Flash Newton is national sales director aat Bright and SHinyToothpaste Company. Tge firm manufactures and distributes afull line of premium-priced personal care products sold through a carefully selected set of distributors nationwide. The popularity and profit margins of the Bright and Shiny product linemake distributorships very profitable and there is intense competition when one becomes available.
Flash, and the other regional sales directors working for him,are compensated by a base salary and a significant bonus tied to percentage increases in yearly sales. Because of an impendingrecession, sales have been mostly flat during the first threequarters of the year. On October 3, Flash convineddistributors with Birght and Shiny's newest dales plan. Alldistributors would be required to buy, during the 4th quarter, upto 2 years worth of inventory of th firm' products. Further,the prices charged on these special purchases would be 10% greaterthan usual. Any distributors not agreeing to the proposalwould automatically lose their distributorship. Because mostdistributors are not expected to have cash readily available to payfor these additional purchases under the usual 30- day creditterms, Bight and Shiny will allow up to 12 months to pay.
The new policy has been a huge success and by year end, totalorders and shipments to distributors are up by 12 % over theprevious year. Bight and Shiny recorded all shipments asrevenuee even though some distributors were told by lower-levelmanagers that they could return unsold products. Because manydistributors could not handle the large shipments in their usualstorage facilities, many orders have been shipped to third-partyware houses for storage sales program, the company held the booksopen for a few days after December 31 to obtain and ship additionalorders.
Identify and explain any problems you see with the sales plan. If you were Bright and Shiny CEO, which aspects of the sales plan would you have approved and which would you have denied. Why?