Merton Industries

Rossemary Milan

Dr. Barksdale

MK 4900

February 2, 2009

Merton Industries

Problem Statement

Merton Industries is a privatively held manufacturer of medium to high priced carpet for the residential segment. Robert Meadows is the president of the company and is considering selling directly to customers, rather than through existing wholesalers.

Situation Analysis

' Recorded a profitable sales growth of 3.6%

' Net profit margin was 4%

' Lagged behind in industry sales growth

' Sufficient cash flow to fund present initiatives

' Currently distributes through 7 wholesalers

' Long term relationship with wholesalers

' Possibly supply 4,000 retail accounts

' Competitor warehousing located in 7 metropolitan areas

' Financing programs from internal funds, except for capital expansion

' Warehouse operations $700,000 in fixed costs

' Salaries & Administrative expenses $70,000 for each sales rep and $80,000 field manager.

Alternative Evaluation

' Lack of marketing in the residential segment

' Obtain more accounts of retail buying groups

' Lower selling price to wholesalers

' Wholesalers passing on savings to customer

' Combination hybrid of both direct to consumer and wholesaler distribution

Recommendation

Merton Industries is currently not doing bad in terms of generating a profit growth, but in comparison to the carpet and rug industry, where sales have increase a 7% from 1998 to 1999. Merton Industries can be classified as “lagging”. Now in the year 2000 Merton Industries can afford to make a change in their distribution system, such as the proposition of selling directly to the retail stores and eliminating the wholesalers. Although it is important to consider the relationship that Merton Industries currently has with its wholesalers, such that all 7 of them have been selling Merton products over 10 years and up to 30 years. Opening the first company warehouse will definitely not please the...