Bates Manor

Cover Sheet

Assignment: Case #2, Bates Manor

Statement of the Problem:

For Charlton Bates, the president of BatesManor Funiture, there is a two part problem in regards to budgeting for the upcoming year. First, it must be determined how much should be budgeted for overall promotion. Second, it must then be determined exactly how the promotion funds should be allocated. Specifically, these two issues are the most important problems stated in the case because all the details directly or indirectly support this problem statement, and the various deciding parties have not yet come to a consensus regarding this issue.

Situation Assessment:

Assumptions: 1. Bott is incorrect in his statement of $3.975 Million available for the 2008 promotional budget. 2. Since the 2007 sales were reported as $75 Million, the promotional budget for 2007 was below the “5% of sales” limit policy since that would have resulted in promotional expenditures totaling $3.75 Million instead of the reported $3.675 Million. 3. BatesManor will not consider selling to retail chains. 4. When Hervey mentioned that cooperative advertising and trade advertising remain at 2007 levels for 2008, this implies $ amounts, and not percentage of budget amounts. 5. Assuming 3% conservative sales growth for BM’s 2008 sales.

From a high level industry perspective, household furniture had estimated sales of $31 Billion in the United States in 2007, at manufacturers’ prices. This industry is broken down into 3 categories, these are upholstered, wood, and other. These 3 categories make up 50%, 40%, and 10 % of sales, respectively. Therefore, $12.4 Billion were the sales in 2007 for wood furniture, the specific market in which BatesManor operates (Figure 8). This market is growing with