Answer Happy

please read case and answer question, do not copy answer from other posted question on answers.
1. situations analysis
• nature of demand
• extent of demand
• nature of demand
• environmental climate
• stage of product life cycle
• cost structure of the industry
• skills of the firm
• financial source of the firm
2. distribution structure
3. problems and Opportunities
• key probelms
• key opportunities
• on the balance, the situation is:
4. objectives
• objective defined
• alternative one
• alternative two
• alternative three
• alternative four
5. decision
444 Part Three Evaluation and Control of the Sales Program Case 3.2 Hanover-Bates Chemical Corporation James Sprague, newly appointed northeast district sales manager for the Hanover-Bates Chemical Corpora- tion, leaned back in his chair as the door to his office slammed shut. "Great beginnings," he thought. "Three days in my new job and the district's most experienced sales representative is threatening to quit." On the previous night, Sprague, Hank Carver (the district's most experienced sales representative), and John Follet, another senior member of the district sales staff, had met for dinner at Sprague's suggestion. Dur- ing dinner he had mentioned that one of his top priori- ties would be to conduct a sales and profit analysis of the district's business in order to identify opportunities to improve the district's profit performance. He had stated that he was confident that the analysis would indicate opportunities to reallocate district sales efforts in a manner that would increase profits. As Sprague had indicated during the conversation, "My experi- ence in analyzing district sales performance data for the national sales manager has convinced me that any district's allocation of sales effort to products and cus- tomer categories can be improved." Both Carver and Follet had nodded as Sprague discussed his plans. Carver was waiting when Sprague arrived at the dis- trict sales office this morning. It soon became appar- ent that Carver was very upset by what he perceived as Sprague's criticism of how he and the other district sales representatives were doing their jobs-and, more particularly, of how they were allocating their time in terms of customers and products. As he concluded his heated comments, Carver said, This company has made it darmed clear that 34 years of experience don't count for anything... and now someone with not much more than two years of sell- ing experience and two years of pushing paper for the national sales manager at corporate headquarters tells me I'm not doing my job.... Maybe it's time for me to look for a new job.... and since Trumbull Chemi- cal [Hanover-Bates's major competitor] is hiring. maybe that's where I should start looking... and I'm not the only one who feels this way. Source: This case was prepared by Professor Robert E. Witt, of the University of Texas-Arlington, as a basis for class discussion and is not designed to illustrate effective or ineffective handling of an administrative situation. As Sprague reflected on the scene that had just oc- curred, he wondered what he should do. It had been made clear to him when he had been promoted to manager of the northeast sales district that one of his top priorities should be improvement of the district's profit perfor- mance. As the national sales manager had said, "The northeast sales district may rank third in dollar sales, but it's our worst district in terms of profit performance." Prior to assuming his new position, Sprague had assembled the data presented in Exhibits 1 through 6 to assist him in analyzing the district sales and profits. The data had been compiled from records maintained in the national sales manager's office. Although he believed the data would provide a sound basis for a prelimi- nary analysis of district sales and profit performance, Sprague had recognized that additional data would probably have to be collected when he arrived in the northeast district (District 3). In response to the national sales manager's comment about the northeast district's poor performance, Sprague had been particularly interested in how the district had performed on its gross profit quota. He knew that dis- trict gross profit quotas were assigned in a manner that took into account variation in price competition. Thus, he felt that poor performance in the gross profit quota area reflected misallocated sales efforts either in terms of customers or in terms of the mix of product line items sold. To provide himself with a frame of reference, he had also requested data on the north-central sales dis- trict (District 7). This district is generally considered to be one of the best, if not the best, in the company. Furthermore, the north-central district sales manager, who is only three years older than Sprague, is highly regarded by the national sales manager. THE COMPANY AND THE INDUSTRY The Hanover-Bates Chemical Corporation is a leading producer of processing chemicals for the chemical plat- ing industry. The company's products are produced in four plants, located in Los Angeles, Houston, Chicago, and Newark, New Jersey. The company's production
