NOTE - : Please take your time (24hrs, 48 hrs ) on this, I am not in hurry, but please provide all complete answers, including numeric part (in Excel),

Discussion Questions

1. Discuss the importance of CRM strategies for companies such as Ajanta. Evaluate the direct and indirect effects of CRM initiatives on Ajanta.

2. What are the possible ways of segmenting Ajanta's customers?

3. What is KAM? Discuss the different strategies Ajanta could adopt for KAM.

4. How did the relationship between Ajanta and SF evolve over time?

5. Why did Ajanta continue its relationship with SF?

6. What should Ajanta do about its recent order from SF

AASIGNMDENT - AJANTA PACKAGING: KEY ACCOUNT MANAGEMENT W18241

Offer good quality products at a reasonable cost and provide exceptional customerservice,

and the customers willremainloyal.Pushpak Agarwal, managing director, AjantaPackaging

OnOctober18,2017,duringfestivalseasoninIndia,AjantaPackaging(Ajanta)shiftedbasetoanew,modern officeinNewDelhi,India.Atthattime,PushpakAgarwal,themanagingdirectorofAjanta,waspleasedwith the company's growthover the past five years?Ajanta had reported revenue of?604 million¹ in 2016, a growthof21.3percentoverthepreviousfinancialyear.Agarwalseemedpositiveaboutthecompany'sfuture andwasplanningforthenextfiveyears.Hispositivemooddissipated,however,whenhissonDeepanker,a directoratthecompany,walkedintohisofficeseemingextremelyconcerned.Agarwalaskedhisson,"Why do you look worried,Deepanker? Is anything bothering you?"

Deepanker's reply acquainted his father with a problem he had not been anticipating. "Have you seen the rate quotation from our biggest client, S.F. Foods [SF]? The company is offering a? 50 million order with profitmarginsoflessthan7percent.TheywantustosupplythegoodsbyDecember1,2017,buthaveset the payment period for 60 days. Our key account management needs to bereworked."

InadditiontoSF'sorder,Ajantahad?90millionworthofordersfromothercustomersthathadprofitmargins ofmorethan10percentandthatweretobesuppliedonDecember15,2017.SupplyingtoSFwitha60-daypaymentperiodriskedjeopardizingotherorders,whichcouldresultinhighercustomerdissatisfactionandthe possible defection of customers to competitors. Ajanta had good customer-management practices in place,with more than 80 per cent of its revenues coming from repeat customers.One cause of concern for thecompany,however,wasitsover-relianceonSF,whichaccountedfor15percentofAjanta'sbusiness,and10 othercustomerswhomadeupalmost50percentofthecompany'stotalrevenue.

DeepankerwasawareoftheworthofacompanysuchasSF?andoftheconsequencesofdefaultingonthe otherorderswithahigherprofitmargin.HewantedtoretainbusinesswithSFaswellaskeephiscompany's commitments to its vendors and other customers. Now that he had a larger buyer base of 1,700 customers, and realizing the importance of doing well by all of them, Deepanker had to consider some serious questions: Would it be wiser to accept the order on SF's terms, or renegotiate the price, payment date, and deliveryscheduletofavourAjanta?WhatprocessescouldAjantaadopttopreventsuchasituationinfuture?

COMPANY BACKGROUND

Deepanker joined Ajanta in 2005 after completing his MBA as a gold medalist from the Institute of Management Technology, Ghaziabad. He wanted to lead the change in the three-decade-old company set upbyhisfather.Ajanta,whichbeganwithaninitialinvestmentof$500²andonlythreeemployeesin1981, hadover100employeesandanetrevenueof?604millionin2016(seeExhibit1),andwasamongthetop glass bottle suppliers inIndia.

The company began by supplying bottles, vials, and jars to pharmaceutical companies and manufacturers of fast-moving consumer goods, and glass bottles to large liquor and wine companies. Over time, it diversified and changed with the times. Soon after Deepanker joined the company, he effected some rapid changes in the business model to attract new customers. An authorized stockist and distributor for Hindusthan National Glass & Industries Ltd., Ajanta became the first company in the Indian bottle-trade industrytobecomefullycomputerized.AlthoughAjanta'scustomersstillpreferredglassbottlesand90per cent of its business came from glass bottles, the company began offering polyethylene terephthalate(PET) bottles, crown caps, and glass bottle printingservices.

