General Electric Appliances

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Abstract

The newly appointed district sales manager, Larry Barr, faces the problem of allocating sales quotas among his various sales representatives. This decision will affect everyone's earnings including his own. This problem is compounded by the fact that different territories have, for a variety of reasons, different potentials. In addition, the territory that is known to be the toughest will soon require a new sales rep.

Company History/Background
Canadian Appliance Manufacturing Co. Ltd (CAMCO) was created in 1998 under the joint ownership of Canadian General Electric Ltd. and General Steel Wares Ltd. (G.S.W.). CAMCO purchased the production facilities of Westinghouse Canada Ltd. under which the brand name White-Westinghouse was created. Appliances manufactured by CAMCO in the former Westinghouse plant were branded Hotpoint. G.E., G.S.W., and Hotpoint major appliance plants became divisions of CAMCO. These divisions were operated independently, had their own separate management staff and competed for sales although they were all ultimately accountable to CAMCO. Larry Barr has recently been promoted to the district sales manager position for G.E. Appliances. One of his more important duties was the allocation of his district sales quota among his five salesmen. He received his 2002 quota in October 2001 at which time his immediate task was to determine an equitable allocation of that quota. This was important because the company’s incentive pay plan was based on the salesmen’s attainment of quota and a portion of his remuneration was based on the degree to which his sales force met their quotas. The five territories were:

TerritoryDestination/Sales PersonDescription
9961Greater VancouverHudson's Bay, Firestone, Kmart, McDonald Garth RizzutoSupply, plus seven independent dealers
9962InteriorAll customers from Quesnel to Nelson,
Dan Seguinincluding contract sales (50 Customers)
9963CoastalEatons, Woodwards, plus Vancouver Island
Ken Blocknorth of Duncan and upper Fraser Valley
(east of Clearbrook) (20 customers)
9964Independent and NorthernAll independents in lower mainland and Fred SpeckSouth Vancouver Island, plus northern
B.C. and Yujon (30 customers)
9967ContractContract sales Vancouver, Victoria All contract Jim Wistesales outside 9962 (50-60 customers)

The sales incentive plan was a critical part of G.E.’s sales force plan. Each salesman had a portion of his earnings dependent on his performance with respect to quota as well as Barr being awarded a bonus based on the sales performance of his district. The plan was relatively simple. Each salesman agreed to a basic salary figure called “planned earnings” which varied according to experience, education, past performance, and competitive salaries. 75 percent of the planned earnings were paid on a guaranteed basis and the other 25 percent was at risk, dependent upon the person’s sales record. The bonus was awarded such that total salary equaled planned earnings when the quota was just met and was paid quarterly on the cumulative total quota. Because of this system, it was imperative that each salesman’s quota be fair in relation to the other salesmen.

Barr’s quota was $13.3 million which was a 14 percent increase over 1999. He had two weeks to allocate the quota among his five territories. He needed to consider factors such as historical allocation, economic outlook, dealer changes, personnel changes, untapped potential, new franchises or store openings, and buying group activity. His first step was to project current sales figures to end-of-year totals. The next step was to make a preliminary quota allocation by adding the budgeted sales increase of 14 percent to each territory’s total. The third step was assessing the circumstances that could cause him to alter that allocation. Projected Sales Results 2001

Oct 20012001 Projected2001Percent ofProjected
TerritoryYear to DateTotalBudgetTotal Budget...
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