Alchemy Training Firm

Company
Alchemy was a Shanghai-based training firm founded in 1997.
In 2003, the company had a staff of 18 with revenue of RMB8 million (Cdn$1.4 million)
Branches in Beijing and Guangzhou.
The company was owned by the three founding partners:
Ye Pei : engineering background with eight years of sales and sales management experience.
Li Min : was an excellent sales rep at a leading information technology (IT) company. Had client
base.
Gan Junyi: a masters degree in management and, in 1995, joined the China office of Milkway, an
international training firm, as a trainer. She quickly became one of the top trainers in the company,
focused on sales training
While Gan and Ye were brewing the idea of setting up a training firm, the timely involvement of Li
cemented the team.

Company (contd.)
Ye, Li and Gan each owned one-third of the new company. On decision-making, they agreed that
decisions critical to the viability and healthy development of the companymust be through consensus
wherever possible. In cases when they couldn't reach a consensus, majority rule would apply.
Alchemy started in sales management training, the hottest topic in the Chinese market for corporate
training at that time. As one of the first local Chinese companies to move into this market, Alchemy
was competing primarily with powerful international firms.
Alchemy was more willing to provide tailor-made sales management training programs customized for
customers in both depth and breadth; the programs were customized to suit the particular needs of
different industries, products and the size and business nature of the company. Besides, the company
was also able to provide flexibility in time and location.
As the business grew, Alchemy contracted with two external trainers, both successful sales
practitioners. These external trainers were brought in to run courses when demand was high, but they
were not permanent employees.
Organization : There were three divisions in the company:
Research And Development (R&D): brain divisionof the company - Relatively new and small, the
department was charged with the responsibility of developing new, hottopics for corporate
training. Their responsibilities included market surveys, customer satisfaction surveys, feedback
and evaluation,etc
Sales : muscle division - was the largest with six full-time sales representatives
Operations : Blood of the company - Li, the vice-president of operations, was charged with three
lines of responsibilities: customer service, financial/accounting and information
technology/automation

Sales Management Reps
All the sales representatives were recruited, trained and managed by Ye himself.

Yes criteria for selecting a sales representative was pretty simple: candidates needed a bachelor of arts
degree, an outgoing personality and motivation.

The sales reps were paid a straight salary plus bonus. While the entry level salary was more or less the
same from person to person, the year-end bonus varied a lot.

In the best cases, the bonus could be twice the annual salary, and in worst cases, only half the salary.
The bonus was calculated on the basis of the revenue generated from accounts, rather than on the
number of accounts opened.

Professional training industry
The demand for training began to pick up from the mid-1990s, spurred by three factors: 1. The benefit
and effect of good training programs were recognized by more companies; 2. The tougher competition
in the market forced companies to capitalize more on human resources in order to stay competitive
and keep market share; and 3. The flock effectand me-too mentalityhelped fan the need for training
programs.
The training market was segmented, by and large, into two parts:
Public training - referred to the training seminars and workshops run for the general public. The
training providers advertised their training topic through the media: newspapers, magazines, Web
sites, e-mail, broadcasting, etc. in order to entice the candidates with similar interests in a certain
topic area to attend seminars or workshops.
Corporate training - referred to the training programs provided exclusively to the internal
employees of a certain organization. The trainers delivered the training program at the corporate
site so the trainees would enjoy the maximum flexibility. The market for corporate training had
been growing rapidly not only the large companies spent more on training, but smaller companies
began to spend here as well.
Competition
During the mid to late 1990s, many small local Chinese training firms (more similar to Alchemy)
emerged.
Unlike the multinational training firms, the local companies were usually set up by one or two
founding partners who had some expertise in certain functional areas. They acted as trainers
themselves, particular into the early stages of development.
The local companies usually charged 30 per cent to 40 per cent less than the multinational companies,
although their quality of training was, in many cases, comparable or even superior to that of the
multinationals.
By 2001, the need for new topics grew, and this diversification posed challenges to the local training
providers due to the nature and structure of the organizations. Under these circumstances, many local
training firms had to resort to contacting external resources, namely practitioners and/or academics,
for a growing supply of good trainers.
Price
For a corporate training program, there were two ways of pricing:
A flat rate - meant that the same fee was charged, regardless of the number of participants.
A variable rate - the fee for training increased for each incremental trainee.
Ye estimated that the 2003 price for a generic training program plummeted to roughly one-quarter of
what it was in 1997.
Nevertheless, the market prices for fresh and emerging topics still remained strong: about RMB20,000
to RMB30,000 for a corporate training program of 10 to 20 people, roughly twice as much as those for
generic topics; such as sales training. If the trainer was well known the price could be even higher.
New Training Topics
The research done by the R&D department endorsed Gans observation: the demand for supply chain
management was robust.

