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Effective Salesforce Management Practices: A Real Option Approach

Article Details

Pub. Date	: March, 2018
Product Name	: The IUP Journal of Business Strategy
Product Type	: Article
Product Code	: IJBS11803
Author Name	: Pankaj M Madhani
Availability	: YES
Subject/Domain	: Management
Download Format	: PDF Format
No. of Pages	: 18

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Abstract

Salesforce are strategic assets to the sales organization, but their returns may not remain stable over time due to changes in business conditions. Salesforce investments are similar to investments in other types of real assets and thus carry uncertainties. The study identifies the uncertainties of return, volume and costs associated with salesforce and discusses various salesforce ‘options’ which are capabilities generated by some Salesforce Management (SFM) practices and their combinations. The ‘real options’ approach enables organizations to evaluate investment opportunities of salesforce in uncertain environments and underscores how these investments create value through future choices. The study also develops various frameworks for managing different types of salesforce uncertainties through better management practices.

Description

For sales organization, salesforce are an asset that can provide value and competitive advantage; however, such assets have associated uncertainties and risks. Salesforce represents the single largest marketing investment for most Business-to-Business (B2B) companies. In aggregate, the US companies alone spend more than $800 bn on it each year—three times more than they spend on advertising (Steenburgh and Ahearne, 2012). Salesforce are valuable assets to the sales organization, but their returns may not remain stable over time due to changes in business conditions. The ‘real options’ approach enables organizations to evaluate investment opportunities of salesforce in uncertain environments and highlights how these investments create value through future choices. Researchers apply this logic to analyze the uncertainties associated with human assets in sales organizations (i.e., salesforce) and discuss how sales organizations manage these uncertainties through salesforce ‘options’ which are capabilities generated by some Salesforce Management (SFM) practices and their combinations. The paper discusses these practices and develops an options model for managing different types of uncertainties.

The issue of managing the uncertainties related to salesforce has been unexplored in the area of SFM, leaving a gap in existing research. The paper addresses this gap in the literature and provides an alternative theoretical rationale on how SFM practices may create or maintain the value of salesforce. The study presents the ‘real options’ view currently popular in the field of strategic management. Real options theory, explicitly addresses the issue of investment choices for future resources and capabilities. It assumes that organization develops a level of foresight sufficient to invest in resources and processes with ‘options’ characteristics that provide implicit or explicit claims on future opportunities and generate flexibilities for future investments (Leiblein, 2003). In other words, it analyzes how sales organizations can lay claim to future rent-generating capabilities through investment in salesforce options. The paper offers a theoretical framework that investigates the link between uncertainty, salesforce and sales organizations’ capabilities to manage uncertainty.

In the following sections, the paper provides a brief overview of the real options concept and develops real options framework focusing on the uncertainties that it seeks to address, apply this framework to identify the types of uncertainties associated with salesforce and examine the implications of this framework for making decisions regarding salesforce investments in organizations through SFM practices.

Keywords

Business Model Innovation,Salesforce Management (SFM) practices and their combinations,Business-to-Business (B2B) companies, Enhancing Salesforce Flexibility With Real Options Approach.

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