EXHIBIT 1 Hanover-Bates Chemical Corporation: summary income statements, 2005-2009 2006 2007 $32,565,000 $28,590,000 20,245,500 18,297,000 10,293,000 Sales Production expenses Gross profit Administrative expenses Selling expenses Pretax profit Taxes Net profit District 1 2 3 4 5 6 7 EXHIBIT 2 District sales quota and gross profit quota performance, 2009 Number of Sales Reps District 1 2 3 4 5 6 Sales-Actual $ 5,859,000 5,610,000 5,109,000 4,977,000 4,815,000 4,950,000 4,695,000 4,807,500 4,080,000 4,657,500 $35,700,000 $35,835,000 "District gross profit quotes were developed by the national sales manager in consultation with the district 7 6 7 2005 $29,835,000 17,901,000 11,934,000 3,909,000 3,036,000 4,989,000 2,268,000 $ 2,721,000 66555 EXHIBIT 3 District selling expenses, 2009 Sales Rep. Salaries $265,650 214,830 236,070 225,720 Sales Quota $ 5,820,000 5,625,000 5,475,000 5,055,000 12,319,500 4,330,500 3,361,500 4,627,500 2,082,000 $ 2,545,500 $29,139 28,050 25,545 24,885 188,925 24,075 187,275 24,397 172,275 26,295 Sales Sales Rep. District Commission Expenses Office 4,188,000 3,201,000 2,904,000 1,185,000 $1,719,000 "Includes cost of fringe benefit program, which was 15 percent of salary. Salary of James Sprague's predecessor District District Manager Manager Salary $84,420 $31,725 $50,250 76,140 31,968 51,000 33,184 52,500 process is, in essence, a mixing operation. Chemicals purchased from a broad range of suppliers are mixed according to a variety of user-based formulas. Company sales in 2009 had reached a new high of $35.83 million, up from $32.97 million in 2008. Net pretax profit in 2008 2009 $32,970,000 $35,835,000 20,418,000 21,844,500 12,552,000 4,387,500 3,411,000 81,654 73,656 33,006 48,750 64,080 31,673 49,500 62,280 67,050 4,753,500 2,139,000 $ 2,614,500 Gross Profit Quota $ 2,328,000 2,250,000 2,190,000 2,022,000 1,980,000 1,878,000 1,632,000 $14,280,000 13,990,500 4,659,000 3,598,500 5,733,000 2,577,000 $ 3,156,000 Gross Profit-Actual $ 2,383,500 2,293,500 1,858,500 1,942,500 Total Selling Sales Expenses Support Expenses $17,190 $104,205 $582,624 18,051 18,573 105,015 106,980 16,507 99,705 16,684 114,900 17,142 100,650 31,488 50,250 33,728 47,250 17,464 88,125 1,779,000 1,768,500 1,965,000 $13,990,500 527,019 552,541 522,229 489,837 473,482 452,187 $3,599,919 2009 had been $5.73 million, up from $4.75 million in 2008. Hanover-Bates has a strong balance sheet, and the company enjoys a favorable price-earnings ratio on its stock, which trades on the OTC (over-the-counter) market.
EXHIBIT 4 District contribution to corporate administrative expenses and profit, 2009 District 1 2 3 4 5 7 Sales $ 5,859,000 5,610,000 5,109,000 4,977,000 4,815,000 4,807,500 4,657,500 $35,835,000 District Sales by Account Category Northeast North-central (A) District Northeast North-central $1,372,500 1,126,500 Gross Profit by Account Category Northeast North-central Gross Profit $ 2,383,500 2,293,500 $ 534,000 495,000 1,858,500 1,942,500 EXHIBIT 5 Northeast (#3) and north-central (#7) district sales and gross profit performance by account category, 2009 1,779,000 1,768,500 1,965,000 $13,990,500 Potential Accounts (A) (B) (C) 90 381 635 60 286 499 (B) $2,521,500 2,553,000 $ 934,500 1,087,500 Selling Expenses $ 582,624 527,019 Although Hanover-Bates does not produce commodity-type chemicals (such as sulfuric acid), indus- try customers tend to perceive minimal quality differ- ences among the products produced by Hanover-Bates and its competitors. Given the customers' perception of a lack of variation in product quality and the industry- wide practice of limiting advertising expenditures, field sales efforts are of major importance in the marketing programs of all firms in the industry. 552,541 522,229 489,837 473,482 452,187 $3,599,919 (C) $1,215,000 978,000 $ 390,000 382,500 EXHIBIT 6 Potential accounts, active accounts and account call coverage: northeast and north-central districts, 2009 Contribution to Administrative Expense and Profit Active Accounts (A) (C) 53 210 313 42 182 218 $1,800,876 1,766,481 1,305,958 1,420,270 1,289,163 1,295,017 1,512,813 $10,390,579 Total $5,109,000 4,657,500 $1,858,500 1,965,000 Account Coverage (Total Calls) (A) (B) (C) 1,297 3,051 2,118 1,030 2,618 1,299 Hanover-Bates's market consists of several thou- sand job-shop and captive (in-house) plating operations. Chemical platers process a wide variety of materials including industrial fasteners (e.g., screws, rivets, bolts, and washers), industrial components (e.g., clamps, cas- ings, and couplings), and miscellaneous items (e.g., umbrella frames, eyelets, and decorative items). The chemical plating process involves the electrolytic appli- cation of metallic coatings such as zinc, cadmium, nickel,
