Reference no: EM132247174

Edmunson Electrical Distribution is a leading distributor of electrical equipment and components with over 230 branches in the United Kingdom. The company is a wholesaler of electrical products acting as an intermediary between manufacturers and customers. Accounts are classified according to turnover and margins achieved. The ‘bread and butter’ of the business is the electrical contractor, who provides high turnover but low margins. The more significant the purchases, the higher are the rebates and discounts awarded to these customers. A second important group of customers are hotels, hospitals, and other institutional customers who provide less volume but better margins. It is company policy to maximize the turnover of each customer so that Edmunson can, in turn, command a better price from the manufacturers. With such a wide range of product lines and items, the company cannot afford to stock every product so their own competence is measured not only in price but also by the service, especially delivery reliability.

The company uses a SPI (standard practice of initiation) to give similar accounting procedures for stocks, invoicing, ledger entry and so on. Branches in all other respects compete in terms of orders, charges, and revenues, which are the sole responsibility of the branch manager. Each branch is a separate profit center and operates more like a franchise since the capital is given directly to the branch, although 19 percent of annual profits go to the parent company. The branches compete, but the sales representatives feel that the syste3m is fair and motivating. The manager is usually supported in each branch by an accountant and at least one representative as well as buyers, telesales, and store personnel and van drivers.

Branch A is one of the most successful in the group. There are several major accounts but relatively few electrical contractors and competition is now well represented in the area. Turnover is higher and costs are lower than in many other areas. The branch manager is well respected and higher successful, the youngest in the group, and last year steered his branch to a $3 million turnover with a profit share between the eight employees of $160,000. This success, combined with the hunger to created by the profit share, has produced a highly motivated team. This team spirit is encouraged by the manager with open offices and an easy communication style. People are allocated to tasks according to their suitability – one salesperson actively seeking new accounts, another servicing existing accounts. All staff are aware of the 19 percent profit levy so they aim to beat this on all business negotiated. However, because their figures are based on previous year’s targets, in some months sales are held back if the increase was too great, in the knowledge this will raise next year’s figure. Salespeople have been sent on training courses, but do qualitative targets are set for them.

Branch B is currently in financial trouble and operates in stark contrast to Branch A. In the past two years turnover fell by almost one-half, a stock deficit was recorded and, since 19 percent of profit was to be paid, no profit sharing to staff was achieved. Competition is fierce in this area, with 30 other wholesalers operating, but no involvement of salespeople in setting targets is allowed. For example, a new recruit with two weeks’ experience was given the task of opening 40 new accounts in 12 months. He failed and left the company. No sales forecast is set and people are encouraged to get business wherever they can. The result is that several people left and, after two years of disastrous results, the manager was asked to resign.

From the information given, suggest what factors contributed to the diverse performances of the two branches.

What training programs would you develop to help their sales operations?