Carrington Furniture

I. Executive Summary

Carrington Furniture is now considering on sale responsibility of the merger between Carrington Furniture, Inc. and Lea-Meadows, Inc. The major concerns facing the two companies are and how to handle the sales responsibilities due to the difference of sale distribution and finding the best way to minimize a cost which not make a negative effect to the market share. Meanwhile, two companies have been well-processing as separate companies, the combining of two companies seem to be more complex. By the same time, Bates recommended to increase the call times to industry norm.

Of these many alternatives we chose to adopt a sale force distribution system and add additional sale person. Even using sale forces distribution system have both fixed and variable cost that would not be worth to used in the small amount of sale company, but for the big amount of sale company, it will be lower cost than using sale agents in the long run. And we plan to add sale persons to reduce the pressure, responsibility and tasks of existing sale force and cover the expanding of the market and product line.

By adding two more sale representatives will cost company to training them and also have to pay them. This amount will be valued to pay if we consider that we could save well-performing in Carrington's current market which has 7% higher gross margin than Lea-Meadows.

II. Problem Definition and Statement of Alternatives

The meager between Carrington Furniture and Lea-Meadows has made them face a problem, using a sales agent. Each company was using a different strategy and both were good at their strategy and had experience with it. They still need to have an effective sales effort and be profitable after the merger and continue the relation with current and prospective dealers.

Decision to be made

In order to have an effective sales effort and be profitable after the meager between Carrington and Lea-Meadows, we recommend alternative 3: Carrington should use more sales representatives for Lea-Meadow to sell furniture.

Objective

To minimize total selling cost.

Success Measure

The success of alternative sales method is measured by the sales in dollar the company can generate.

Alternative

1. Maintain current sales force and sales agents.

2. Utilize only sale force.

3. Utilize sales force with the addition more sale representatives.

Constraints

1. Maintain appropriate responsibilities of sale forces.

2. Maintain market share or minimize the impact on Lea-Meadows sales.

3. Concerning about the relationship with the agent.

4. Maintain Carrington sales and profitability.

5. Adding new salespeople would require restructuring of the sales territory.

6. Buyer conflicts due to relation with agent versus brand loyalty.

7. Terminating Martin Moorman's current position.

III. Analysis of Alternatives.

Alternative 1: Carrington continues using sales agents for Lea-Meadows to sell furniture.

Advantages:

1. Carrington still maintains the market share of Lea-Meadows; its brand name, image and buyer would not have to split their loyalties.

-Sales agents have a good and long relationship with the customer.

-Sales agents can contact with specialty store and customer that Carrington's

sales force can not reach.

-Sales agents can provide a better after sales service to please their customer.

The growth rate of Lea-Meadows Company is 7% that we can predict the net sale in the future (Appendix 6) and the industry growth rate is 4% (Appendix 4) so if we can maintain market share, we can get the higher net sale.

2. Having only variable cost (commission) on each selling unit.

3. Keeping the valuable and well-experience Martin Moorman who has a good contact with agents.

4. Agents can sell Lea-Meadows product together with other complementary product.

Disadvantages:

1. Carrington can not reduce the selling cost, if they still use Lea-Meadows agents (economic of scale).

2. Carrington's sales force might overlap with Lea-Meadows agent customer account.

3. Can not control the performance of sales agents.

Alternative 2: Carrington use current sales representatives for Lea-meadow to sell furniture.

Advantages:

1. If we use only sales force, Carrington can reduce the selling cost. The sales force's commission rate will be used instead of sales agent rate which is higher.

2. Carrington's sales force can eliminate overlap among customer account.

3. Carrington can control over sales force directly

Disadvantages:

1. Adding too much task to Carrington's sales force would lead to lower productivity (we should consider on Carrington's product line which is 5% higher gross margins).

2. Carrington has to spend time and money for training sales force to be able to selling Lea-Meadows product.

3. Fixed salary and small commission create less motivation to sales