and brass. The degree of plating precision required var- ies substantially, with some work being primarily deco- rative, some involving relatively loose standards (e.g.. 0.0002 zine, which means that anything over two ten- thousandths of an inch of plate is acceptable), and some involving relatively precise standards (e.g., 0.0003- 0.0004 zinc). Regardless of the degree of plating precision invol- ved, quality control is of critical concern to all chemical platers. Extensive variation in the condition of materials received for plating requires a high level of service from the firms supplying chemicals to platers. This service is normally provided by the sales representatives of the firm(s) supplying the plater with processing chemicals. Hanover-Bates and the majority of the firms in its industry produce the same line of basic processing chemicals for the chemical plating industry. The line consists of a trisodium phosphate cleaner (SPX); ane- sic aldahyde brightening agents for zinc plating (ZBX), cadmium plating (CBX), and nickel plating (NBX); a protective post-plating chromate dip (CHX); and a pro- tective burnishing compound (BUX). The company's product line is detailed as follows: Product SPX ZBX CBX NBX CHX BUX Container Size 400-lb. drum 50-lb. drum 50-lb. drum 50-lb. drum 100-lb. drum 400-lb. drum COMPANY SALES ORGANIZATION List Price $120 114 114 120 330 180 Gross Margin $ 42 51 51 52.50 135 66 Hanover-Bates's sales organization consists of 40 sales representatives operating in seven sales districts. Most sales representatives had formerly worked for a Hanover-Bates customer, and none were college- educated. Sales representatives' salaries range from $33,000 to $45,000, with fringe benefit costs amount- ing to an additional 15 percent of salary. In addition to their salaries, Hanover-Bates's sales representatives receive commissions of 0.5 percent of their dollar sales volume on all sales up to their sales quotas. The com- mission on sales in excess of quota is 1 percent. District sales manager salaries range from $47,250 to $52,500. Sales managers are also eligible for a bonus based on district sales performance. In 2007, the national sales manager of Hanover- Bates had developed a sales program based on selling the full line of the company's products. He believed that if the sales representatives could successfully carry out his program, the following benefits would accrue to Hanover-Bates and its customers: 1. Sales volume per account would be greater, and sell- ing costs as a percentage of sales would decrease. 2. A Hanover-Bates sales representative could justify spending more time with an account, thus becoming more knowledgeable about the account's business and becoming better able to provide technical assis- tance and identify selling opportunities. 3. Full-line sales would strengthen Hanover-Bates's competitive position by reducing the likelihood of account loss to other chemical-plating suppliers (a prob- lem that existed in multiple-supplier situations). The national sales manager's 2007 sales program had also included the following account call-frequency guidelines: A accounts (major accounts generating $20,000 or more in yearly sales)-two calls per month. B accounts (medium-sized accounts generating $11,000-19,999 in yearly sales)-one call per month. C accounts (small accounts generating less than $11,000 yearly in sales)-one call every two months. The account call-frequency guidelines were devel- oped by the national sales manager after discussions with the district managers. The national sales manager had been concerned about the optimal allocation of sales effort to accounts and felt that the guidelines would increase the efficiency of the company's sales force, although not all of the district sales managers agreed with this conclusion. It was common knowledge in Hanover-Bates's corporate sales office that Sprague's predecessor as northeast district sales manager had not been one of the company's better district sales manag- ers. His attitude toward the sales plans and programs of the national sales manager had been one of reluctant compliance rather than acceptance and support. How- ever, when the national sales manager succeeded in
448 Part Three Evaluation and Control of the Sales Program persuading Sprague's predecessor to take early retire- ment, no replacement was readily available. Carver, who most of the sales representatives had assumed would get the district manager job, had been passed over in part because he would be 65 in three years. The national sales manager had not wanted to face the same replacement problem again in three years and also had wanted someone in the position who would be more likely to be responsive to the company's sales plans and policies. The appointment of Sprague as district manager had caused considerable talk, not only in the district but also at corporate headquarters. In fact, the national sales manager had warned Sprague that "a lot of people are expecting you to fall on your face.... They don't think you have the experience to handle the job, in particular, and to manage and motivate a group of sales representa- tives, most of whom are considerably older and more experienced than you." The general sales manager had concluded by saying, "I think you can handle the job, Jim.... I think you can manage those sales reps and improve the district's profit performance... and I'm depending on you to do both."