John is a finance director of Nadim Product PLC, a company which manufactures and sells bathroom product such as baths, sinks and toilet. These product are sold through a selection of specialist shops and through larger store, customers include professional plumbers and also ordinary householder who are renovating their houses themselves. The company operates at the lower end of the market and does not have a strong reputation for service. Sales have been slowly declining whereas those of competitors have been improving. In order to encourage increased sales the board of directors has decided to pay senior staff a bonus if certain target is achieved. The two main targets are based on profit levels and annual sales. Two months before the end of the financial year the finance director asks one of his staff to check through the order and account to assess the current situation. He informed that without a sudden improvement in sales before the year end the important sales target will not be met and so bonuses will be adversely affected. The finance director has proposed to other senior staff this shortfall in sales can be corrected by taking one of the following decisions. 1. A significant discount can be offered to any outlets which takes delivery of additional products prior to the end of the financial year. 2. Distributors can be told that there is risk of price increase in the future and that it will be advisable to order early so as to circumvent this possibility. QUESTIONS · What are consequences of the bonus base on sales? · What other options could be more appropriate. · What are some of the practical steps to improve sales?

Practical Management Science

6th Edition

ISBN:9781337406659

Author:WINSTON, Wayne L.

Publisher:WINSTON, Wayne L.

Chapter9: Decision Making Under Uncertainty

Section: Chapter Questions

Problem 30P

See similar textbooks

Related questions

Question

100%

SE STUDY John is a finance director of Nadim Product PLC, a company which manufactures and sells bathroom product such as baths, sinks and toilet. These product are sold through a selection of specialist shops and through larger store, customers include professional plumbers and also ordinary householder who are renovating their houses themselves. The company operates at the lower end of the market and does not have a strong reputation for service. Sales have been slowly declining whereas those of competitors have been improving. In order to encourage increased sales the board of directors has decided to pay senior staff a bonus if certain target is achieved. The two main targets are based on profit levels and annual sales. Two months before the end of the financial year the finance director asks one of his staff to check through the order and account to assess the current situation. He informed that without a sudden improvement in sales before the year end the important sales target will not be met and so bonuses will be adversely affected. The finance director has proposed to other senior staff this shortfall in sales can be corrected by taking one of the following decisions. 1. A significant discount can be offered to any outlets which takes delivery of additional products prior to the end of the financial year. 2. Distributors can be told that there is risk of price increase in the future and that it will be advisable to order early so as to circumvent this possibility. QUESTIONS · What are consequences of the bonus base on sales? · What other options could be more appropriate. · What are some of the practical steps to improve sales? · Assess the commercial and other ethical implication associated with each of the proposed options. · Assess the significance of the corporate social responsibility model for the directors.

Expert Solution

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, marketing and related others by exploring similar questions and additional content below.