in relation to my time and capabilities.

1.3.4 Research methods Preparation phase

This research started with a preparation phase of collecting information of the Express business and build up theory baggage in this specific field. In this phase I have interviewed nine people personally and four by phone. With the outcome of this information I was enabled to identify the problem that exists in the TNT Express Benelux sales function and to make a start with the development of a method to research this problem and work on the explanation and to formulate solutions.

Theoretical phase

After the preparation phase I started an extensive literature review (Chapter 2) on theoretical concepts related to customer needs, sales structure, business unit structure, profit and loss account driven organizations and intra-organizational networks. Links with TNT Express are made and therefore chapter 2 contains the grid of this research. The theoretical concepts gave answers to the influences of a business unit structure of a part of the organization, as well as to the profit and loss structure implemented in organizations. Next to that, theoretical concepts will explain how intra-organizational networks operate and the link is mentioned with the MCN of TNT Express. Theory about the customer needs is focusing on the customer curve elements of Lasserre (2004) and customer demands in service organizations in general. Of course the actual customers’ needs relevant for TNT Express Benelux will be presented in chapter 3. Theoretical concepts of the sales function that refers to multi country management was hard to find. In most cases authors refer to global account management. Therefore the main advantages and disadvantages of global account management are mentioned and described which of them are relevant for multi country management. The same counts for the demand of global account management. Actually, the multi country account management implemented at TNT Express is a derivative of global account management which makes above stated method useful because of the relation between global account management and multi country account management.

Field study phase

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Collection of the data

This study relies on primary data and secondary data, whereas the primary data are the data obtained from 26 interviews. At the start of this study, I developed a question form about the potential multi country customers in their region to 9 depots in the Benelux. After collecting the answers, 26 sales people were interviewed about the customer characteristics and demands. The interview was semi-structured to identify problems in the current relationships which were not included in the question list. Each interview lasted between 20 minutes and 1 hour. The secondary data were published before in scientific journals, books, magazines for the transportation sector, and reports from consultancy firms.

Analyzing the data

As all data have a qualitative character, the methods for analyzing quantitative data are useless in this context. With respect to the qualitative data I have categorized all data to be able to find patterns, similarities and suggestions. The data collected from interviews were interpreted and judged by myself. Interviews with customers and employees of TNT Express can be considered as an inductive approach (Gill & Johnson, 2006). It is an observation of the empirical environment, customers and employees, to build on an explanation supported by interpretation of the existing theoretical concepts. While analyzing the data I have always kept in mind the possible subjectivity in the interpretation of the data, which is inherent in inductive research and qualitative data. Therefore, unbiased questions and non-threatening questions where part of the strategy of interviewing (Yin, 2003), to ensure that at least the data collected were free of interpretations and subjective opinions. In addition, labeling of the questions and answers was a helpful tool to categorize the answers. Literature was consulted to interpret unexpected findings and set off subjective reasoning.

Limitations & conditions

This study contains limitations and conditions which are enumerated below: Limitations

o One of the limitations in the data collecting process is the opaque decision making structure in the customers’ organizations. Consequently, it was not always possible to interview the real decision maker.

o Due to limited time and resources this study maps the customer needs of only the current customers. However, three potential customers were also interviewed to explore possible similarities and differences.

Conditions

o Because there are two parties involved in this research it had to contain scientific depth for the University of Groningen and practical relevance for the organization TNT Express Benelux

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2. Theoretical framework

The theoretical framework of this research can be divided into one general part, the global trends and two more extensively described research subjects, respectively, customer demands and the sales function. How these theories are connected together and related to the sub-questions is presented in paragraph 2.4.

2.1 Global trends in the transportation sector

Unless the fact that influences of global trends on customer needs, especially multi country customer needs, lie behind the scope of this research, some important global trends and theories related to the subject are presented for a better understanding of the environment of TNT Express Benelux in relation with their current or potential multi country customers.

