Palladium Door Analysis

Palladium Door’s Current Position

Palladium Door has seen respectable growth in sales revenue in the decade preceding the 2003 sales year. Executives with Palladium Door would like to propagate this success in succeeding years, but have set a higher sales growth rate for the following sales year. Palladium Door has set a sales increase of 36% for the 2004 sales year, an increase that the company would like to create primarily through enhanced supply chain management and increased distribution.

To achieve this growth, Palladium must create a suitable distribution and supply-chain strategy that is both conducive to the desired sales increase and that is cooperative with the company’s dealers. However, this increase in sales must not surpass the 20% increase allotted to marketing budget – also, the outlay of this additional marketing expenditure must remain consistent with achieving the 2004 sales goal.

Possible Courses of Action

Palladium Door has four possible routes to the desired sales increase. These alternatives are as follows:

1. Increase the number of independent (nonexclusive) dealers in the existing market by 100.

2. Develop a formal franchise program as suggested by some 27 independent dealers.

3. Reduce the amount of dealers without the creation of a franchise model.

4. Allow Palladium Door to continue as is (i.e., no change to current distribution network).

These alternatives, formulated during a company planning process in 2003, would result in distinctly different outcomes. However, to standardize the measurement of each alternative, an examination of each of the proposed solutions’ effects on the 2004 Income Statement will be performed, with the overall change in net income providing an important indicator of success. Commensurate changes in total marketing and sales representative expenditure will also be considered.

Suggested Approach

To achieve Palladium Door’s desired sales increase, market penetration and dealer cooperation, the...