what is the initial investment that the SMA would require? What is the anticipated B/E point?

cases Did . nen Businessland Computers, Inc.: ing What If We Automated Our Salesforce ther Bell Pear Sales Manager for Businesland, was reviewing sales ales performance and selling expenses from the past trair fiscal period in preparation of a budget which was due in a couple of weeks. At first glance, Bill was surprised to and see that the company's total selling expenses were up- prod proaching $300 million. In purring initial analysis, be mid noted two areas in particular that were quite disturbing the First, the average cost of a sales call had been increasing with substantially in recent years to where it was near $300 port during the previous year. Secondly, nearly 60% of the com sales rep's time was spent in non-selling activities. Com chats pounding this was the company's profit trend which last simile year dropped to an all-time low ending at a loss of $25 the da million. Bill's thoughts centered upon some of his own to OP company's technology products. He questioned, tions $150 "What it...we were to look toward technology decad based solutions Could Businessland develop new sales ales systems to bring together data from many Sales sources providing a reputacent to the most up marke to-date information? How would the sales repere spond to it for that matter how would Business at $50 land's diena respond to ? 1 needs As Bill began to formulate ideas about using technol addres gy, he projected that a process could reduce adminis puters trative communication angles so sales professionals Wheap would have more time for customers, and improve hardw information accuracy and efficiency for more effective velopim time estensi tions, "Maybe we color w technology (com parent pu) to provide the salesforce imate for quired or ander pricing wallabiliyok fos fim, electronic mullerad sheet, account and terrory. This would helping Rear all 4H CHI HHCatias Flog ries of the replacorporate marketing pated prennen, portantly, the custome sonnel training forgren Background Business and was founded in the mid 1980s by Bret Lane and Gerald Pro. They combined knowledge skill and the experience of marketing and technology o form a company that we wervices, and rapporto Saten Aulding ciency SA 3 80 99 $ 3 % 5 4 6. Page - Inc. What // We Automated Our Salesforce! 499 Sast due Elto ap- be ng ng 300 the DIE fast 323 own hent, privately held company that specializes in build ing PCs from multiple manufacturers and integrating them into customic environments by using an outside salesforce of 500. In addition, they provide customer training, service, and telephone hotline support The personal computer industry is very dynamic and has experienced rapid changes in technology and product that have a relatively short life cycle. By the mid 1980s, hundreds of manufacturers had entered the market and there was a scramble to sell hardware with little attention to applications systems. or sup- port. There was an industry wide rush to establish computer orea and retail outlets with the anticipation that personal computers would imately be marketed similarly to that of refrigerators, In the latter part of the decade, a large number of those companies ceased to operate either due to failure, mergers, or acquis tons. World sales of personal computers exceeded $150 billion in the mid 1990s up from $12 biliona decade earlier. Similar growth occurred in the US as sales of $6 billion in 1985 exceeded $60 billion in 1995 Sales of personal computers dwarf all other computer markets including mainframes which Ivave plateated at $50 billion annually The companies that did survive discovered the need to emphasize software ahead of hardware and to addresa suser needs. The initial surge for personal com puters was limited is most sens required education in the applications and selection of both software and hardware. Essentially, it was an evolution. With the de velopment of more sophisticated software and more extensive wage in many different areas of applica- tion, the need for yems and networking became ap parent. Thus, a more complex systems approach te quired not only a change in marketing but also a need for service and support. Many of these changes called for greater resources can originally planned Invento ries of equipment and parts were higher than antici pated, the need for knowledge and well-trained per: sonnel increased, and there was an increase in the training of ers and in providing aftersale support nol Inis nals rove ctive Bret edye. Sales and Earnings Adding to Bill'e dilemma of rising costs and inefli ciency in the selling proces, was the realization that ology Sport See All Wedel. de Sen. The do DIE DD 610 440 Cases Businessland Computers Inc. What If We Automated Our Salesforce? Businessland's orders for the last year increased only 1% as compared to a 19% increase five years earlier. In a similar pattern, current year revenues increased only 13.8% compared to a revenue growth of 21.1% the previous year and 42.7% two years earlier. Earnings, however, decreased to a negative of $2 million in the last year as compared to decreasing growth rate of 91.5% in the previous year and 37% two years can tiet. Parallel to this, Bill noted that the category of expenses identified as selling, general, and admin trative increased nearly 1996 during the past year com pared to only 9.8% the previous year. It was immedi cly apparent that revenues were will increasing but a decreasing rate but that orders had almou be come taget during the past year by contrast, opera ing expenses were running wild and if Businesland were trenian competithe, these would have 10 brought back under control Be began to focus pernatives Revenues and earnings are shown in Sales and Marketing Automation At a recent seminar entitled "Marketing Technolog Bill had been exposed to the concept of Sales and Marketing Automation (SMA) which is a slem de signed to add efhciency to sales operations. In the words of Steve Husner, a sales rep for Nation's Cart ers "The laptop allows one to follow through with a customer rather than having to get back to them Inter time. It permitt rep to hook right up to mainframe via a modem and Renswer to any que tion the customer may have right on the spol SMA also improves salesforce productivity and increase fectiveness by 1 reducing the amount of time alesperson devotes to administrative auch in the preparation of all reports tracking sales leads tive . rate but that actual orders had almost be Et during the past year. By contrast, operat- es were running wild and if Businessland main competitive, these would have to back under control. Bill began to focus atives. Revenues and earnings are shown in reducing the amount of time a salesper devotes to administrative tasks such as preparation of call reports. tracking sales leads. . FIGURE 1 Businessland Computers, Inc. Five Year Selected Financial Date Your last furcal Year 2 Year 3 (in thomands) period) Year For 5 Net Sales $1,367370 $1.200.628 $990,119 $699.828 $501,033 287,550 313,645 265,868 198.955 136,475 298,076 250,762 928.673 181,364 139.455 Gross Profit Selling. General, & Administrative Exp Restructuring Exp Income (los) from Operations Income (los) for IRS 13,633 (24.161) 62.884 37.195 17,592 02.9393 (30,850) 56,334 31,665 13.882 80H 125.354) 33,205 17.485 8.078 Income clos before extra ordinary item (10.769 Net Locate (low) (28,297) 33,497 17,485 12,789 (2180) Cases Royal Coregration Page