Globalization starts to appear in the early 1970s (Lasserre, 2003). A complete description of globalization in the past 35-40 years would be exaggerated. Nevertheless it is worth mentioning the four major pushing factors of globalization. Lasserre (2003) declares that there are political, technological, social and competitive factors. Where the political factors mainly reduce trade barriers, technological factors reduce the cost of co-ordination and increase the economies of scale, and competitive factors induce integration and co-ordination. The social factors should convergence the customers’ needs. Unfortunately in Lasserre’s description the social factors focus on customers of consumer goods instead of service providing to the business environment. The increase of technology could be in favor of the multi country network co-ordination, like telecommunication and efficient transfer of data. The political factors are visible within the work of the European Union (EU), as their current actions reduce trade barriers and borders.

The business environment of TNT Express is changing continuously. A major source for this changing business environment is that the distribution networks of various companies are sensitive for major global forces (Capgemini report, 2006). In this context two major forces can be identified. The first one is consolidation of distribution centers, reducing supply chain costs and complexity as driver for merging distribution networks. The second one is the growing importance of regional distribution. Growing transport costs, shorter delivery lead times and emerging markets require distribution that has focus on limiting transport costs rather than inventory costs. The rising transport costs have two main causes. Increasing cost of fuel, road tax and EU driving limits. In addition, many companies focus on improving customer service by increasing delivery frequencies (Capgemini report, 2006).

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The future demand of customers is unfortunately neither predictable nor possible to extract from the literature. Therefore, research on the customers demands will enable TNT Express Benelux to get better insight their customer behavior and gives the opportunity to fulfill customers’ needs ultimately.

2.2 Customer demands

This paragraph outlines the customer demands of TNT Express Benelux. It is a theoretical consideration of customer demand and the influences on the sales organization. It is also a validation of the research on the customer demands by explaining the components researched on the customer demands in relation to the TNT Express Benelux organization and sales function.

Figure 4: Pressures on the sales system (Piercy,2006)

Figure 4 shows the pressures on the sales organization stated by Piercy (2006). Powerful company and customer forces are sources for pressures on the sales organization according to Piercy (2006) and from his point of view customer demands are highly linked to the shape of the sales organization. In this paragraph the customer demands are subject for theoretical considerations. The other sources for pressures on the sales organization are behind the scope of this research.

An important aspect of this research is to analyze customer characteristics of potential multi country accounts. Before focusing on that (chapter 3), it is a necessity to have a certain goal to be sure that the outcomes of the survey are satisfying. The goals in this case consist of two aspects. Firstly, the location of the decision making unit: centralized or decentralized. Secondly, the sustainability of the customer demands: long-term versus short-term relationships. When it is a temporary demand it would not be preferable to change a certain multi country network design. Both aspects are theoretically considered to function as a framework when analyzing the outcome of the survey and highlight the pressures from the customers on the sales function.

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2.2.1 Customers movements and decision making units

In general there are two strategic directions for service operations to serve global customers. McLaughlin and Fitzsimmons (1996) suggest that one strategic direction is to import customers and the second one is to follow customers. However, TNT Express is almost forced to follow their customers because of the type of service they offer. Import of customers, requires creation of willingness by the customers to travel to get their service (e.g. medical clinics, Disney World, universities) or create substitutes by means of telecommunications (McLaughlin and Fitzsimmons, 1996). Fortunately, most service companies can create added value by following their customers to other countries. An ideal situation for TNT Express would be to offer services in each country where the customer is active, which requires global and multi country account management. To follow your customers can generally result in two outcomes. Firstly, when the customer decide to move to a certain country for a longer period, than it is up to the organization to succeed in serving the customer. Another scenario is that the environment of the customer is rapidly changing and the movement was for the short-term. The question arises if the organization should follow the customer (centralized approach), or adapt the local structure to the need of the customer (decentralized approach). In example: company X could request for services in multiple countries based on a central approach. Or company X could request for services in multiple countries based on a decentralized approach. The first situation implies that the decision making unit of company X is responsible for all local offices and could select a service provider with a certain centralized decision making unit to negotiate conditions and prices. The latter implies that local offices of company X request services towards local offices of service suppliers.

2.2.2 Relationship between the sales function and customers

Piercy (2006) mentions in his description of the pressure on the sales function, the salesperson effectiveness. Research proofs that salespersons’ effectiveness accounts for as much as forty percent of the business-to-business customer choice of vendor, because technology has made products themselves increasingly substitutable (Stephens, 2003). Actually, this study is neither about salesperson effectiveness nor about substitutable products. The relation between sales people and the customers’ choice of vendor does support the interaction between the customer demands and the sales function (Chapter 4).

