Hendison Electronics Company

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

o pass along to consumers involves the fact that their buyers are able to demand price concessions from vendors based on the volume of business the mass merchandiser can deliver. A third idea for increasing sales of Hendison's products involves offering the 425 independent dealers the option of becoming exclusive distributors by allowing or requiring them to sell off the other brands of home entertainment systems they sell. Under this plan, a non-exclusive distributor that opted not to become an exclusive distributor with an exclusive territory would be asked to resign the Hendison account. This exclusive franchise distribution concept became known when a group of 27 of the company's non-exclusive dealers approached Hendison last year about the possibility of becoming exclusive dealers. One of the possible implications of this proposed arrangement is that only a fraction of the company's 425 independent dealers would agree to become exclusive dealers. As a consequence of being given the option of resigning as a non-exclusive distributor, it is possible that sales of Hendison products could decrease rather than increase. It would be a mistake for Hendison to act on the assumption that the 27 dealers that approached the co

Category: Business - H