Gan and her department quickly contracted Mr. Chen, from the University of Commerce and Industry,
as an instructor. Though well-known, Chen charged a flat rate of RMB8,000 per day for a one-day
corporate training seminar and RMB13,000 for a two-day seminar.

Chen was responsible for developing the content of the program and had ownership of it.

The members of the Alchemy management team could not agree over pricing: Ye wished to price the
supply chain course high in order to maintain the premium brand equity of Alchemy and because he
felt they could still skim the market. Gan felt it would be more important to enlarge Alchemys share in
the emerging market first, and therefore she proposed to price at the lower end. Li was not bothered
by pricing; rather, he was more concerned with the way the program was going to be sold. He thought
it would be more cost-effective to buy a mailing list from China Federation of Logistics and Supply
Chain Management and sell the program online. Finally, they all agreed to price the new programs in
the middle and kept online sales of the programs as a backup option.

Sales calls
September 25, 2003, was a busy day for Andy Wong. The top sales representative of Alchemy, a well-
known training firm headquartered in Shanghai, Wong had just visited three potential clients to sell
two training seminars on supply chain management the freshly launched training programs
developed to target the emerging segment in supply chain management.

It was 6 p.m. Wong was still in his office preparing his sales call reports for the three meetings and
deciding what he should say to his sales manager in tomorrow's weekly sales meeting.
Sales call 1
Company - Durapak, a large Japanese-owned packaging materials manufacturer. Wong looked
cheerful and confident. He knew Durapak spent handsomely on purchasing raw materials and
equipment every year, and the company had just consolidated its purchasing and transportation
department into a new supply chain department. Besides, Alchemy had done sales training for
Durapak with very successful evaluations. Wong was also friends with Wei, the manager of the
corporate training department.

Concern Background & reference of the trainer - Chen Fan as the program must be approved by the
director of our supply chain management department.

Wong was not expecting that Wei would ask for references because she had been quite easy-going and
flexible when he sold the Sales Management Course to her last time.

Sales call 2
Company - Tiandi Instrument : a medium-sized but fast-growing private enterprise that made
electronic components for various industrial manufacturers. Wong knew this company through the
referral of the companys sales manager Zhou, who had attended Alchemys sales training program a
year ago when he was working for Tiandis competitor.

Concern Cost of the training for 8 people : Wong quotes that it will be in a range of RMB1 600 to
RMB1,700 per head for a seminar day for up to 10 people and RMB1,000 for up to 20 people, and 800
for up to 30 people.

According to Liu (from Tiandi),the price was not competitive at all. He was expecting RMB500 to
RMB600 or something. Tiandi is not a multinational, so the company wanted to have affordable and
cheap training.
Sales call 3
Company : Shanghai Aihua Trading Corporation, a state-owned company and one of the sourcing arms
for the municipal public sectors.

Concern : Ethics training requirement - State-owned enterprises used to have an image of poor
financial performance and heavy waste. Abuse of power is no secret in many key positions. The
purchasing department is a sensitive part in the sense that buyers are prone to corruption, but we do
have a plan to elevate the ethical standards to immunize them from those so-called occupational
crimes such as taking bribes. So what we need most in the short run is Purchasing Ethics with some
legal content. Meeting with Mr. Guan:
Questions