LAHORE SCHOOL OF ECONOMICS SALES FORCE MANAGEMENTSupersonic Stereo, Inc. Submitted to: Prof. F. A. Fareedy Haadiya Qaiser (TA) Submitted by: Sobia Sohail Usman Bajwa Zahrah Sodhi MBA-II Sec A MBO requires the managers to set specific measurable goals with each employee and then periodically discuss the latter¶s progress towards the goal. a sales representative asked to raise his salary. Basler on the other. However. To further analyze the case. . and proposed two solutions either to raise the quotas or to implement management by objectives in the company. the company is now facing a problem in the Atlanta district and there is now a difference of opinion regarding the way that the company has been dealing with the sales force. Now the issue arose within company when Charles Lyons. let¶s just look at the break down of the sales organization structure that is based on the geographic basis: Pete Lockhart (National Sales Manager) Bob Basler District Sales Manager (Atlanta region) Stella Jordan (Executive) Lyons (Sales Rep) Sand (Sales Rep) Gallo (Sales Rep) Parks (Sales Rep) The two options that were given by Jordan were a) to raise the quota of the sales representative and b) to have management by objectives. and the executive of the company Stella Jordan said that the company is not expecting much from its sales people. is now going to take the decision based on the profitability of each sales representative.Introduction Supersonic Stereo Inc is a company that manufactures USA¶s leading stereo equipment and since its formation it has seen rapid expansion. and is only going to increase the salary if he thinks that the sales rep is bringing in profits to the company. 7. The problems however cannot be solved by MBO. and that is not possible because the problems are only in the Atlanta region. at best Supersonic (Atlanta district) has been able to achieve a sales growth of a meager 6.14 6.638340 Growth (%) . apart from that they have been struggling to achieve a high sales growth.050 15.67 4. because it needs to have a complete makeover of the company. We can see.445120 2. The table below shows the sales growth from 1994-1998.27 9.47 . Problems identification and justification 1) The sales and profits for the last five years did not meet the objectives that had been set.74% for the year 1995-1996.74 -3.You need to have comprehensive and formal organization wide goal-setting and appraisal program.381 Growth (%) 1. the figure turns out to be negative in the year 1998 signifying the fact that Atlanta division is having problems for achieving a high sales growth and profits.94 Years 1994 1995 1996 Net profit($) 13. The six steps that you need to have in the MBO program are: 1) Set organizational goals 2) Set departmental goals 3) Discuss departmental goals 4) Define expected goals 5) Performance reviews 6) Provide feedback The analysis of quotas however cannot be made over here because the data on the quotas is not available.514113 2.873 14.610029 2. so a comprehensive analysis of both the options given to us cannot be made. and MBA has to originate from inside the company which would ultimately not want to revamp the whole company for one region. Years 1994 1995 1996 1997 1998 Sales($) 2. Coming to the profits.641081 2. 060 Parks($) 667.759.350) (19.723 .368 Gallo($) 681.256.472 % of total expenses 29.6) (34.184. Basler needs to check out whether it would be right to increase the salaries of the sales rep.662) 156.170 (444.072.266.25) (11.050) (19337.04% and 6.335 (537.5) (11.5) (21. Year(1998) Salaries Commissions Amount ($) 177000 37431 Expenses ($) $ 609.38) (33.862.04 6.472 $ 609.731.70) (27.763.14 Here is a summary of the profit and loss account that has been calculated and the details for the calculations have been given in the additional insert of the case.40) (24.511 14.704 Sand($) 584.500) (8362.80) (26.24) (35. not only this but he also suggested raising quotas and using a management by objective approach in order to increase the overall performance of the company.390) 160.383 7.385 (510.08) 705.534) (20. Jordon wanted to reduce salaries or cutback commission.631) 167.08) (29.14% of total expenses respectively.463.5) (9.500) (9603.34 -12. Profit and Loss Account (Summary) Charlie($) Sales CGS Gross Margin Expenses: Salaries Commision Advertising Packaging Warehousing Travel Expenses Other Misc Exp Net Profit (loss) (50.5) (13.79 (99.88 Core problem 2) Jordon and Basler had conflicting views.72 23. and for that he needs to analyze the data.708) (16.989) (10.888.85 22.1997 1998 16.14) 18.5) (13.430.000) (9403. Whereas Basler considered his sales rep as heart to selling efforts.802) 139.953.000) (10062.450 (521.75) (11. So he basically wanted to provide proper compensation to sales reps Salaries and commissions that accounted for 29.369.208. 0341 1998 -0. What Baslar should do is that after the calculation of net profit per person.2385 0.00545 1994 -0. Problems with Charlie Lyons Charlie is the only rep who is getting a lot of salary for the three accounts that he maintains. and on the basis of his sales volume.2364 -0.00589 0. this is because of the major chunk that he is devoting to the advertising expenditure.0343 Parks 0. .03244 Gallo 0.Here the data shows that the company¶s sales reps are incurring a lot of expenses and the only sales rep whose net profit is going in negative is Charlie. rather he should bring this fact into Charlie¶s notice that his advertising and overall expenditure is causing net loss for the company and all the effort and sales that he is bringing to the company are being nullified if ultimately it is not proving to be profitable for the company. And if you notice.2364 -0.2348 0.00545 0. The effect of Charlie¶s NP margin is so much that it is pushing the positive NP margins of Sand. he is demanding increase in the salary.0341 Looking at the profitability ratios.00654 0. he should show Charlie that even though he is getting sales volume. except Charlie.0719 1995 -0. Gallo and Parks into a negative figure.0719 Sand 0.00525 -0.03244 1996 -0. however the individual NP margin is positive for all. in the per sales rep NP margin.0343 1997 -0.00545 Charlie 0. Basler should not raise the salary for Charlie. we can see that the company has been facing net profit margins in negative over the years because of the fact that their expenses have been high. Conclusion Based on the ratios that have been calculated. but the expenses that he is incurring on advertising and other misc expenses need to be reduced in order for Charlie to be profitable to the company and to be in position to demand more salary Profitability Ratios Profitability Ratios per Sales Rep Total GP Margin Operating Profit Margin NP Margin Total Per year NP Margin -0. the total NP margin is negative.2377 0.00574 0.