Case: Harverwood Furniture, Inc (A)
Eduardo Barroca de Moura
1. State the Central Strategic Issue
A. State the central strategic issue identified in your situation analysis. Haverwood needs to decide whether go with their agency ad suggestion or else. Mike Hervey, from Hervey and Bernham suggested increasing their expenditure by $225,000 by 2008, through various shelter magazines ads. However, that approach is lightly out of line with the current policy of budget of 5% of expected sales for total promotion expenditures. Also, the vice president of sales had requested more sales representatives. So the funds allocated to promotion is just one side of the problem. The allocation of theses funds within the budge is the other problem.
B. State the four to six most relevant factors (from the your situation analysis) that led you to this strategic issue definition. 1. The ad agency suggested to invest in ads in shelter magazines to creat brand awareness and enhance image. 2. To back the idea of a expenditure of $225,000 for 2008 a study shows that 85% of readers, red furniture ads before they actually need furniture, and 95% say they get redecorating ideas or guidance from magazines. 3. The 2007 stock market is worrisome and grew 2.5, even though economists are predicting 4% increase for 2008 in industry sales. 4. Contribution margin will fall to 20% due to rising material costs. 2. Formulate Strategic Alternatives (Include estimates of market potential & BEA.) A. Alternative 1
Reject Mike Herverys budget. Accept John Botts’s sales projected sales expenses, and have a more compatible with the budget promotion mix. 1. Advantages/Benefits
All 50 new accounts would be covered with a new representative, and the cost of sales would be ready for the 2008 increase. 2. Disadvantages/Costs
The disadvantage would be that would offer other furniture retailers to increase their marketing share in a very delicate ere – the late 2000s economy recession. B. Alternative 2
Reject Mike Herverys budget. Accept John Botts’s sales projected sales expenses. And both create a promotional website and increase brand awareness in in-store galleries, following a more conservative approach and keeping, and perhaps growing in tough economy years.
The budget would remain unchanged for the most part, and a new tactic of taking advantage of in-store galleries and creating a website to customers to familiarize with its new furniture and promotions, would create a very efficient way to promote sales.
Other bigger furniture manufactures already seems to be taking this measure, and do not promote in great scale. There is no proof that sales will increase to desire levels using this approach.
Increase the margin of 5% of expected sales, and take a very risky and broad measure to accept both Mike Hervey’s and John Bott’s sales budget. That aggressive way of promoting and selling can bring a great result or a big disappointment and bring losses to the budget, in 2008, the peak of the great economy recession.
3. Select and justify an alternative.
A. Use Decision Matrix
1. Consistent with company goals?
No. A increase above the 5% for total promotion expenditures would have to be increase 2. Risk.
Very low. This would be withing the company's budget, and take advantage of the true-and-tried in-store galleries High. This agressive measure could prove to be a huge success or a big disappointment. 3. 3. Investment required
4. Competitor retaliation
Likely. Competitors with a higher sales figure could take advantage of that and creat a bigger promotion techinique. High. Other competitors could use the same tools but with a much higher strenght, since they a much higher revenue. 5. Compatibility with current...
Please join StudyMode to read the full document