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Hanover-Bates Chemical Corporation Sales Volume - Assignment Example

Summary
This paper "Hanover-Bates Chemical Corporation Sales Volume" focuses on the Sales Volume Analysis which is a very effective methodology to analyze the performance of an organization. Generally, the sales and profit of a company depend on various factors such as the cost of sales, price of self. …
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Hanover-Bates Chemical Corporation Sales Volume
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Hanover-Bates Chemical Corporation Sales Volume Sales Volume Analysis is a very effective methodology to analyze the performance of an organization. Generally, the sales and profit of a company depends on various factors such as the cost of sales, price of self, price of competitors and so on. Sales volume analysis studies this relationship between these factors. This report analyzes these factors for Hanover Bates Chemical and makes suggestions for improvement. Comparison of the performance of various districts The performance of the various districts on parameters such as sales, profit, contribution etc is displayed in table 2,3 and 4. Analysis of District Sales and Gross Profit Quota Performance This information for the 7 districts in which Hanover-Bates is operating is given in table 2. As can be seen from the table, district 3 (North-East) has under-performed on both the parameters: sales as well as profits. The sales team has not been able to achieve the desired sales and profit margin by a quite long range. The percentage deviation from the target for both Sales and profit is shown below: Under-performance in Sales = Under-performance in Gross Profit = As can be seen from the above figures, sales persons in the North-East district have not been able to meet the profit figures by a larger range. The table below shows the comparison of the profit margin of the 7 districts: Table 1: Profit Margin for the 7 districts As evident from the table, the profit margin is the least in the North-East district. This indicates that the cost of sales have not been kept under control. A look at the direct selling expenses of the company across the seven districts shows that the North-East district is having the second highest selling expenses. This is not justified for a sales team that has not been able to achieve its sales target and is operating on minimum profit margin. Table 2: Sales, Gross Profit and Profit Margin by Category Analysis of the sales, gross profit and profit margin is shown below in Table 2 above. As can be seen from the table, the profit margin is less than North-Central in all the three categories of the customers. From the case it is evident that more calls are being made in the Northeast district as compared to the North-Central district. The table below shows the success conversion rate of all calls to potential customers and from potential customers to active accounts. Table 3: Success Conversion of calls across categories As can be seen from the table, the conversion of potential accounts to active is poorer than North-Central district in category A and B. Altough a higher percentage of all calls are being converted to potential calls in Northeast district, the conversion ratio from potential to active is not good. As we see, while North-Central sales team converts 70% of the potential accounts to active ones, the same conversion rate in Northeast is just 58.89%. The higher number of calls being made points which are not being converted into potential calls raise two issues: the efficiency of the calling team or a lot of effort is being wasted in targeting customers which might not be much interested in making the purchase. Weak spots and Root causes of poor performance of Northeast district The northeast district has many problems which need to be worked upon in order to improve the performance of the company. The first of these is high direct costs of making the sales. The district is having the second-highest direct costs a major portion of which is the sales salary. Sales representative expenses is another major head with a significant contribution towards direct costs. The high costs result in a less profit margin which makes it necessary to make more sales in order to achieve the desired gross profit. Another issue with the Northeast district is the inability of the sales force of the region to convert the calls to active customers. A much larger proportion of potential accounts are not being converted to actual accounts. This needs to be changed in order to get more actual customers. This has also resulted in the failure of Northeast salesman to achieve their sales target. The sales team in the north east is not able to effectively convert calls into potential calls which implies that a lot of effort is being wasted in targeting customers which might not turn into actual customers. Suggestions for the Management Based on the analysis, it is clear that the major focus area of the management shall be to control the direct costs of sales. One head which require significant focus from the management is the higher sales representative overhead expenses. The costs of sales can be increased by incorporating the use of tight budget and strictly pursue it. There is also a need to redefine the salary structure of the district. The salary of the manager is the highest in the northeast district. There needs to be strong relationship between the salary of the performance of the district and the district sales manager. Same is to be done for the incentives of the salespeople. The incentives need to be linked with the profit as well rather than just sales figure. A relation with the sales figure merely encourages the sales force to increase the sales by compromising on prices. As a result, the profit margin of the district decreases. Linking the incentives with profit per salesperson might be a good idea. The management also needs to take care of the poor conversion rate of potential customers to actual customers. The sales force need to be trained about converting a prospect customer into a suspect and then into actual customer. The sales force need to be trained about the products,competitors and sales techniques such as cross selling and up selling. Read More

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