Castrol India’s Channel Dilemma: Play Safe or Disrupt to Change the Rules of the Game?

In August 2021, the director of sales at Castrol India Limited (Castrol), headquartered in Mumbai, was concerned about how best to prepare the company for the future. Through the company’s strong distribution network and digitized tech stack, he and his sales team had ensured efficient dealings with its trade partners of distributors, retailers, and mechanics. After meeting with Castrol distributors, distributor sales representatives, distributor field marketing representatives, and key account executives, he was aware that the distributors’ return on investment was declining due to increasing costs and lower margins. He wondered whether these three frontline sales teams were working synergistically and leveraging each other’s strengths, and he was aware that the next decade would see immense changes in the basic structure of the Indian automotive lubricant market. While Castrol was a leader in this market, with about 20 per cent of the market share, this share had not increased in accordance with the company’s ambitions, and the company now faced competition from existing and new industry players. The sales director was considering three options to transform Castrol’s distribution model: (1) making incremental changes that could bring in efficiency in the existing system, but might require effort and increase in distributor margins; (2) appointing an independent task force to suggest and experiment with new, innovative distribution models; or (3) implementing a managed salesforce route-to-market model, which would involve hiring a specialized third-party sales solution provider and outsourcing distribution differently. Each option had its complications, risks, and rewards. Which one should he implement?

This case is suitable for use in MBA and graduate-level management programs. It can be useful in sales management, channel management, and strategic marketing courses. It highlights the challenges encountered with attempts to disrupt an existing, well-established distribution system. Instructors can use the case to demonstrate the choices between the resources that can be deployed and the control of a large multinational company would like to have. The case helps students assimilate the nature of outsourcing and the factors that can impact decisions about this, including channel conflict. After completion of this case, students will be able to do the following:<ul><li>Describe the dynamic business environment of the automotive lubricant industry, which a market leader must consider for its growth.</li><li>Assess the impact of changing consumer behaviour in a large and complex distribution system.</li><li>Outline the fundamentals of an indirect sales route-to-market model, and explain how to apply this while balancing a firm’s control against the number of intermediaries.</li><li>Evaluate various options for transformative growth using the concepts of disintermediation, reintermediation, and management of anticipated conflict.</li></ul>

• channel management
• distribution
• disintermediation
• salesforce