Ajanta's success was driven by sourcing service contracts with various global manufacturing companies. The idea was to put in place strong procurement and supply-chain systems and a diverse supplier base to eliminateoperationalrisks.HavingwarehousesinmultiplelocationsgaveAjantaastrategicadvantageover competitors in that it was able to offer its customers lower freight costs, resulting in higher sales for the company. Ajanta could also capitalize on the location advantage it gained from its four marketing offices acrossnorthernIndiabyofferingflexible,just-in-timeservicetoitscustomersbecauseoflowerleadtimes.

ByOctober2017,AjantawasanichesupplierofglassbottlesinIndiaandhad1,700customers.Notonlywasitaquality-focusedandcost-effectivecompany,butitalsooffereditscustomerspromptandcustomizedglass-packagingsolutions.Wide-rangingqualityproductsandprofessionalexpertisegaveAjantamusclepowertonegotiatewithitssuppliersandcustomers,andforgesuccessfulandprofitablecollaborations.

Deepankerwasasticklerforcommitmentandqualityofservice.Becausemorethan80percentofAjanta's revenues came from repeat customers, Deepanker knew that his business triumphs depended on customer loyalty. Thus, he worked to enhance Ajanta's customer-relationship management practices, as this augmented the company's use of resources when providing customizedservices.

Deepankeralsointroducedmanyinnovativepackagingmaterialstoservethegrowinghotel,restaurant,and cateringsegment.Althoughthecompanyhadnopresenceinthefoodsegmentuntil2015,byOctober2017, 40 per cent of its business came from that segment (see Exhibit2).

INDIAN PACKAGING INDUSTRY

The global packaging industry saw an annual global turnover of around $550 billion in 2015, of which India's share was around $16.5 billion. The Indian packaging industry was ranked 11th in the world, and its turnover was projected to reach $32 billion by 2020.³

In the five-year period between 2016 and 2021, the Indian packaging industry was expected to grow at a compoundannualgrowthrateof9.2percentasopposedtothe6.2percentgrowthregisteredbetween2011 and2016.Factorssuchasrapidurbanization,asurgeinmiddle-classconsumers,anorganizedretailsector, and the e-commerce boom were all key drivers of growth in the Indian packaging industry. Growth was also fuelled by innovations such as the development of lighter packaging with better barrier properties. These changes increased the demand for new packaging formats, such as different sizes, materials, and strengths.Theprojectionsfor2016-2021expectedthesoftdrinkandfoodindustriestocapturethehighest packaging market share by units, with a share growth of 3.4 per cent and 1.3 per cent, respectively. Glass andrigidplasticpackagingmaterialwereexpectedtobethemajorsharegainers,withmarketsharegrowth of 0.7 per cent and 0.6 per cent, respectively, during the sameperiod.⁴

GLASS BOTTLE INDUSTRY

The global glass packaging market, which was worth $57.22 billion in 2017, was estimated to grow at a compound annual growth rate of 4.5 per cent and reach $108.3 billion in 2025.⁵ In 2015, the Asia-Pacific (APAC) region led the market with a market share of 33.7 per cent, followed by Europe with a share of

28.5percent.Factorssuchasariseindisposableincomeandgreateracceptabilityofalcoholconsumption fuelled increased demand for glass bottles in the APAC region. The growing beer industry in India was expectedtoincreasesalesandmarketshareintheregion.Whiletheindustrywaslosingitsshareinregions such as the United States and Western Europe, it was gaining share in India because of greater penetration level availability. Cost advantage, lighter and thinner glass products, and sustainability were important factors aiding industry growth: glass bottles were about 30 per cent lighter than they had been in the past decade,whichresultedinbetterprofitsformanufacturersbecauseofreducedrawmaterialcosts.Yet,glass packaging was facing rising competition from other materials that were stronger, lighter, and cheaper to manufacture and transport.⁶

