Green Acres

Example of a Case Writeup

Green Acres Seed Co.

Avery M. Abernethy

Situation Analysis: Green Acres has increasing sales, but gross margin percentage, profits and profit margins are falling. Cash on hand is $380,900 and working capital could be as much as $500,000 (current assets - current liabilities).

Green Acres has less than a 2% market share. Slight increases in sales could gain major revenue increases. For example, increasing market share in Iowa by 1% yields a $704,600 revenue increase (see appendix 1). Performance is also quite uneven by salesperson and by state. Allocation of salespeople to market potential is also weak (see Table 1).

Single cross is sold at the industry's lowest price, but is most expensive to make and has the highest commissions. Any product advantage or disadvantage that Green Acres has is unknown. Also, approximately 1/2 of the dealers are ordering fewer than 25 bushels a year giving high administrative and promotion costs with little advantage. The competition also spends far more on advertising and far less on sales promotions.

Suggested Strategy: 1] Change the commission structure. Currently we are giving the most commissions on the easiest product to sell (Single Cross) that also has the lowest contribution. It is suggested that Green Acres change commissions to:

Current Suggested

Double Cross # of Bushels Commissions Commissions

1 to 25 $3.00 $2.00

26 to 99 $3.00 $4.00

100 to 249 4.00 5.00

250 or more 5.00 7.00

Single Cross 1 to 25 $4.00 $1.00

26 to 99 $4.00 $2.50

100 to 249 5.00 3.50

250 or more 7.20 4.50

This new...