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Hanover-Bates Chemical Corporation Sales Volume Analysis

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Comparison of sales, profits and activities between the northeast district of the Hanover-Bates Chemical Corporation (HBCC) and other districts reveals that that northeast district is not as efficient. There are fewer sales per sales person, and sales costs are higher for each dollar in revenue. Optimization is required to ensure greater efficiency and profit maximization; however the previous district manager did not contribute to a culture that supported these ideas. The workforce tends to be older men, and they are not aware of new agile methods or the importance of continual improvement through feedback. A further theme in the problems of northeast district is a lack of succession planning. The new district manager, Jim Sprague, can solve all of these problems if headquarters agrees to create a training center using the existing salespersons at northeast district as trainers, while hiring a new time. The new recruits should be ready to take over just as the sales force retires, and this provides for the ability to move forward with profit optimization in two to three years’ time when new recruits become the new sales force. 

Hanover-Bates Chemical Corporation Sales Volume Analysis
Performance evaluation
Comparison of sales, profits and activities between the northeast district of the Hanover-Bates Chemical Corporation (HBCC) and other districts reveals that that northeast district is not as efficient. In other words, inputs of number in the sales force do not equal the same output per sales person, and the sales of northeast district salespersons seem to carry higher costs (Johnston & Marshall, 2013). North-central district has just 5 sales people, while northeast district has 6 (Johnston & Marshall, 2013). While northeast district failed to meet its sales quota, north-central district far exceeded theirs (Johnston & Marshall, 2013). The gross profit actual of $2,478,000 of the northeast district is only slightly more than the gross profit actual of north-central district with a gross profit actual of $2,260,000, even though the north-central district had far fewer resources (Johnston & Marshall, 2013).

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The salaries of sales reps for northeast district are higher, which makes sense because there is one more salesperson (Johnston & Marshall, 2013). The district manager salary was the highest of all of all the districts, despite the lack of performance (Johnston & Marshall, 2013). Selling expenses for northeast district were ranked the third highest, while the selling expenses for north-central district were the lowest (Johnston & Marshall, 2013). The performance of the northeast district is poor in comparison to other districts generally.

Weak points of performance
The weak spots in the northeast district’s performance are profitability and capturing potential market share. The problem of profitability is poor results despite higher inputs in comparison to other districts, especially that of north-central district. A further issue is the failure to capture the available market share, while north-central has done a better job in dominating a smaller market. Essentially, it would appear that there is little understanding of interpreting performance and trying to improve.

For example, while the sales for the north-central district in 2010 are $6,210,000, which is lower than the sales of the northeast district at $6,812,000, the gross profit for the north-central district was $2,620,000, which was higher than the gross profit for the northeast district. Overall, the northeast district does not seem to have been taking a focused and strategic view of their performance indicators, and how to improve on each to achieve higher profitability.

Root causes of poor performance
Sales and gross profit performance are greatly impacted by leadership. This leadership includes top level strategy decisions as well as the on the ground leadership at the district level. Leadership has responsibility for creating the organizational culture, and this determines the direction of the company- or lack of direction (Nanda, 2016). The organizational culture is an important consideration in terms of the performance (Nanda, 2016). Because the previous district manager of northeast district had been complying with headquarters’ directions reluctantly, he neglected to build a motivated workforce that understood and had an interest in continuous improvement and the use of new approaches to optimization. The negative attitude resulted in a self-fulfilling prophecy of a failure to leverage improvements, since the strategy was not incorporated as part of new processes and structures. The sales team for this district is older, according to the advice to Jim Sprague that the sales people were mostly older and more experienced. The best salesperson is only three years away from retirement. As a group they are likely to reinforce tradition, and therefore use methods that might not be in touch with new potential customers in the startup and digital world. Succession planning has therefore also been a key missing consideration that resulted in the lack of replacement for the district manager, an older workforce that is out of touch with the perspectives of the contemporary approach to sales and profitability, with no potential replacements despite a looming crisis when they all retired. A new approach requires dealing with irritated workers using out of date approaches while cultivating a new workforce that has a better understanding of optimization and continual improvement methods.

The recommendation is to transform northeast district by transforming the sales team, while actively paying attention to succession planning and a graceful exit for aging salespersons who do not have the modern mindset. This will require an active investment consisting of the final years of salary of the current sales force that is close to retirement age.

First, a new unit would be developed, perhaps called the Sales Excellence Development Center. This would consist of training and development courses and activities that ensure that there are new recruits who are ready to take over. The current sales force that is near retirement age from northeast district would staff these positions, providing real life scenarios and strategies for selling HBCC chemical mixtures. They would move out of their current positions as the sales team that was trained became ready. Perhaps the recruits would come from other areas of the company, or they would be recruited out of college. The result would be a ready sales force that is ready to take on modern challenges of profit optimization, while taking an older workforce that is resistance to change with negative performance out of the way as a liability (Kunze, Boehm & Bruch, 2013).

Jim Sprague would love to simply solve the problem this quarter, but he realizes that this is a long range problem, and he needs to take a long range point of view. He is likely to take on a deficit budget for the next two years, which will likely require approval of the plan at the headquarters level. Sprague needs to ensure that he has a capable workforce, soon, and he needs to the current workforce, despite their flaws, to leverage the training part of the succession plan. Ideally all of these sales persons would receive lofty titles, but the same pay, and feel respected for their experience and expertise- even if it is out of touch with contemporary approaches.

  • Johnston, M. W., & Marshall, G. W. (2013). Sales force management: Leadership, innovation, technology. Routledge.
  • Kunze, F., Boehm, S., & Bruch, H. (2013). Age, resistance to change, and job performance. Journal of Managerial Psychology, 28(7/8), 741-760.
  • Nanda, V. (2016). Quality management system handbook for product development companies. CRC Press.

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