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Copy of Las Ferreterias de Mexico

Case Summary

Leonardo Costa

on 26 March 2013

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Transcript of Copy of Las Ferreterias de Mexico

Key Issues: 1. Evaluate the performance and incentive plan
2. How would you modify the plan? Store Manager Las Ferreterias de Mexico Advice and oversight of stores

Large accounts

Select materials and estimate cost

Regional sales office Regional Managers Centralized functions: Corporate Staff Managers Incentive Plan Problems with Current Plan Store Managers Regional Managers Corporate Managers
Upside down bonus structure based on performance

Centralized system

Regional pool

Allocate resources to poor performing areas Improvements Return on Investment Corp Regional Store Manager Employee (cc) image by rocketboom on Flickr (cc) image by quoimedia on Flickr $$$$ $$$ $$ $ Expenses Revenue Purchasing

Human Resources

Real Estate

Investor Relations Performance cannot be measured

Not included in the bonus scheme

Many factors that affect their price and sale are out of their control

Is this any different from the other staff? Personal de Ventas i Encargado!
(Regional salespeople and buyers) Hiring / firing personnel
Merchandise offerings
Inventory levels
Promotional campaigns
Grant credit
Calling prospective customers Big Bath Accounting

Violation of matching principle

Misuse of credit checks

Mathematical manipulation of ROI

Controllability principle Issues with ROI ROI: (Revenue-Expense)/Investment

Revenue: All sales except for Regional and Corporate sales

Expenses: All expenses

Investment: Cash, inventory, A/R Decentralized functions: Decentralized functions: Agency Problem

Controllability Principle

Decentralization Q & A
Full transcript