Its recyclability, non-corrosive nature, non-permeability, and zero rate of chemical interaction made glass a suitable packaging material for beer, soft drinks, beverages, and pharmaceuticals.⁷ Glass packaging ensured that the products inside the bottles retained their strength and/or aroma and flavour. It also helped preservefoodandbeveragesforalongertime,andpreventedcontamination.Packagedglasswastrustedto safeguardnotonlypeople'shealthandtaste,butalsotheenvironmentbecauseitwas100percentrecyclable and had neutralreaction.⁸

The introduction and growth of the organized retail market led to both competition and innovation in the Indianglassbottle-packagingindustry.Considerableupgrades,andresearchanddevelopmentledtonewer designsandtechnologiesinglassproduction.Whilenarrowneckpressandblowprocesstechnologyhelped increase the productivity of lighter and thinner containers, which made glass packaging cost effective and consumer- and ecology-friendly, distribution was improved by a well-developed retail network. Because ofthesepromisingfactors,theindustrywasexpectingimmensegrowthpotentialthroughto2021.⁹Because ofconsumers'viewofglassasapremiumpackagingmedium,Ajanta'spromotionalcampaignsemphasized the benefits of glass packaging (see Exhibit3).

The glass bottle industry was characterized by large buyers in each segment, and the demand for glass packaging had become highly seasonal, especially for products such as soft drinks, cosmetics, and beer.

Challenges Facing the Indian Glass Packaging Industry

Although glass was viewed as a premium packaging medium, the Indian glass packaging industry faced some serious challenges.

Rising Prices of Raw Materials

The priceof raw materials was always rising, whichput immense cost pressureson the glass packagingindustry.Asaresult,glassbottlesbecamecostlier,drivingsmallerbuyerstolookforotherpackagingoptions such as plastic and Tetra Pak cartons. For Ajanta, this meant spendingmore money on raw materials. Moreover,increasedwarehouserentalscosts,interest,andfreightcostsputimmensepressureonprofitability.

Price Wars

The number of companies selling glass packagingin Indiahad risensince 2014, leadingto increased competition, price wars, customer poaching among suppliers,and clients renegotiating purchase costs.All of these problems considerably reduced profit marginsin the industry.In lightof the slashed pricesof competitors,manyofAjanta'scustomerswantedthecompanytorevisepricesbeforetheyplacedtheirorders.

Increased Use of PET bottles

Light, clear, tough, sustainable, and an excellent barrier to oxygen and carbon dioxide?the many positive attributes of PET made it the most opted-for packaging medium among several industries that had previously favoured glass. This had helped PET gain market share at a rapid rate and even replace a considerable portion of glass bottles, which, in contrast, were extremely fragile, prone to breakage, and costly. While consumers chose PET plastic for its convenience, ease of use, lightness, and sturdiness, marketers were attracted to the material because of its light weight, cost effectiveness, product safety, and pliability for their execution of innovative package designs; retailers found the unbreakable PET packages easy to stack. PET was the packaging of convenience for companies in the soft drink, mineral water, fast- moving consumer goods, pharmaceutical, agrochemical, wine and liquor, and food sectors.

KEY ACCOUNT MANAGEMENT AT AJANTA

Deepankermaintainedanear-obsessivefocusonAjanta'skeycustomersbecause80percentofitsrevenues came from repeat customers. The company had two sales teams for customer management?one managed the key accounts and the other catered to the other customers. Deepanker knew that developing and maintainingsolidrelationshipswithkeyaccountswascriticaltothecompany'ssuccessinthehyper- competitive market. While Ajanta's churn rate¹⁰ for 2016 was 4.5 per cent, which was quite lowcompared to the competition, the defection rate¹¹ was 11 percent.

Until 2014, the company's focus was big clients. It also supplied to around 400 customers, some of which were major accounts. Most large deals were based on price and quantity, so when many of its bigger customers delayed payments, Ajanta's profitability was severely dented. Deepanker wanted to reduce this severe dependence on the company's larger customers, so it began encouraging smaller orders to increase its customer base. This strategy paid off, and by October 2017, Ajanta had 1,700 customers. Many of its small-order customers wanted unique packaging, and were less price sensitive than its larger customers were.Forexample,thefirstorderplacedbyonesmall-ordercustomerinMay2015wasforonly35bottles, but by 2017, that customer had begun to buy around a millionbottles.

