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Haverwood Furniture, Inc. (B)

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by

Ashley Small

on 23 April 2014

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Transcript of Haverwood Furniture, Inc. (B)

Haverwood Furniture, Inc. (B)
Background
Haverwood Furniture
Formed in the early 1900’s by Charlton Bate’s great-grandfather
Focuses on high quality furniture:
Sell to over 1,000 high end quality department stores
Lea-Meadows. Inc,
Privately owned manufacturer of upholstered furniture for use in living and family rooms
75 year old company
Charlton Bates (Owner of Haverwood Furniture) merged with Lea-Meadows
Lea-Meadows, Inc inherited by Bates daughter due to the death of her father-in-law

Problem
Selling Effort
Haverwood Furniture, Inc uses its own Sales Force
Lea-Meadow, Inc hires outside Sales Agents

John Bott (Haverwoods VP of Sales) VS. Martin Moorman (Lea-Meadows National Sales Manager)
Personal conflict of interest
With the merge in companies, should Haverwood salesforce take on Lea-Meadows merchandise or should the Lea-Meadows merchandise be strictly sold by Lea-Meadows sales agents ?

Haverwood Sales team's Current performance
Index: 10 - sales reps.
10 - calls per week
3hrs - length per call
50 - weeks in the work year
2000 - hours in a work week
John Bott Believes...
Taking on Lea-Meadows would take 15% of selling time, which would mean:

Adjusting time per call by 15% time would increase from 3 to 3.45 (3*.15)

Step 1: 10*10* 3.45=345
Step 2: 345*50=17,250
Step 3: 17,250/(2000*10)= .8625

86% of the Sales Team time used
for selling


Pros + Cons: Giving Lea-Meadows line to Haverwood Furniture Sales Force
Pros
Haverwood Furniture well respected and professional sales force in industry
Representatives can learn fabrics, patterns, and combinations
Representatives personally know buyers that build the furniture
Lea- Meadows line require 15 percent sales call time
More control on sales effort
Haverwood Furniture was created 30 years earlier
Sales representatives have the Haverwood “Look”
Would make more sense if Haverwood representatives took over to prevent both representatives from each company from contacting the same buyers and store
Cons
All 15 agents would lose their jobs
Earn a living through representing company
Sale Agents partner with buyers not associated with Haverwood Furniture, Inc
Risk losing these additional accounts
Lea- Meadows Inc has over 1000 different frames for sofas and upholstered chairs
Combinations of fabric, skirts, pillows, springs, and fringes, which would conclude for a Haverwood Sales representative to know no fewer than 1 billion possibilities
Reconstruct sales territories
potential loss of commissions
Martin Mooreman would be laid off

Step 1: 10*10*3= 300
Step 2: 300*50= 15000
Step 3: 15000/(2000*10)= .75

75% of Sales Team time is spent selling

Martin Moorman believes..
If the sales team of Haverwood takes on a portion of Lea-Meadows' merchandise
it would reduce selling time by 25%

Value of Commission - 5% of Sales is allocated to commission so.......
$5mil x5%= $250,000 ------->$250,000/15= $16,666.67 per agent

2000*12.5= 250 aver. selling time per year
250*.25= 62.5 change in average selling time
250-62.5= 187.5 selling hours per yer is Haverwood
takes on part of Lea-Meadows merchandise
Dollar Value
250,000/250=$1,000 per selling time
1000X187.5= $187,500
Savings= $62,500

Testing Suggestions #1
Adding an additional sales rep. & taking on Lea-Meadows Products:

Step 1: 3.45*10*11= 379.5
Step 2: 379.5*50=18975
Step 3: 18975/(2000*11)=.8625

86% time spent selling

Incurring an additional $70,000 in salary for another sales person shows no benefit. Time for selling does not increase at all

Suggestion rejected
Testing Suggestions #2
Bates suggests increase call frequency by 7 per account per year

Not adjusting: 1000*7 = 7000 - calls annually
call length 7000/50 = 140 - calls a week
140/10= 14 - calls per sales rep.
10*14*3=420
420*50=21000
21000/(2000*10)=1.05
Cannot work b/c there is only 2000 hours in a work year

Reducing call length: 10*14* 2.25= 315
315*50=15750
15750/(2000*10)= .7875

78% time spent for selling

Is not worth it. Would have to reduce time spent with customers and does not show significant growth
Conclusion
The sales teams should remain completely independent from each other and should not cross sell merchandise.
Haverwood taking on Lea-Meadows's only
marginally increases their selling time
savings of reducing Lea-Meadows sales time does not cover the cost of a new Haverwood Sales rep.

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