Hello Please help me in my assignment It's about Shanandoah Industries Case study. This is about merging two different sales forces.

My question is if for example I'm the sales manager to handle the decision making on the merger, what will be the best solutions on their concern?

296 CHAPTER 8 ORGANIZATION SHAN CASE 8-3 sentat SHANANDOAH INDUSTRIES (B) the a time v travel increa n November 1986, Shanandoah merged with Lea- to represent all lines carried. On a typical sales call, a was Meadows Industries, a manufacturer of uphol- sales agent would first visit buyers. New lines, in add norm stered furniture for living and family rooms. The tion to any promotions being offered by manufacturer, merger was not planned in a conventional sense. Charl- would be discussed. New orders were sought where MER ton Bates's father-in-law died suddenly in August and when it was appropriate. A sales agent would then 1986, leaving his daughter with controlling interest in visit a retailer's selling floor to check displays, inspect furniture, and inform salespeople on furniture. Lea In se the firm. The merger proceeded smoothly, since the was two firms were located on adjacent properties and the Meadows industries paid an agent commission of 5 spec general consensus was that the two firms would main- percent of net company sales for these services. Moor- mad tain as much autonomy as was economically justified. man thought sales agents spent 10 to 15 percent of cally Moreover, the upholstery line filled a gap in the their in-store sales time on Lea-Meadows products. Shanandoah product mix, even though it would retain The company did not attempt to influence the type the its own identity and brand names. of retailers that agents contacted. Yet it was implicit in gav The only real issue that continued to plague Bates the agency agreement that agents would not sell to dis- Sha was merging the selling effort. Shanandoah had its count houses. All agents had established relationships res own sales force, but Lea-Meadows Industries relied on with their retail accounts and worked closely with Sal sales agents to represent it. The question was straight- them. Sales records indicated that agents were calling gon forward, in his opinion: "Do we give the upholstery on furniture and department stores. An estimated 1,000 buy line of chairs and sofas to our sales force, or do we retail accounts were called on in 1986. Sec continue using the sales agents?" John Bott, Shanan- onl doah's sales vice president, said the line should be he given to his sales group; Martin Moorman, national SHANANDOAH INDUSTRIES Th sales manager of Lea-Meadows Industries, said the not upholstery line should remain with sales agents. Shanandoah is a manufacturer of medium- to high- ope priced living and dining room wood furniture. The firm bec was formed in 1902. Net sales in 1986 were $50 mil- and LEA-MEADOWS INDUSTRIES lion. Total estimated industry sales of wood furniture ow Lea-Meadows Industries is a small manufacturer of in 1986 were $7.1 billion at manufacturers' prices. The company employed 10 full-time sales repre- tio upholstered furniture for use in living and family rooms. The firm is over 75 years old. The company has sentatives who called on 1,000 retail accounts in 1986. sai These individuals performed the same function as sales tiv some of the finest fabrics and frame construction in the industry, according to trade sources. Net sales in 1986 agents but were paid a salary plus a small commission were $3 million. Total industry sales of 1,500 uphol- In 1986 the average Shanandoah sales representative received an annual salary of $50,000 (plus expenses) can stered furniture manufacturers in 1986 were $4.4 bil- lion. Company sales had increased 15 percent annually and a commission of 0.5 percent on ent on net company sales over the last 5 years, and company executives believed Total sales administration costs were $1 12,500. this growth rate would continue for the foreseeable The Shanandoah sales force was highly regarded in future . the industry. The salespeople were known pa Lea-Meadows Industries employed 15 sales agents for their knowledge of wood furnitu 1own particularly to represent its products. These sales agents also repre- ingness to work with buyers and retail sales personnel sented several manufacturers of noncompeting furni- Despite these points, Bates kn es knew that all retail ture and home furnishings. Often a sales agent found it accounts did not carry the complete Shana necessary to deal with several buyers in a store in order ture line. He had therefore instructed John Bott to "push the group a little harder." At pres At present , sales repre- Prepared by Professor Roger A. Kerin of Southern Methodist University. Reproduced by permission.C . IZATION SHANANDOAH INDUSTRIES (B) sentatives were making 10 sales calls per week, with 297 the average sales call running three hours. Remaining time was accounted for by administrative activities and He noted that Shanandoah and Lea-Meadows Indus- travel. Bates recommended that the call frequency be tries overlapped on all their accounts. He said, "We'd call, a increased to seven calls per account per year, which be paying a commission on sales to these accounts n addi- norm. was consistent with what he thought was the industry when we would have gotten them anyway. The differ- morale." ence in commission percentages would not be good for cturers, Martin Moorman advocated keeping sales agents where for the Lea-Meadows line. His arguments were as fol- Id then MERGING THE SALES EFFORT lows. First, all sales agents had established contacts nspect In separate meetings with Bott and Moorman, Bates and were highly regarded by store buyers, and most Lea- had represented the line in a professional manner for of 5 was able to piece together a variety of data and per- many years. He, too, had a good working relationship Moor- spectives on the merger question. These meetings also with all 15 agents. Second, sales agents represented lit- ent of made it clear that Bott and Moorman differed dramati- tle, if any, cost beyond commissions. Moorman noted, s. cally in their views. "Agents get paid when we get paid." Third, sales agents were committed to the Lea-Meadows line: "The type John Bott had no doubts about assigning the line to agents earn a part of their living representing us. They cit in the Shanandoah sales force. Among the reasons he have to service retail accounts to get the repeat busi- dis- gave for this approach were the following. First, Shanandoah had developed one of the most well- ness." Fourth, sales agents were calling on buyers not ships respected, professional sales groups in the industry.! contacted by Shanandoah sales representatives. He with Sales representatives could easily learn the fabric jar- noted, "If we let Shanandoah people handle the line, lling gon, and they already knew personally many of the we might lose these accounts, have to hire more sales personnel, or take away 25 percent of the present sell- 000 buyers who were responsible for upholstered furniture. Second, selling the Lea-Meadows line would require ing time given to Shanandoah product lines." only about 15 percent of present sales call time. Thus As Bates reflected on the meetings, he felt that a he thought the new line would not be a major burden. broader perspective was necessary beyond the views Third, more control over sales efforts was possible. He expressed by Bott and Moorman. One factor was prof- noted that Charlton Bates's father-in-law had devel- itability. Existing Shanandoah furniture lines typically gh- oped the Shanandoah sales group 25 years earlier had gross margins that were 5 percent higher than those for Lea-Meadows upholstered lines. Another fac- irm because of the company commitment it engendered tor was the "us and them" references apparent in the hil- and because it provided customer service "only our meetings with Bott and Moorman. Would merging the ure own people are able and willing to give." Moreover, sales efforts overcome this, or would it cause more "our people have the Shanandoah 'Look' and presenta- problems? Finally, the idea of increasing the sales tion style that is instilled in every person." Fourth, he force to incorporate the Lea-Meadows line did not sit said it wouldn't look right if we had our representa- well with him. Adding a new salesperson would tives and agents calling on the same stores and buyers. require restructuring of sales territories, potential loss of commission to existing people, and "a big Additional background information on the company and industry headache." can be found in case 2-2, Shanandoah Industries (A)