Until 2015, the company assigned new designs to manufacturers after the receipt of orders, but beginning in January 2017, it began maintaining an inventory to cater to new and old customers.

Key Accounts

Ajanta had many renowned, revenue-generating customers, including Patanjali Ayurved Limited, G.K. Dairy and Milk Products Private Limited (famous for the brand Gopaljee), Veeba Food Services Private Limited, Amrit Food, Coffee Day Global Limited (also known as CCD), Carnation Hospitality Private Limited (famous for the brand Barista), Super Milk Products Private Limited, SF, and Akums Drugs & Pharmaceuticals Limited.

S.F. FOODS AND AJANTA PACKAGING

SFwasaleadingmanufacturerinIndiaofsauces,pickles,jam,custardpowder,instantmixes,noodles,and baking powder. The company was also a leading exporter of these products to the United States, Europe, and the APAC region. SF reported net revenue of?15.5 billion in 2016 and registered year-over-year growth of 23 per cent over 2015. Its expansion plan included launching new products and increasing its footprint across Australia and Africa by 2018. Purchase decisions at SF were made by a purchasing committee comprising a member each of the marketing, quality assurance, finance, and procurement departments. The decisions were based on price, quality, previous experience, capacity, delivery period, andpaymentterms.SFhadgoodlogisticsmanagementpracticesinplace,andinitiallyhadagooddelivery time?of 45 days?to Ajanta. This time frame was sufficient for Ajanta to procure the required material from the manufacturer and supply it to SF. SF bought bottles from three companies, but the majorityshare (of 60 per cent) went toAjanta.

SF had been Ajanta's customer since 2001. It was one of Ajanta's oldest and most important customers, andconstitutedaround15percentofAjanta'sbusiness.However,althoughAjantareceivedgoodbusiness from SF, the profit margins were very low. Also, over time, SF had begun making payments after 60 days and sometimes even as late as 90 days. This did not work well for Ajanta, as it was expected to pay its suppliers within 30 days. While this affected Ajanta's profitability, Deepanker continued to compromise because of the volume of SF'sbusiness.

THE DILEMMA

During 2015-2017, Deepanker made many changes in the business model, shifting away from Ajanta's heavy reliance on its large customers and particularly on SF. Deepanker could see the need for a new customer-management system to service the company's customers more effectively, but was still unsure about how to segment the customers. He struggled with his company's relationship with SF?although it promised sizeable business, its arm-twisting on payment dates and deliveries made it increasingly difficult to manage. SF's large?50-million order came with very low profit margins, and accepting the order with a60-daypaymentperiodandashortdeliveryturnaroundwascertaintojeopardizeAjanta'spaymentstoits vendors,inturnaffectingthesupplyoforderstoitsothercustomers.WantingtoretainSF'sbusinesswhile keepinghiscompany'scommitmentstoitsvendorsandothercustomers,Deepankerhadtodecidewhether toaccepttheorderonSF'sterms,orrenegotiatethetermstosuitAjanta.Healsowonderedwhatprocesses he could follow to prevent such a situation in thefuture.

EXHIBIT 1: SELECTED FINANCIALS FOR AJANTA PACKAGING (IN ? MILLIONS)

	2012	2013	2014	2015	2016
Sales Turnover	204	306	396	498	604
Other Income	12.2	22.4	32.4	42.6	56.6
Total Income	216.2	328.4	428.4	540.6	660.6
Total Expenses	182.2	275.4	352.6	443.7	537.6
Operating Profit	34	53	75.8	96.9	123

Note: Figures have been changed to maintain confidentiality. Source: Company documents.

EXHIBIT 2: BUSINESS FROM DIFFERENT SEGMENTS

Category	% Share in 2015	% Share in 2016	% Share in 2017
Food	0	15	40
Pharmaceuticals	80	75	50
Others	20	20	10

Source: Company documents.

EXHIBIT 3: AJANTA PACKAGING PROMOTION POSTERS

Milk Water Beverages Jam Pickle Honey Spreads Cake Juices Milk Beverages Glass Preserves The Soul Of Your Product Glass is Recyclable Pharma Be Healthy, Use Glass, Be Smart, Be Safe, Be Sure. www.ajantabottle.com