Sunflower Incorporated is a large distribution company with over 5,000 employees and gross sales over $700 million in 1991. The company purchases and distributes salty snack foods and liquor to independent retail stores throughout the United States and Canada. Salty snack foods include corn chips, potato chips, cheese curls, tortilla chips, and peanuts. The United States and Canada are divided into 22 regions, each with its own central warehouse, salespeople, finance department, and purchasing department. The organization distributes national as well as local brands and packages some items under private labels. The head office encourages each regions to be autonomous because of local tastes and practices. The northeast United States, for example, consumes a greater percentage of Canadian whisky and American bourbon, while the West consumes more light liquors, such as vodka, gin, and rum. Snack foods in the Southwest are often seasoned to reflect Mexican tastes.
Early in 1989, Sunflower began using a financial reporting system that compared sales, costs, and profits across regions. Management was surprised to learn that profits varied widely. By 1990, the differences was so great that management decided some standardization was necessary. They believed that highly profitable regions were sometimes using lower-quality items, even seconds, to boost profit margins. The practice could hurt Sunflower’s image. Other regions were facing intense price competition in order to hold market share. National distributors were pushing hard to increase their market share. Frito-Lay, Bordens, Nabisco, Procter & Gamble (Pringles), and Standard Brands (Planter’s peanuts) were pushing hard to increase market share by cutting prices and launching new products.
As these problems accumulated, Mr. Steelman, president of Sunflower, decided to create a new position to monitor pricing and purchasing practices. Agnes Albanese was hired from the finance...
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