Register to read the introduction…
To order copies or request permission to reproduce materials, contact Ivey Publishing, Ivey Management Services, c/o Richard Ivey School of Business, The University of Western Ontario, London, Ontario, Canada, N6A 3K7 phone (519) 661-3208 fax (519) 661-3882 e-mail cases@ivey.uwo.ca. Copyright FORMTEXT 2007, Ivey Management Services Version FORMTEXT 2007-03-28 SYNOPSIS Ponlerd Chiemchanya had just completed his MBA and was, on one hand, excited about rejoining Biomed Co., Ltd. (Biomed), the family business in Thailand. On the other hand, as the new general manager of Biomed, he had some concerns about the first major decisions he was about to make and implement upon his return. Biomeds parent company, Thai Drugs Co., Ltd. (Thai Drugs), had just revised Biomeds market strategy, and the follow-on to this was the need to realign the sales compensation system to fit with the new strategy. Chiemchanya was charged with this task, and he saw high company risk and high personal risk in this situation. Teaching objectives The overarching objective behind this case is to get students to recognize the path to designing an appropriate sales compensation plan (market strategy ( sales roles and goals ( compensation plan both level
…show more content…
Contribution margin(THB)/month Commission rate To threshold (0 30,000)01st Commission RateFrom threshold to target (30,000 37,353)542nd Commission RateAbove 100Y Commission Rate for Contribution Margin above Target (Y) The contribution margin above the target amount represents the profit to the company beyond the cost of capital. This profit can be shared with the sales representatives by any amount that management deems appropriate. Thus Biomed set a commission rate at 60 per cent for a contribution margin that exceeds the target amount. They believed that this rate would highly motivate sales representatives, align their interests with the company and increase their loyalty to the company. In the plan, this was to be stated as Sales representatives who cover their part of Biomeds fixed overhead costs, that is those who reach at least THB30,000 contribution margin, will be eligible to receive commissions. From the threshold to the target (THB37,353, which is the figure needed to cover minimal Biomed profitability), sales representatives will receive 54 per cent of the
Contribution margin(THB)/month Commission rate To threshold (0 30,000)01st Commission RateFrom threshold to target (30,000 37,353)542nd Commission RateAbove 100Y Commission Rate for Contribution Margin above Target (Y) The contribution margin above the target amount represents the profit to the company beyond the cost of capital. This profit can be shared with the sales representatives by any amount that management deems appropriate. Thus Biomed set a commission rate at 60 per cent for a contribution margin that exceeds the target amount. They believed that this rate would highly motivate sales representatives, align their interests with the company and increase their loyalty to the company. In the plan, this was to be stated as Sales representatives who cover their part of Biomeds fixed overhead costs, that is those who reach at least THB30,000 contribution margin, will be eligible to receive commissions. From the threshold to the target (THB37,353, which is the figure needed to cover minimal Biomed profitability), sales representatives will receive 54 per cent of the