Before ascribing the credits towards the salespersons only, the relationship between vendors and sellers is changing. Piercy (2006) mentions the move from transactional relationships with customers (selling on the basis of price and product advantages) towards value added relationships. Similarly, Jones et al. (2005) mentioned a shift from individualistic customer relationships to team-based selling with large customers.

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consumption of the product, but to judgments people inside the company make about the external customer. When external customers “disappoint” employees by their adverse reaction or complaints, this may easily have a negative effect on the future behavior of employees in dealing with customers (Piercy, 2006). Apart from selling the company to the customer, an external market process, the sales function is also responsible to sell the customer to the company. A good understanding of the customer demands is therefore a necessity.

2.3 Sales function

In this part a theoretical description of relevant issues concerning the multi country network, profit and loss structure and global account management will be outlined

2.3.1 Multi country network

The multi country network implemented at TNT Express can be related to organization designs described in the literature. Albeit mainly focused on manufacturing organizations instead of service providers, most models are based on the entire organization, while in this case the focus lies on a small part of the sales structure, namely the sales function. Nevertheless, it is interesting to see what the main advantages and disadvantages are for a certain structure. In that perspective the multi country network of TNT Express will be evaluated to discover improvement points for the future. Also incorporated is the global account management structure described in the literature which is closest related to the multi country network of TNT Express.

Daft (2001) describes different organization designs for companies. He mentions the matrix structure which can have either a focus on product and function or product and geography. In the case of TNT Express, and the multi country network in particular, the fundaments of the matrix structure are based on geography.

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Figure 5 Dual authorities in the multi country network based on the matrix organization (Daft, 2001)

Some researchers specify the organization design for service companies in particular. However, here the focus lies on classic service companies with hard definitions of service companies. For example, Daft (2001) classifies a company as a service company when there is a high customer contact and consumption and production will take place at the same time. He mentions the difficulty of measuring the outcome of a service compared to manufactured goods. Unfortunately, these characteristics do only partly match with the characteristics of the transportation sector, where for example the service output can be measured very well and production and consumption does not take place at the same time completely. In the case of TNT Express Benelux shipments take place without the presence of the customers. Sometimes the customer is present when the shipment is delivered or picked-up.

The characteristics Daft (2001) describes are mainly focused on service companies as hotels, person air transport, consultants, banks, etc. Also Slack, Chambers & Johnston (2004) limit their findings to the sectors mentioned afore. Although they mention the transport sector often, albeit in the context of the transportation of persons, rather than documents or goods, which makes it only partially useful in this context.

A further look at the description of transportation of persons given by Slack (2004), shows that the service organization has to be fully equipped in optimizing the comfort of clients. To a certain extent this is also applicable for the transportation of goods and documents. Customers want their product to be delivered on time and undamaged.

Divisional H ead office

Multi country management BU TNT BLX BU TNT Germany BU TNT Italy BU TNT France BU TNT IBU

Multi country account =

Divisional H ead office

Multi country management BU TNT BLX BU TNT Germany BU TNT Italy BU TNT France BU TNT IBU

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Sometimes the products have to be protected against frost or heat, or need a special treatment. However the main difference is that the customer does not take part of the transportation process, whilst when transporting persons the customer does take part. For the transportation of goods or documents the customer must put effort in the sending or collecting department.

An accurate organization design for a company like TNT Express seems to be hard to find. Therefore the use of sometimes both, service and manufacturing literature, seems necessary to describe the organization. This phenomenon where the transportation sector is left out in specific organization design research, can also be found in literature about the strategy of service organizations, where the focus is also on the above mentioned sectors. An exception can be found in the work of Mathe and Perras (1994) who describe successful global strategies for service companies and highlight the transportation sector. They describe the importance of a good working transportation network in combination with optimal cost reduction. Unfortunately they did not outline the structure necessary to achieve this global strategy.

Many structures in the real world do not exist in pure forms and are therefore called hybrid structures (Daft, 2001). This is actually an optimum solution, given the circumstances. For example a part of an organization can also have a functional structure (activities grouped together by function), divisional structure (activities grouped together by product or project) or a geographical structure (activities grouped together by region), Daft, (2001).

