Hanover-Bates Sales Districts - Assignment Example

Case Study A5 Question Evaluate the performance of the northeast district in comparison with the other Hanover-Bates sales districts. Answer: Comparison of the northeast district with the other Hanover-Bates sales districts is done by considering various parameters: 1) District wise Actual Sales: The graph below shows the actual sales figures of northeast district and the other Hanover-Bates sales districts. It is clear from the graph that District number 1 has the maximum sales of $7812 (in thousands) with the sales representative strength of seven, the second district has actual sales of $7480 (in thousands) while northeast district (District number 3) is third at $6812 (thousands) with six sales representatives. The other districts follow northeast district in terms of the actual sales of the company. As far as the sales are concerned the performance of the northeast district is reasonably good. It is at par with the other companies. Thus as far as the sales are concerned there is no problem with northeast district. Figure 1 2) District wise Actual Gross Profit: The actual gross profit of district number one is $3178(in thousands) with the actual sales of $7812(in thousands), whereas of district number two is $3058 (in thousands) with the actual sales of $74809(in thousands). The northeast company with the sales of $6812 (in thousands) has actual gross profit of $2478(in thousands). This district, since it has third largest sales is expected that it would have third larges profit margins also, but it is not so. The other districts like district number 4 has more profit margins, $2590(in thousands) than the northeast district. The graph below shows the comparison of various districts considering actual gross profit of various districts. District number 4 has same number of sales representatives as northeast district. It is this figure which ahs compelled the country sales manager to appoint a new district sales manager so as to increase the sales margins of the company in that district. The actual gross profit of districts 5, 6 and 7 are $2372(in thousands), $2358 (in thousands) and $2260 (in thousands) respectively. Though northeast district higher profits than district 5, 6 and 7, yet considering its sales figure it is not high enough Figure 2 3) District Selling Expenses: The graph below shows the selling expenses of all the districts. The analysis of these expenses is important because the actual profits of the company depend on these expenses. As clearly seen from the graph, district 2 has less expenses than district 3 i.e. north east district this in spite of district 2 having more actual sales and actual gross profit than northeast district. As the expenses increase profits are bound to reduce. This explains why northeast district is showing lesser profits compared to other districts with the similar actual sales. Of these expenses the district has $108(in thousands) expenses in the form of sales representative expenses. The main aim of the new manager would be to reduce these expenses. Selling expenses of the other countries are comparatively lesser than that of the northeast district. This has prompted the country sales manager to appoint the new sales manager for the district so as to reduce the expenses. Figure 3 4) District wise contribution to the Corporate Profit: From the graph below it is clear that district 1 contributed $2401,168 while district 2 contributed $2355,308 towards the corporate profit. However since the northeast company higher expenses its contribution towards the corporate profits is $1740942. This is even lesser than the district number 4 which we had seen earlier had lesser sales than the northeast district. Contribution of district 4 is $1,893,694. Contribution of north central district, number 7, is surprisingly 2,019,484, which is much more than northeast district. The prominent reason behind this is that is has very low expenses $600516. This clearly shows again that the expenses of northeast company are higher than the other districts, this is the cause of the lower profits and this ultimately results in lower contribution to the corporate profits. Contribution districts 4, 5, 6, and 7 are $1893694, $1718664, $1727248 and $2019484 respectively which are comparatively higher then northeast district. Figure 4 Question 2: What are the weak spots in the northeast district's performance Answer: The northeast company has good actual sales amounting to $6,412,000, which is only third in the overall sales of company's sales in the seven districts. However its actual gross profit is lesser than even the other companies with lesser sales. The main reason behind this have been the expenses of the northeast district. Higher expenses are the weak point of this district. The graph below shows the various expenses of the districts. From the graph it can be seen that there is little difference in sales representative salaries, sales representatives commissions, District Office expenses, District Manager's salary and expenses and sales support expenses of all the districts. However the major difference in the expenses is for the sales representative expenses. The sales representative expenses for northeast district are $108,872, which is only second to district 1, which has expenses of $112,560. Considering the overall sales of the two companies, the expenses for northeast company are much higher. Figure 5 Not only the company has higher sales representative expenses but also higher sales representative salaries and higher district office expenses. Even the district manager's expenses are higher. Higher expenses are the weakest point of the company. Due to this inspite of the higher actual sales figures the district has not been able to shows the higher gross profit. This is also the reason that the contribution of the district towards the corporate profit is lower than the other districts. The higher expenses clearly sales representative expenses also how that its sales representatives are misusing the resources of the company. The job of the new manager would be not only to increase the sales of the company but also see that the expenses of the sales representatives are reduced. These expenses may be traveling expenses, lodging and boarding expenses. There may be some expenses on entertainment, which may also need reduction. Question 3: What should the management do to improve the areas of poor performance in the northeast districts Answer: The weakest area of the northeast district is the higher selling expense. The district in all, in the year 2000 had $736,722 expenses. Of these the expenses from the sales representatives were $108,872. These are only second to the district number 1 which has sales representative expenses of $112,560. However, the profit margins of district number one are much more than northeast district. Also the other districts have comparatively higher profits than northeast country. Considering the above factors, the best way for the management to improve the performance of the northeast district would be to reduce the sales representative expenses of the district. At the same time management would have to reduce the District Manager's expenses, which stand at $24,764 for the year 2000 and sales representative salaries, which were $314,760 for the year 2000. Here are certain measures suggested to improve the performance of the district: 1) The sales representatives should be made more accountable. That is, whatever the expenses are made by them, they should be able to give clear justification for that. 2) The expenses made by the sales representatives should be closely monitored and checked for the authenticity. 3) The management should make the sales representatives understand that the expenses made by them are more than the their counterparts in the other districts and they should be encouraged to reduce their expenses. 4) Even the salaries of the sales representatives of the northeast district are higher. It would be a good idea to bring in new cheap young sales force; the old expensive sales force may be requested to take voluntary retirement. 5) There is always the chance to increase the market sales. The management should find new markets and new methods of marketing, keeping in mind that the expenses should not raise considerably. 6) It has been found that the sales manager's expenses were also high in 2000. The new sales manager himself should strive to reduce his expenses, this would serve an example even for his subordinates to follow. 7) The management should study the other districts like north central and see how they have fewer expenses and try to implement the similar strategy for northeast district. 8) Again the sales quota for northeast district for the year 2000 was $7,300 (in thousands) but the actual sale of the company was $6812 (in thousands), this shows that company had not achieved its targets while its fixed expenses remained same. The management should see that the sales of the district are increased. This can be done by new methods of marketing, advertising and exploring new markets. Even if the sales increase, its fixed costs would remain the same, hence the expenditure would effectively reduce and the profit margins would increase. These are some of the methods suggested for the management to take so as to improve the performance of the northeast district branch of the company. Read More