Hendison Electronics Company [Hendison] has been in business for almost forty years. Hendison is an assembler of home entertainment equipment. The company distributes is products through 425 independent specialty home entertainment dealers and through 50 exclusive dealers. Hendison sells regionally. It products are sold in 150 markets in 11 western and Rocky Mountain States.
Hendison is currently trying to determine the best way to increase its sales revenues. Senior management has just completed a plan calling for an increase in sales revenues in the coming fiscal year of 37%, from $67.5 million to $92.5 million. The company does not distribute its products through any mass merchandisers such as Circuit City Stores, but various senior managers are debating whether its current distribution model is capable of generating the 37% increase in gross sales volume mentioned above.
The problem statement under consideration is this: Can Hendison generate the necessary sales increase to justify the planned increased expenditures on advertising and marketing without making major modifications to the current distribution model which could include adding new sales representatives, expanding sales geographically, ending the exclusive dealer arrangement, and distributing the company's home entertainment systems through one or more mass merchandisers?
There are several approaches to achieving the sales growth goal described in this case study. For example, a number of executives have suggested that no changes are required to the current distribution strategy. These executives suggest that the sales increase could be accomplished by the addition of salespeople employed by Hendison to call on the current distributors and by the planned expansion of Hendison's television advertising budget. The implications of this 'status quo' approach to product distribution is that the company's expanded advertising campaign is going to be so ...