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(Shaefer Electronics) Shaefer Electronics is a medium-sized producer (about $ 18 million in sales in 2003) of electronic products for the oil...

This question was answered on Jan 28, 2013. View the Answer
(Shaefer Electronics) Shaefer Electronics is a medium-sized producer (about $ 18 million in sales in 2003) of electronic products for the oil industry. It makes two main products - capacitors and integrated circuits. Capacitors are standardized items. Integrated circuits are more complex, highly customized items made to individual customer specifications. They are designed and made to order, require installation, and sometimes require post sale servicing. Shaefer's annual sales (in thousands of dollars) are shown in the table below.


1990 1995 1999 2000 2001 2002 2003
Capacitrs $5,568 $6,488 $7,131 $7,052 $7,043 $7,360 $8,109
Integrated circuits $678 $1,679 $4,651 $6,245 $7,363 $8,589 $9,508
Total $6,246 $8,167 $11,782 $13,297 $14,406 $15,959 $17,617

Shaefer relies entirely on manufacturer's representatives (MRs) located throughout the United States to sells its products. MRs are independent contractors who sell Shaefer's products in exchange for a sales commission. The company's representatives are not exclusive-they represent manufacturers of related but noncompeting products, such as circuit breakers, small switches, or semiconductors. Often a customer will buy some of these related products along with integrated circuits or an order of capacitors. MRs have long experience within local markets, close ties to the engineers within the firms that buy control systems, and deep knowledge of their needs. In the markets in which they operate, MRs develop their own client lists and call schedules. They are fully responsible for the expenses they incur in selling their products. Once an order for one of Shaefer's products is taken by the MR, Shaefer is then responsible for any installation or postsale servicing that is needed. Shaefer recently hired two different marketing consultants to study its sales force strategy. Their reports contained the conclusions reported below. Comment on the soundness of each conclusion


a) Shaefer should continue to sell through MRs. Whether it uses MRs or an in-house sales force it has to pay commissions. By relying on MRs, it avoids the variable selling expenses (e.g.. travel expenses for salespeople) it would incur if it had its own sales force. As a result, Shaefer's selling expenses are lower than they would be with an in-house sales force of comparable size, talent, and know-how.

b) Selling through MRs made sense for Shaefer when it was first getting started and specialized in capacitors. However, given its current product mix, it would not want to set itself up the way it is now if it were designing its sales force strategy from scratch. But with what it has got, Shaefer should be extremely cautious about changing
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Shaefer relies entirely on manufacturer's representatives (MRs) located throughout the United
States to sells its products. MRs are independent contractors who sell Shaefer's products in
exchange...

This question was asked on Jan 24, 2013 and answered on Jan 28, 2013.

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