Angelina Fashions, founded in 1992 by Mr. Marshall has been a profitable business venture that has been doing well since its inception. Starting out as a company, specializing in the distribution and manufacturing of high luxury women’s coat and jackets, Angelina Fashion expanded to a multi-million dollar organization. With 10 efficient sales people who have been with the business since it started and virtue designers, the company was able to exclusive women’s clothing boutiques.
Initially the most effective way for the company to keep all selling expenses in line with sales was paying six percent commission on all sales and sales people would handle their expenses. This, method had worked for sometime, keeping all sales people and managers satisfied. However, Mr. Marshal decided it was time for a change. Coming to the realization that an annual rate if six percent commission on all sales was too much in comparison their annual sales expenses.
Sales manager, Ms. Hartman was ...view middle of the document...
• Annual salary of 24,000 and a 3% commission rate on sales over $120,000.
Mr.. Marshall objected to these three options and presented his own; a salary of $40,000 plus 2% commission on all sales over $160,000 and a fixed fund of $20,000 towards expenses.
The impact of the aforementioned plans will be big on the salespeople’s income and expenses, being that they were making so much from their original commission rate. Although the sales people were already paying attention to their expenses because they kept whatever they spent, the managers had no control of their salespeople’s activities The salespeople will now have limits on their expenses and they will see a steep decrease in their income.
The fixed fund expense system will force salespeople to be mindful of how they are spending their money, which may be difficult coming from a “pay own expenses” system. Although it allows the reps some form of flexibility with how they will budget this fixed fund there must be a sense of responsibility.
Although I believe the present system is sufficient and does not require any adjustments, if Mr. Marshall forces a change than I would go with his proposal. Yes, the salespeople will loose out on a tax advantage but for the changes Mr. Marshal wants, this would be most effective. The salespeople will have some type of leverage with their expenses as long as they budget right. Mr. Marshall wants control and this the best way for him to get it. This method is economical and allows the company to budget their expenses ahead of time as oppose to having an unlimited plan.
If the decision were up to me I would keep it as is. Mr. Marshall may feel he doesn’t have control over the sales expenses of the company but it cost him nothing. His salespeople were great, made their sales, and loyal to the company since it was founded. Any new method that has a negative impact on the salary of the employees may cause them to be less efficient than they have been in the past. As long as Angelina Fashions is generating sales and the company continues to grow than why change anything, especially when it has no impact on the profit of the company. Any new method will require more time, micro-management, money, and a whole lot of budgeting.