Daft, (2001) outlines that the optimum strength of a matrix structure is reached when the company is active where the environmental change is high and when goals reflect a dual requirement. A moderate size and only few product lines within the organization also contribute to the success of the matrix structure. In this situation it has a strong customer focus and resources can easily adapt to the changing environment. Negative aspects can be found in the dual authority, multi country network responsibility versus the business unit responsibility in the case of TNT Express’ organization. Information processing and collaboration between managers is of crucial importance in the decision making processes. Relatively smaller negative effects are spending a great deal of time in meetings and traveling- and communications costs.

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information processing through the matrix organization. Especially this information processing will be subject of research later on.

2.3.2 Challenges for a multi country network

Now that the organization structure has become clear, questions arise about the challenges the multi country network has to cope with. Recent and older studies are quite scant about the complexity of serving customers with multi country requests and their related organization designs and networks. However, examples of organization design, implications, advantages and disadvantages, related to global account management are available.

One main example that can be found in several studies is that of the Citibank. In this study, outlined by Lasserre (2003), issues related to the implementation of a World Corporate Group (WCG) are discussed. In short, this new WCG is staffed by several parent account managers (PAM) and subsidiaries’ account managers (SAM). Before discussing the advantages and disadvantages, which can be very crucial in the research at TNT Express Benelux, it is worth to mention the similarity between the WCG and the multi country network of TNT Express, albeit in two different sectors, respectively the banking- and transportation sector.

The PAM, in the case of Citibank, can be compared with the multi country manager of TNT Express. In both cases they are responsible for, or have an overview of accounts that have business in multiple countries. The SAM, are account managers on business unit level. They deliver the services contracted centrally. This corresponds with the shared responsibility of the multi country network and the business units, as can be seen in figures 1 and 5.

The essence of TNT Express’ network is to create an environment in which it is possible to negotiate with potential multi country customers and sign a better deal. An example of such negotiations can be as follows: in a multi country network, trade-off and arbitrages are done by the multi country managers. An outcome can therefore result in a discount offered to company X for transportation of documents or goods by TNT Express Germany, to get a profitable deal with company X for TNT Express Benelux, with an overall benefit for TNT Express ultimately.

A multi country networks’ job can have implications on the profit and loss structure of each business unit separately. The advantages and disadvantages of certain ‘global account management’, in this perspective multi country management, will be dealt in the paragraph 2.3.3.

2.3.3 Business unit and profit and loss structure

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their findings; argue that information systems are an important source to calculate the profitability of global customers.

As in mentioned earlier in the example of a multi country deal, the PLS of TNT Express Germany is in principle negatively influenced. At the same time, a boost is generated on the PLS of TNT Express Benelux. This relatively simple example highlights the consequences for the PLS of the business units. It is even more complicated when several business units are involved in a multi country deal.

Citibank had to cope with the same problematic nature: “Revenues where calculated per account and a complex system of reallocation to the local branches was put in place” (Lasserre, 2003) However, later on the WCG lost its success and after seven years it was dismantled. “It was creating a dual structure in the local subsidiaries” (Lasserre, 2003) Birkenshaw et al (2000) also outline the complexity of the accounting system in relation to the information processing technology in their empirical study. Successful account management, in financial terms, is important for each profit-driven organization and therefore incorporated in the objective of this research.

Because the PLS has certain advantages and disadvantages and possibly unintentional meanings, it needs further research for the TNT Express Benelux organization. Next to that a PLS is relatively specific for an organization and especially when it is related to key performance indicators, which is the case at TNT Express.

2.3.4 Global account management

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Lasserre (2003) is scant about this perspective, but gives a clear overview of the four main advantages of global account management and three main issues for implementation as shown in table 1.

Table 1: Lasserre’s (2003) overview of the implementation of global account management

Four main advantages

o The ability to provide full and consistent services to customers, reducing the hassle to negotiate deal after deal

o A lower overall cost for the customer, partly owing to volume purchases o The ability for customers to optimize their procurement strategy

o For the service provider, it enlarges the overall sales and optimizes profitability

Three main implications

o Customer subsidiaries may be reluctant to accept global procurement. Local operations may find that it is cheaper or better to source locally

o Supplier subsidiaries may be reluctant to abandon potential sources of local income for the benefit of the global account

o A complex internal accounting system may be required for reallocating income among subsidiaries

Despite the fact that multi country account management and not global account management is part of the research, it is very interesting to describe the characteristics of global account management. In addition, global account management was often subject to scientific research and many interesting and useful aspects of global account management are relevant for multi country account management in this study. Table 1 can support the evaluation of the sales function with respect to the multi country network.

