Question

How would you respond to this post?

As mentioned, managers are rotated annually and their income is dependent upon the direct contribution margin of that store. Contribution margin is “the revenue minus certain costs” (Schneider, 2017, Section 1.7, “Contribution Margin and Its Many Variations,” para. 1). It can be computed by total sales minus total variable costs (Schneider, 2017). It seems that the manager of Store 9 is trying to reduce the amount of variable costs in an attempt to increase the store’s contribution margin. This can be seen in two ways; the manager can be trying to make sure they receive the highest income possible or the manager is working to increase the overall profit of the company. I am more inclined to believe the manager is trying to make sure they receive a good income instead of thinking about the future of the company. Contribution margin tells you how much you can put towards the fixed (uncontrollable) costs and how much profit the store will make. Controllable costs are under the store manager’s control. Based on the items Zoya mentions, the manager is not investing in the store. For example, the manager is not increasing the skillset of the employees to help advance the store. Many times managers see employee training as an expense rather than investment and end up paying in terms of low productivity and high turnover. In addition, the manager is not focused on growing revenues, but more focused on cutting expenses. By ceasing participation in community service events, the manager is harming the stores visibility and loosing potential consumers. Although community service events would increase expenses, long-term, it would aid in producing revenue. It is important to take into consideration how each dollar of expenses can increase the overall revenue of the store. Similarly, in the previous store, the manager focused on increasing profits, therefore, when a new manager took over the store and started to spend money to invest in the store’s growth, it shows a drop in profit and an increase in operating costs. Marketing also has a strong relationship with a company's profits. A solid marketing strategy can grow a brand, attract consumers and ultimately build profits. However, spending the entire marketing budget in the first four months can give the impression that the manager is trying to inflate profits prior to his or her promotion. While many managers grow profits ethically, others maximize profits unethically by marketing or cutting employee expenses. An ethical implication in this scenario is the manager preventing the growth of his or her employees, which can lead to poor morale in the workplace. It is also unethical for the manager to only raise profits for their own income benefit, but not invest in the store for appropriate growth and long-term revenue opportunity. Company leaders need to do what is best for all who are part of the company. The regional manager’s ethical responsibility in this scenario is to confront the manager regarding their performance and the company’s expectations for conduct. It would also be the responsibility of the regional manager to report this behavior to upper management and delay any promotion until actions are taken.

Answer 1

Our submissions :

The manager’s income is dependent on the Contribution margin/Profit of the store, but managers have to concentrate on the point that profit margin of the store increase only when the sales of the store increase. The prime factor towards the sales/revenue appreciation is investment in the services and development of stores and reaching out the prospective customers of the store. This will require increase in expenses in the present time for the benefits/appreciation in the future. The investment should be dependent on the sales pattern of the stores. If in some period store have good sales, then the marketing and expansion expenses could be increased in the coming period. Rather we can have expenses for society promotion and stores marketing based on percentage of sales. This will not degrade the contribution margin of the store and the income of the managers. The development of the employees benefits and stores services to the society will apprehend the future sales and growth in the profitability and the manager’s income.

The managers should be future centric because present income is consumed or sacrificed to some extent for the growth of the income in the future. Thus, making a little expense in the development and growth pattern of the store will keeps the future sales, profits and managers income intact.

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