Janmar Coatings Case Analysis

Janmar Coatings, Inc. To Ronald Burns Subject Janmar Coatings, Inc. Suggestions Comments The problem facing Janmar Coatings, Inc. is ending making where and how to execute corporate commercializeing efforts in the s proscribedhwestern United States. Janmar Coatings is shortly marketing to 50 counties, their main condense orbit so off the beaten track(predicate) has been the 11 counties in the Dallas-Fort Worth commonwealth. The main issue Ronald Burns, the president of Janmar Coatings, is having is laborious to come up with a solution to market his society in the nigh cost effective way during 2005.After 2 long meetings with his executive team he still has no clear direction. He has gather an approach from each of his team members, including VP of Advertising, VP of sales, VP of trading operations, and VP of Finance, and now has four solutions to consider. The VP of Advertising has proposed to profit corporate publicise with an large emphasis on television. The VP of gross revenue proposed hiring a new topic representative to help generate new accounts. The VP of Operations has proposed a 20% legal injury cut on all Janmar crossing sales.The VP of Finance proposed that nothing be done that the club continue with their ongoing efforts and keep a 35% contri scarceion margin. After looking at the companys overall goals and finances, I would agree with the VP of Sales. Based on his suggestion, I believe it would be a smart time to carry a new sales representative for Janmar. The cost attributed to company for hiring a new sales representative would be $60,000 per year. And the amount of sales tax claimed to cover this expense is $170,000.However, if this sales representative position is decently used, they ordain be able to make this margin back rapidly. Because by concentrating on just developing new sell accounts in the non-DFW area, the company could generate lots of sales to a brand new purchaser market. Janmar has realized that th ey need to focus to a greater extent energy on the Do-it-yourselfers as they say, or DIY population, and the non-DFW area reckons to be where most of these consumers are located. It was mentioned that product tolls would need to be lowered 40% in order to attract contractors, but that is not an immediate worry.Janmar needs to focus all their current energies on the DIY consumers and professional painters. Hiring a new sales representative would be the smartest decision advanced now because they will know every detail of the products and incur the ability to market that properly to each of those consumer segments. However, I have likewise considered the Vice President of Advertisings suggestion that they should cast up denote expense by $350,000. While initially, increasing ad expenses sounds like a good thing to do, this decision would close to double the current advertizement expenditure.Janmar is spending around 3% of revene on advertising and sales promotions efforts wh ich comes out to nearly $360,000. And while it may By increasing advertising expenses by $350,000, an additive $1,000,000 in sales will need to be regain to make up for this expenditure. Mr. Burns makes a valid point by saying that 75% of the audience advertised too is not buy paint. With 25% of your audience only looking to buy paint, it would not be worth the risk of not increasing sales by $1,000,000, to pass the extra advertising expense.Also, I considered the Vice President of Operations device for a 20% price cut on all Janmar Coatings, Inc products. wrong cuts are always something that needs to be entered into with extreme caution. Even the slightest 1-2% regorge in price can lead to a huge spend in margin. In Janmars situation, if they choose to implement a 20% price cut, they decrease their overall sales dollars by $2. 4 mm. And their covariant cost will not be effected by this price cut to their cost of goods sold will be held constant.In the end trim down their gross profit by 50%, which is extremely high. By implementing this price cut too, they would be lowering their contribution margin by almost 60%. While initially, a price cut may seem very appealing to the consumers, the overall toll it will take on the contribution margin and sales dollars generated by Janmar, it would not be a smart decision to move forward in making that a reality. Now, the Vice President of Finance suggested pursuing the current approach. His idea is that Janmar Coatings has always, and will continue, to be successful.The contribution is high, just because an increase in costs doesnt mean in that respect will be an increase in sales, so why do anything different? Although the VP of Finance has valid points, there is seemingly something that needs to be done, or else 22 meetings would not have been necessary. Yes there is a great contribution now, but if things stayed the same, other companies may arrive much popular and generate more sales than we do and vi tality us out. Based on information from 2004, Janmar currently has a 15% market share in the 50-county service area. If Janmar just stays where they are, they could ose market share as well. It is true that with any expenditure, sales have to increase to compensate for those expenditures, but a company cannot merely stay unbiased when something absolutely has to be done. There is a way to introduce a plan that will generate sales to compensate for the expenditure. In this case, just adding a new sales representative seems to be the best, lowest risk, most probable solution in this case. Lastly, to do a more in depth review the Vice President of Sales suggestion to take up on a new field representative to the sales force.The focus for this new representative would be to focus on developing retail account leads and calling on professional painters to gain new tune through dealers. In the overall non-Dallas Fort Worth area, the penetration of Janmar is only 16%, so this representa tive would only concentrate in this area. everywhere the last 5 years, Janmar has focused most all of the actions toward the DFW area, while the non-DFW area has started to grow. The non-DFW area sales have grown 23% over those 5 years. DIY customers represent a higher percentage of sales than professionals in two areas.However, DIY customers represent 90% of sales in non-DFW areas. Because our contribution margin is 35%, with the addition of a new representative costing $60,000, about $171,429 additional in sales would be needed to recover the expense. With the addition of a sales representative, though, this sales rep could be focused on the non-DFW area and create account leads with more professional painters. The company would need a price cut of about 40% to attract contractors, but if the company could also just create awareness among more professionals in the non-DFW area, more sales could be generated there.Lets not focus on contractors right now, and get the professional sales in the non-DFW area up, and create more accounts with them. Sales in the DFW area and non-DFW area in the last 5 yearsIncrease Advertising Spending (emphasis on television) online advertising spending 3% of sales=. 03*12mm=$360,000 Sales needed to recover advertising expenditure $350,000/. 35(CM)=$1,000,000 20% Price Cut on all Janmar products Current Sales Gross Profit CM Sales $12mmGross Profit $4. mmCM 40% Sales, Gross Profit, and CM changes after 20% price cut Sales $9. 6mm ($2. 4mm change)Gross Profit $2. 4 mm ($2. 4mm/50% change)CM 25% (60% decrease) Adding another Sales Representative to the work force Current Sales Reps 8 field reps that cast about $480,000 +commission (assuming they receive the $60,000 salary the new rep would receive) Sales needed to recover new rep expenditure $60,000/. 35 (CM) = $171,428. 57 Janmar Market Share of architectural paint and allied products 15%