Before elaborating any further on global account management a clear distinction that is made in this research is that global account management is account management by one responsible actor, often located at the head office and has direct contact with the highest customers’ decision making units. Lasserre (2003) supports this argument. Whilst in the case of a multi country network as with TNT Express, the business units together share the responsibility with the multi country network as explained before. In Galbraith’s (2001) customer-centric approach there is a clear role description for the network coordinator. This coordinator, who can be one of the multi country managers of TNT Express, firstly becomes the global customer voice of the management team. Secondly, the role of the coordinator is crucial in managing customer information and communication across customer teams. Another issue is the PLS, which is also mentioned by Galbraith (2001) and is described as a key measure in setting customer priorities. At last, a careful planning process between countries, customer teams and product lines will help to reach goals set.

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A more in-depth look at global account management results in a description of the operational level. Holt and McDonald (2000) focus on global account manager roles and made a distinction between roles towards the customer, internal focused roles, account planning roles, and goal focused roles. Besides this distinction they focus on the importance of personal contact between the account manager and customer.

Concluding the global account management, it is importance to outline the conditions for global account management. Especially, because the role of the multi country managers and network at TNT Express is not defined yet. The organization of the sales function and the roles of the multi country manager will be shown in chapter 4.

Demand of customers will determine the best possible way of serving them. Montgomery, Yip and Villalonga (1999) mention the importance of the demand of the customer before installing global account management. Yip and Madsen (1996) suggest that global customers are the strongest drivers of a company’s need for global account management. If the derivative of global account management would fit the customers’ demand can be evaluated against the following points (table 2) suggested by Montgomery et al (1999).

Table 2: Demand for GAM (Montgomery et al, 1999)

Demand for GAM

o Coordination of resources for serving customers o Single point of contact

o Uniform prices

o Uniform terms of trade

o Standardization of products and services o Consistency in service quality and performance

o Service in markets in which company has no customer operations

Whether this is the actual situation of the customers of TNT Express, as shown in table 2, should result from the survey. Next to that the importance of this research lies in the points of contact and coordination of resources to serve customers. The focus on price, terms of trade, products and services, quality and performance are behind the scope of this research. Nevertheless, it determines the possibility for a good working sales function.

2.4 Conclusion

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2.4.1 Sub-questions and reflection

Three sub-questions will be answered in this research. Figure 6 shows the relation between the three sub-questions and the possible sequence of this research.

Figure 6: Relations of the sub-questions

An overview of the three sub-questions and answers is presented below.

1. What are the multi country customer characteristics and demands?

A scorecard developed in cooperation with TNT Express Benelux was used as a tool to analyze the multi country characteristics. This scorecard is partially developed on basis of the theoretical concepts presented in paragraph 2.2. The developments, caused by the global trends in the transportation sector were considered as well. The customer movements and the location of the decision making unit in terms of decentralized, joint or central, were criteria in the scorecard.

The answer to sub-question 1 is based on a selection of potential multi country customers. This selection is further analyzed to select the multi country nominees. The answer to sub-question 1 shows mainly the characteristics and certain demands of 10 multi country nominees.

2. What are the design criteria for the sales function in terms of facilitating the revenue growth in serving the multi country nominees?

A scorecard was developed to determine the success factors of a potential multi country customer (chapter 3). Each multi country nominee is evaluated against the scorecard. The design criteria are focused on revenue growth and based on the findings in chapter 3, for a complete design of the sales function many other design

Answering sub-questions

Characteristics Design criteria

Implementation of changes in sales function design to fulfill customers’ needs 1.

Sales function design

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criteria are necessary. Nevertheless three specific design criteria were developed that formed the basis for the sales function structuring. The revenue growth was determined by estimating the revenue potential in the next 3 years (chapter 3). The answer on sub-question 2 is presented in chapter 4 and provides three design criteria.

