Haverwood Furniture Inc Case Study Essay

Background on the mergerIn April 2008 Haverwood article of furniture merged with Lea-Meadows, a manufacturer of upholstered furniture for living and family rooms. The merger was non planned in any conventional sense. The merger proceeded smoothly since the dickens firms were located on adjacent locations and the two companies would of importtain as a lot autonomy as was economically justified. The only real issue that whitewash remained was merging the selling efforts. The question was straight-forward do we give the upholstery take in of chairs and sofas to our gross revenue force out, or do we continue using the gross revenue agents? Haverwoods valetudinarianism president said the line should be given to his gross gross gross revenue group, simply Lea-Meadows said the upholstery line should remain with sales agents.Lea-Meadows Inc.Lea-Meadows Inc. is a clear, privately possess manufacturer of upholstered furniture for use in living and family rooms. The firm is to a greater extent than 75 years old. The fraternity has some of the finest fabrics and frame construction in the patience. Their net sales in 2007 were $5 million and the total constancy sales in 2007 were $15.5 billion. A forecasted industry sale for 2008 is about $16.1 billion. everywhere the past 5 years sales had increased 3% annually, in any case believing that this trend would continue. Lea-Meadows employed 15 sales agents to represent its products. sales agents found it necessary to deal with several buyers in a shop class in order to represent all the lines carried. On a normal sales call, a sales agent first visited buyers to discuss raw lines, in addition to any promotions being offered by manufacturers.These new orders were desire where and when it was appropriate. Lea-Meadows paid an agent commission of 5 percent of net company sales for these services. Also were thought to have spent 10-15 percent of their in-store beat on Lea-Meadows products. There is no influ ence on who to sell their products to precisely there is a stigma of non selling to discount houses. Records convey that agents were calling on specialty furniture and department stores. An estimated 1,000 retail reputations were called on in 2006 and 2007. All agents had ceremonious relationships with their retail accounts and worked closely with them.Haverwood Furniture Inc.They atomic number 18 a manufacturer of medium- to high-priced wood bedroom, living room and eat room furniture. Their net sales in 2007 were $75 million and the industry sales of wood furniture in 2007 were $12.4 billion. It is projected that in 2008 they go out have $12.9 billion in industry sales. The company has 10 fulltime sales representatives, who call on 1,000 retail accounts. They perform the same activities as sales agents but were paid a earnings plus a small commission. In 2007 the average sales representative received an annual salary of $70,000 and a commission of 5% on net company sales. enumerate administration hails were $130,000 Haverwoods salespeople were highly regarded in the industry. They were known especially for their knowledge of wood furniture and willingness to work with buyers and retail sales personnel. gross sales representatives were presently making 10 sales calls per week with an average sales call running three hours. Their remaining time was accounted for by administrative activities and travel. It was also recommended that the call frequency be increased to seven calls per account per year.Pros and ConsPoints in favor for combing the two companiesHaverwood has one of the most respect sales force in the industry. Their sales force could easily fall upon the lingo to interacting with upholstery buyers. Selling Lea-Meadows would only require 15% of present sales call times More control over sales efforts is affirmable and a combined sales forces fits with the belief that only our people atomic number 18 willing and able to give It would no t look right if both representatives and agents called on the same stores and buyers because of the overlap on the companies on both companies accounts.Points in favor of keeping in the sales agentsAll sales agents had established clients and were highly regarded among the store buyers. Sales agents represent little cost beyond commissionSales agents were committed to the lea-meadows line.Sales agents were calling on buyers not contacted by haverwood sales force. Haverwood sales people would have a unvoiced time learning the ways of lea-meadows because there are over 1 billion possible items to learn. Both companies make valid points but the main thing is to determine the cost and profitability. Financial calculations based off the cost of sales force,and sales agents.Haverwood10 (sales force members) x $70,000 (average salary) = $700,000 .005 (commission) x $75,000,000 (net sales) = $375,000 x 10 = $3,750,000 $130,000 (total sales administration costs)Total cost of sales force$4,5 80,000Lea-meadows5,000,000 (net sales) x .05 (commission) = $250,000 x 15 (sales agents) Total cost of sales agents$3,750,000Although Lea-Meadows pays their sales agents less with 5 more employees, their profit margins fall 5% on a lower floor that of Haverwood. It ultimately will affect them more than the cost for Haverwood affects them. If Lea-Meadows were to give their line to the Haverwood sales force, they would only need to pay for 15% of the cost for the sales force.HaverwoodTotal sales force cost = $4,580,000Lea-Meadows$4,580,000 x .15 (percentage of time utilise to Lea-Meadows line) = $687,000 The decision to give the line to Haverwood saves Lea-Meadows $3,063,000.Haverwoods sales processHaverwoods individualized Sales forces sell ConsumerLea-Meadows sales processLea-Meadows Sales agency Retail Consumer