Situational Analysis
Steel Door Technologies, Inc. (SDT) is experiencing growing pains. This privately held corporation is regionally based and moderately sized. SDT has recorded sales gains in each of the past ten years that exceeded the industry growth rate and have added 50 dealers in the past decade. This growth has catapulted SDT to the brink of becoming a large corporation with an ever increasing geographical footprint. On one hand, SDT has enjoyed a better than average growth rate. However, on the other hand, they have neglected to grow their manufacturing and distribution infrastructure to maintain a competitive position within the larger market place they have grown into. In order to increase its buying position with suppliers, senior executives believe that SDT has to attain a larger critical mass of sales volume.
SDT manufactures and sells steel garage doors to the residential and commercial markets. The doors are sold through a distribution chain of 350 dealers located in 11 states that represent 150 different markets. The primary purchase of new doors from SDT is for replacement of old doors and the remainder of the purchases are broken down between new home construction and commercial use. Currently, SDT has 50 exclusive dealers and 300 non-exclusive dealers that represent $9.2 M in sales for 2002 fiscal year. The 50 exclusive dealers represent 70% of the total sales or $6.44M, while the 300 non-exclusive dealer stores make-up the remaining $2.76M. SDT is paying 8 sales representatives to call on the 300 dealer stores twice a month. These stores are generating, on average, only $9200 a year in sales. When this figure is broken down into a per sales call ...