3. Which structuring of the sales function of TNT Express Benelux in cooperation with the multi country network is able to fulfill the multi country customers’ needs?

The final step was to develop a sales function that is capable to deal with the selected potential multi country customers. The imperatives for the strategic sales organization by Piercy (2006) as shown in figure 7 together with the design criteria developed form the foundation of the new structure of the sales function.

Figure 7: Imperatives for the strategic Sales Organization (Piercy 2006)

The answer on sub-question 3 provides a sales function design that is capable to cooperate with the MCN to fulfill the multi country customers’ needs. The characteristics and the demands of the potential multi country customers were used to develop the structure. Theories of global account management were helpful in setting out a framework for redesigning the sales function.

2.4.2 Schematic overview of the theoretical concepts

The theoretical concepts used in this study are presented in table 3. The level of analysis indicates on which level the variables are researched. The levels represent a gradation in the researched system. In addition, table 3 presents the main theories used for each research variable and to which chapters and sub-questions they are supportive.

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Table 3: Schematic overview of theoretical concepts

Level of

analysis Author(s) Theory Research variable Ch. SQ.

Level 0 Lasserre (2003) Global trends n/a 2 n/a

Level 1 Piercy (2006)

(figure 4) Pressures on the sales system Customer demands & characteristics 3 1,2

Level 1 McLaughlin and

Fitzsimmons (1996)

Strategic directions service

operations Customer demands & characteristics 3 1

Level 1 Piercy (2006) Intelligence Customer demands &

characteristics 3 2

Level 2 Piercy (2006) Involvement MCN & Business units 4 3

Level 2 Daft (2001) Matrix structures Infrastructure MCN 4 3

Level 3 Piercy (2006)

(figure 7) Imperatives for the strategic sales organization Strategic sales organization 4 3

Level 4 Lasserre (2003) Implementation of GAM Infrastructure Sales

function 4 3

Level 4 Montgomery et al

(1999) Demand for GAM Infrastructure Sales function 4 3

Level 5 Piercy (2006) Integration Sales & marketing

function 4 3

Level 5 Piercy (2006) Internal marketing Multi country

management 4 3

(Ch = Chapter, SQ= Sub-question n/a= not applicable)

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3. Customers

This chapter firstly outlines the requirements that are set to select a potential group of multi country customers and the selection methods in combination with an explanation of the chosen sources. Secondly, the information collected about the customers in combination with the scorecard developed in cooperation with TNT Express Benelux is presented, which includes the general characteristics of the potential multi country customers. Thirdly, the analysis of the customer demand is given and the characteristics are formulated. Finally, a summary on above mentioned issues are presented to answer sub-question 1, which contains the description of the multi country customer characteristics and demand.

3.1 Requirements set for potential multi country customers

The goal to set requirements for potential multi country customers was to obtain 10 potential multi country customers of value ultimately. The customers that met the requirements came from two sources. The first source to collect information from was the regional sales manager. Each depot has a responsible sales manager for the operating region of the depot. Often these managers have up-to-date information about their customers and they can estimate the future potential of their customers. The second source was a list of fifty-three customers with the highest turnover in 2007 for TNT Express, except for the global accounts. Both sources will be described in paragraph 3.2. At the start of this research the question was formulated to all regional sales managers, 4 in the Netherlands and 3 in Belgium, to select customers from their current or potential portfolio with the requirements set to become a potential multi country customer. Enumerated with three bullets (table 4).

Table 4: Requirements set for potential multi country customers

Requirements set for potential multi country customers

o Request for services in three or more countries o Need for cooperation between business units o Potential to increase turnover

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Because on forehand, the selection process of potential multi country customers was not committed to paper, each customer proposed by a regional sales manager could theoretically be nominated for a multi country account. The extent wherein cooperation between business units is necessary, requirement 2, was neither known to the multi country manager, nor to the researcher. The same accounts for requirement 3. A dedicated scale was not dictated, nor known by anyone in the organization. Therefore a scorecard (table 8) was developed to determine the value of the proposed multi country account. Simply said, if the account is active in three or more countries, with a certain potential to become a future multi country account, some cooperation between business units is required. The scorecard distinct the high value multi country accounts from the low value accounts and determine which accounts will be treated as a multi country account in the future. A description of the development and functioning of the scorecard can be found in paragraph 3.4.

