Haverwood Case Analysis Essay

Haverwood Furniture Individual Summary
Introduction:

In 2008. Haverwood Furniture and Lea-Meadows Inc. merged into one company. The issue at manus involves unifying the merchandising attempts of the two companies. They both go about selling their merchandises otherwise and the best program of action is unsure. John Bott. of Haverwood. believes that Haverwood gross revenues representatives implement the best merchandising scheme whereas Martin Moorman. the national gross revenues director at Lea-Meadows believes that they have the superior scheme. Haverwood is a fabricating company that makes medium-high priced furniture made out of wood. Net gross revenues for Haverwood was 75 million in 2007 with a before revenue enhancement net income of 3. 7 million. They employ their ain gross revenues representatives who represent 1000 different retail histories for the company. These representatives earn an one-year wage of 70. 000 ( plus disbursals ) and have a committee of. 5 % of the company’s net gross revenues. Haverwood believes that their gross revenues forces are extremely regarded in the furniture industry. knowing about wood furniture. and willing to work with purchasers and retail gross revenues forces.

The lone negative facet about Haverwood’s selling scheme is that all of the retail histories that the amalgamation will make make non transport the complete Haverwood line. In order to battle this. Botts was instructed to force the gross revenues reps. pressing them to do 10 gross revenues calls per hebdomad and increasing the call frequence to seven calls per twelvemonth. On the other manus. Lea-Meadows is a little. in private owned maker of upholstered furniture for life and household suites. The company is known for utilizing some of the finest cloths and frame building. Their net gross revenues in 2007 were 5 million. Entire industry gross revenues for upholstered furniture makers were 15. 5 billion.

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This figure is expected to increase 3 % yearly in the hereafter. Lea- Meadows employs 15 gross revenues agents. These agents besides represent several makers of noncompeting furniture and place trappingss. Gross saless agents are paying 5 % of net company gross revenues. The agents name on forte furniture and section shops. They called an estimated 1000 retail histories in 2006 and 2007. All of the agents had relationships with and worked closely with their retail histories.

Options:
Option 1: Assign Lea-Meadows Line to Haverwood Gross saless Force

Botts believes that delegating the line to Haverwood gross revenues force was the right determination because they have a professional. adaptable and knowing gross revenues force and they know many of the purchasers personally who were responsible for upholstered furniture. In add-on the Haverwood gross revenues squad has a 5 % higher net income border than that of Lea-Meadows. In add-on. taking on the Lea-Meadows line would necessitate merely approximately 15 % of current gross revenues call clip. doing it comparatively easy for the gross revenues force to take on. Botts besides called on the company motto that “only our people are able and willing to give” . intending that Lea-Meadows sales representative would non stand for the rules the company was founded on.

His concluding ground was that it wouldn’t expression favourably on the company if representatives and agents called on the same shops and purchasers. which would besides intend that Haverwood would perchance be paying committee twice on one sale. However Bates knows that it would be hard to develop the Haverwood gross revenues representatives on all of the different facets of the Lea-Meadows line.

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Break Even Analysis:

Costss:
$ 700. 000 in wages
$ 130. 000 in gross revenues disposal
Entire: $ 830. 000
Break Even Equation
$ 830. 000+ ( . 005x ) = . 05x
X= $ 18. 444. 444. 44

This figure means that if the expected gross revenues volume is greater than $ 18. 444. 444. 44 so the company’s gross revenues force should be used. If the expected gross revenues volume is less than $ 18. 444. 444. 44 so the independent gross revenues agents should be used. For Haverwood. since their jutting gross revenues is equal to 78 million [ ( ( 12. 900. 000-12. 400. 000 ) /12. 400. 000 ) industry growing is 4 % . applied that to Haverwood gross revenues ] . it signifies that Bates should utilize the Haverwood Gross saless force to sell the Lea-Meadows line.

Option 2: Keep Lea-Meadows Gross saless Agents

Moorman believes maintaining the gross revenues agents for the Lea-Meadows line is the right determination. He called upon the fact that the agents ( and he. himself ) have already established contacts and were extremely regarded with old ages of experience. The gross revenues agents would besides be a really little cost beyond committee. In add-on he believes that the agents are committed to the line. Furthermore he argued that some of the Lea-Meadows agents called upon purchasers that were non contacted by the Haverwood gross revenues reps. Finally. he disagreed that the Haverwood gross revenues reps could easy larn about the Lea-Meadows line. With the combinations of cloth. skirts. pillows. springs. and fringes the company has. the gross revenues rep would hold to be knowing about over 1 billion possibilities.

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However. as shown by the interruption even analysis. it is non economically justifiable for these two companies to run individually any longer. Merely by the economic sciences. it is an easy determination for Bates to merely utilize the Haverwood gross revenues agents. Bates. However has personal ties with Moorman which affects his determination. If they do non utilize the Lea-Meadows gross revenues agents. so Moorman will lose his occupation. Although this is a important factor for Bates. it is obvious that utilizing Haverwood gross revenues representatives if the right determination for the company in footings of profitableness.

Option 3: Hire More Gross saless Reps

The 3rd option that Bates is sing is engaging extra gross revenues representatives. These gross revenues representatives would be trained to understand Haverwood and Lea-Meadows furniture. However. making so would necessitate reconstituting the gross revenues districts and would perchance take committees off from bing gross revenues representatives. It besides does non look necessary to take on extra gross revenues reps after carry oning the interruption even analysis.

Recommendation

Because of the break-even analysis. it is easy to see that Bates should make up one’s mind to entirely utilize Haverwood. Inc. gross revenues representatives. It is more profitable for the company to give these histories to the Haverwood gross revenues reps. It would besides let Bates to hold more control over the gross revenues representatives as they would wholly be Haverwood reps and non Lea-Meadows.