Written Analysis and Communication Situation Analysis based on “The Madison Corporation” Case Study.
submitted BY – Akhil Chopra (820127673) The Madison Corporation: The Madison Corporation, producers of electric clocks have been in the market for more than 28 years . i. e. before the year 1932. They have 40 models in line for production. Out of these 40 models there is one model # 329.
Model #329 was introduced in September, 1959 and soon became a quick seller. It is a highly styled clock with mirror face and exposed hands made of brass base and chrome plated.However the sales of this model have started facing a declining trend from January 1960 (see exhibit 1). The situation in hand is, the production manager has received production orders from the sales manager for the second quarter of which the requisition for model# 329 is of 4,500 brass bases.
The purchasing agent then recommended that if the brass bases were purchased in a quantity larger than 4,500, they could get a heavy discount, his recommendation were to buy at least bases. The production manager in turn forwarded the request to the sales manager for uthoring the purchase.In 1932, the company suffered a heavy loss on inventories due to price declines. Therefore, since then Madison made a policy of not buying inventory in excess of what is needed or forecasted.
This means the policy only permits the inventory held at any point of time to be maximum of one quarter’s estimated sales. The responsibility of inventory forecasting and authorizing the excessive purchase of inventory was entrusted to the sales manager as he would have a better understanding about the requirements.Apart from getting discounts for buying the stock in bulk of more than 4,500, Madison would also receive discounts in furnishing the models (see exhibit 2) from the company’s regular supplier. If company purchased in a lot of more than 9,000 they would save $270 and purchasing more than 15,000 would save them $900 towards furnishing the products. But however if the company fails to make this many sales it would mean there is a risk of inventory loss and the company does not want to incur any losses which is very prominent as per the policy laid down.
The sales of the model# 329 are declining and also the overall sales of all the clocks have gone down (exhibit 3). So there is high possibility that the company may not receive high demand for model# 329. Therefore the sales manager has to decide whether he should go with the purchase of extra stocks which would mean earning discounts and saving money or go as per the policy of buying what has been forecasted for the second quarter which would save them from any risks of inventory loss. Exhibits: Year/Month Model # 329All Clocks 1959: September 3,220 October 3,410 November 1 ,940 66,500 December 970 30,250 1960: January 665 20,870 February 24,200 Sales of The Madison Corporation Exhibit 1 Prices per unit (Cents) Discount (Cents) Savings (in $) Less than 5000 24 9000 or more 21 3 (9000*0. 03) 1 5000 or more 18 6 (1 5000*0. 06) Price for furnishing the brass bases of model# 329 Exhibit 2 Year The Madison Corporation Electric Clock Industry 1956 1957 1958 1959 Sales of Electric Clocks Exhibit 3 Total # of words (without the exhibits): 572 (448)