3.1.1 The process of developing requirements

At the start of this study, the first goal was to make clear what the characteristics of a potential multi country customer group should be. People within the TNT Express organization and the TNT Express Benelux organization are familiar with the global multi country accounts of the global account management department of TNT Express. To some extent they are also familiar with their characteristics, such as operations in multiple countries and strong coordination requested by the customer for their shipments.

It was not known however, what the characteristics and demands of the potential multi country customer group has been, at the moment it was served by the business units. It was not even known which customer belongs to the potential multi country customers group. Therefore, a list of requirements (table 4) was necessary to start the filtration process of selecting customers. In this context a filtration process means that the current customers of TNT Express Benelux were tested against a list of requirements. The list of requirements was formed by intensive consultation between the multi country manager and the researcher. Input was derived from people within the organization, such as account managers (2), business development managers (2), business solution managers (2) and regional sales managers (4).

The first step to formulate these requirements was to collect information on the current portfolio of TNT Express and find out the characteristics of these customers. Because one of the objectives of this research was to increase turnover, it was preferable to focus on a group of customers with a high turnover, as a low percentage of growth in turnover would imply a high absolute growth in turnover in comparison to small customers. Another line of reason was the assumption that those larger customers should be active in multiple countries and would sooner be confronted with problems in coordination between business units.

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order to better serve customers and increase turnover. The degree of coordination is therefore important to determine. If it is low in the group of potential multi country customers, working together between the different business units does not seem to be necessary for this purpose. If turns out, that the degree of coordination needs to be high between business units, cooperation between business units is necessary to serve customers.

The degree of coordination is not directly available from the figures and numbers of current customers. Nevertheless, we assumed that if customers have operations in many countries it indicates that there is a need for coordination between the business units. Therefore requirement 2 (table 4) is related to requirement 1. It makes only a distinction between firstly, customers that are currently active in multiple countries whereby everything is going well and secondly, customers where an opportunity is that they will operate in multiple countries in the future, and or need a degree of coordination between business units to increase the turnover.

The third step was to set a requirement which is related to the objective of the multi country customer group. Therefore, requirement 3 (table 4) was formulated, potential to increase turnover. Because it was on forehand not predictable to set a certain percentage of turnover growth, the characteristics of the potential multi country group were not familiar to the organization, therefore it was decided to name requirement 3 as potential to increase turnover. Later on, the potency will be measured against the scorecard (table 8).

The requirements set for potential multi country customers do not stand alone. Conditions hereto were also set by the divisional head office, namely the customer segmentation as drawn in figure 1, which implies that the global accounts are not tested against the requirements. Furthermore, accounts that have presence on a watch-list cannot be selected for the multi country customers group. A watch list is a list of customers that have in the near future, 0 to 12 months potency to grow in their operations and to become a global account in the future. Currently these customers are too small, or can still be served by a number of business units according to the director of global accounts.

3.2 Data collection Desk research phase

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Field study phase

In the field study phase I have collected the data for above mentioned thirty customers. The purpose of this data collection is to map the customer demands and characteristics. Responsible sales people were consulted to map the customer demands and define the characteristics like possible competitors, revenue potential within the next three years, the number of invoicing countries and the decision making structure.

Interviews were held with 18 account managers, 3 business development managers, 2 senior contract managers, 2 regional sales managers and 1 area Sales manager. To complete missing information 4 major account indoor sales executives of the depots were consulted (see appendix 4 for the role description of the persons that were interviewed). In addition, 3 potential multi country customers were visited to map their demands. This number is relatively low due to the lack of willingness of customers to cooperate or due to internal restrictions by TNT Express Benelux to visit the customer. In addition to the 30 customers selected by the researcher, the sales people from the depots proposed in total 24 potential multi country customers, there was an overlap of 8 customers. So the analysis of the final 46 multi country nominees concerns both, the customers proposed by the sales people and the selected customers by the researcher.

3.3 Sources of potential multi country customers

The criteria for source selection of the customers were set by multi country management by a selection of fifty-three customers of all TNT Express customers with the highest sales figures in 2007. This was the first source of potential multi country customers. I have collected all detailed sales figures per country of these fifty-three accounts.

