Bates Manor

INTRODUCTION

In April 2008 BatesManor ("BM") merged with Lea-Meadows, Inc. ("LM"), an upholstered furniture manufacturer for living and family rooms. This merger was the result of the death Charlton Bates' father-in-law, who left Charlton's wife controlling interest in LM, a line that will fill the gap in BM's product mix.

Lea-Meadows' is a 75+ year old company, selling upholstered products made of the finest fabrics and frame construction in the industry. Its net sales in 2007 were $5m and have increased 3% annually for the past 5 years. The total upholstered industry had sales of $15.5b and is anticipated to have sales reach $16.1b in 2008. LM has 15 sales agents, who represent several manufacturers of noncompeting lines. These agents spend approximately 10-15% of their in-store time on LM products. Those agents get 5% of sales as commission and there is little other cost associated with them.

BatesManor sells medium-to high priced wood for bedroom, living room and dining room furniture. The company had net sales of $75m in 2007 and a before tax profit of $3.7m. The industry sales of wood furniture in 2007 were $12.4b and are projected to be $12.9b in 2008. The company currently employs 10 full time sales reps, who work off of an average salary of $70,000 (plus expenses) and a commission of .5% of net sales. The total sales admin costs in 2007 were $130,000. BM's sales reps are highly regarded and known for their knowledge of wood furniture and their willingness to work with buyers and sales personnel. On average the reps are making 10 calls per week and each call averages 3 hours. VP of Sales, Bott, is recommending an annual increase per account per year to 7 calls (7,000 calls total).

PROBLEM STATEMENT

While attempting to maintain as much autonomy as economically justifiable, the company is faced with the dilemma of whether or not to give the LM line to the current BM salesforce or to continue to use agents. BM believes the line should be given to the salesforce, but doesn't like the idea of increasing the current team. Moorman, the sales manager for LM, would like to remain with the agents.

There is an additional problem of Moorman's future. At 58 years old, he has worked for LM for 30+ years, is a family friend and godfather to Bate's youngest child. If the salesforce absorbs LM, his role would be eliminated.

PROBLEM ANALYSIS

The problem faced by these two entities is a challenge because both are well-established, family-operated businesses that have successfully marketed under their current sales models for many years. Marrying, changing, or displacing either or both of them could have the effect of exponentially increasing performance, or of spelling disaster for the future of these brands.