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Lotus Case Study

Lotus Case Study

Lotus Development Corporation is one of the leaders in its segment of the market. In spite of the fact that the company has entered the market at the early stages of its development its current leading position is under a serious threat, though the perspectives of the company may be quite good as well. Such a controversial situation is basically provoked by the rapidly changing market which demands the implementation of new approaches to sales management. To put it more precisely, at the moment, the company faces a dilemma either to refuse from its dealers and develop direct sales to customers, or, on the contrary, continue the traditional strategy of sales through the network of dealers.

First of all, it should be said that the dilemma is really serious and it is even possible to estimate that postponing the solution of this problem may threaten to the future of the company in the market. In fact, it is necessary to underline that the challenge the company faces at the moment is the result of the long lasting process of the development of the market of software products where the company traditionally had strong positions. In this respect, it should be pointed out that since the beginning of the development of the market the company was under a serious risk of being in a worse position compared to its major competitors. Obviously, the software market was rapidly developing and, what is more important, the permanent and rapid implementation of new technologies forced the company to keep pace with its major competitor, which also grew very fast since the industry was new and focused on the implementation of innovative technologies. As a result, at the beginning there were a lot of minor companies that could a technological breakthrough and take the leading position in the industry. Nevertheless, in such a situation, Lotus managed to keep pace with its major competitors Microsoft, Ashton-Tate, and IBM.

The situations started to deteriorate in the mid-1980s when the demand on microcomputers decreased consistently. As a result, the company’s product sales started to decrease too. In such a situation, the implementation of new products proved to be an important way to maintain the positive performance of the company in the market. In such a way, after the successful 1-2-3 spreadsheet, there were implemented Symphony, and later Jazz that helped the company remain competitive.

On the other hand, there remained a serious problem concerning sales management. In fact, the management of the company started to develop a direct sales network and, in this respect, hardware producers and educational institutions were the major customers the company sold its products directly. Obviously, this was quite profitable since the company sold directly its software to hardware companies and, therefore, supplied its products to the rest of the companies along with hardware devices, while the direct sales to educational establishment contributed to the loyalty of students to Lotus as a recognizable and reliable company.

In such a situation, the development of the direct sales network could be very perspective since the company could decrease the price of its products and make competitive in the market. However, such step would also mean the cannibalization of dealers. In fact, Lotus would have to compete with its own dealers who would be apparently hostile to the company in case it refused from their services. On the other hand, the effectiveness of sales could decrease substantially since the company did not have a sufficient amount of employees nor it had the well-developed network to sales directly to customers. What is more important is the fact that the price of the product is often secondary for customers, instead they need a constant and reliable technological support, which the poorly developed network of Lotus could hardly provide.

Obviously, in such a situation, the company should not refuse from the idea of direct sales because of possible benefits from such a step which could improve the competitive position of the company in the market. At the same time, the development of its own network would be quite expensive and time consuming. This is why it is possible to recommend either to acquire or merger with a network of one of its dealers in order to have a widely spread work that could provide customers with the essential technical support and have a positive brand image. In such a way, it will be possible to save cost and get a working network simultaneously. Naturally, the further development and even rebranding may be needed but this way is more effective than the development of a totally new network which effectiveness would be under a question.

Thus, it is possible to conclude that Lotus should not waste time and implement the recommended change in a possibly shorter term after a profound analysis of the potential of its possible partners or target dealers networks.

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