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Table 5: Potential multi country customers source 1

Censored

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capital Luxembourg. Each depot has a manager in charge for the regional sales. These nine regional sales managers were asked to deliver a list of names of potential multi country accounts based on the requirements of table 4, in addition to source one (table 6).

Actually, most data were collected by interviewing the responsible sales people of the nominated accounts. In that perspective the responsible sales people were the true source instead of the regional sales managers. An advantage of interviewing the responsible sales people directly was that the information was up-to-date and they generally nominated customers with whom they recently noticed multi country opportunities. This is in contradiction with the first source, where the information collected dated from 2007. I have adjusted for the discrepancy of the data collection by making accounts of 2007 up-to-date, with assistance of the responsible sales persons. For the nominated accounts derived from the regional sales managers, I have collected in almost every case the sales figures of 2007. Another aspect, which was hard to control, is opportunistic behavior of the sales people. In that case I rely on the sales figures, which do not contain opportunistic aspects, and the scorecard that mainly focuses on hard data.

Table 6 Potential multi country customers source II

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3.4 Selection of potential multi country customers

The selection of the potential multi country customers is twofold. Firstly, I started with the list of fifty-three customers of TNT Express with the highest sales figures in 2007, to filter out insufficient accounts based on the filter (table 7). Secondly there was a group (24) of potential multi country customers that was provided by the regional sales managers of TNT Express Benelux which is already the selection based on the requirements. I have also checked these accounts by using the filter (table 7). Furthermore this selection was based on the preference of the regional sales managers and their subordinates, business development managers, senior contract managers and account managers, towards customers of whom they expect to become potential multi country customers in the future.

Before selecting the customers of the top fifty-three sales figures list, it was necessary to get further insight in the customers because of the group’s diversity. A filtration process was created to analyze each customer. This filtration process was developed in cooperation with the multi country manager. In addition, characteristics regarding revenue per country, number of invoicing countries and total revenue of the top fifty-three customers are documented (appendix 1-3).

The filter used to select potential multi country customers consists of 3 steps, which are listed in table 7.

Table 7: Filter to select potential multi country accounts

Step Filter # out of total

1 < 3 invoicing countries 11 of 53

2 Former GAM accounts 2 of 53

3 Watch list accounts 10 of 53

Total remaining 30 of 53

(Based on figures of 2007, total sample: 53 customers)

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Table 8: Characteristics of the top-53 customers of TNT Express (except for GAM)

Characteristic Average St. dev. Sample

Revenue % per lead country 66,51 26,93 53

Revenue % per runner-up country

17,54 10,57 45

(Measured without 100% lead countries)

Revenue % per third country 8,61 6,87 42

(Measured without 100% lead countries and or 100% lead- and runner-up countries)

Number of invoice countries per customer

11* 8,43 53

Revenue per customer censored censored 53

(All calculations based on figures of 2007, total sample: 53 customers. See appendices 1-3) (* Absolute value = 11,43)

(St. dev = standard deviation formula used for the whole population (Carter & Williamson, 1996))

The characteristics described in table 8 and 9 were chosen to determine the value and distribution of the value of potential multi country customers. Lead country means that the largest part of the revenue is generated in that specific country. The business unit of TNT Express responsible for the lead country is leading in the contacts concerning the customer. The average revenue distribution for leading countries is 66,51% (see table 6). This implies, that an average of 66,51% of the revenue per customer is dedicated to one country. The second country in row, the runner-up country, collects an average of 17,54% of the revenue. The third country receives on average 8,61% of the revenue, while the total revenue per average customer is divided over 11 countries. The latter fact implies that on average 8 countries (11- lead- runner-up and third country = 8 countries) have to divide 7,34% (100%- 66,51%- 17,54- 8,61= 7,34%) of the total revenue.

Table 9: Characteristics of the selected potential multi country accounts

Characteristic Average St. dev. Sample

Revenue % per lead country 63,43 24,18 30

Revenue % per runner-up country 16,00 10,40 30

Revenue % per third country 7,34 6,15 30

Number of invoice countries per customer 13* 7,14 30

Revenue per customer censored censored 30

(All calculations based on figures of 2007, total sample 30 customers. See appendices 1-3) (* Absolute value = 12,63)

(St. dev = standard deviation formula used for the whole population (Carter & Williamson, 1996)