We Have Numbers Of Free Samples

Table of Content

• Question 1
• Question 2
• Question 3
• Question 4
• Question 5
• Question 6
• Question 7
• Question 8
• Question 9
• Question 10
• Reference List

Question 1 Discuss the pros and cons to launching the Foxy brand in the United States.

A SWOT analysis was conducted for determining the pros and cons of the expansion into the US market.

Strengths– The Canadian market was saturated by Foxy Originals and therefore was chance of growth for the company. As stated by Vida (2015), the two owners were passionate about their work and they produced a variety of trendy jewellery from their high school days. The owners had knowledge about their target market and therefore they were able to offer funky products at a reasonable rate. This helps in the creation of loyal customers.

Weaknesses– The expansion process needed a lot of money and time as they needed to conduct market research and decide on the launch of the products. Proper decision making was needed for the price points and retail outlets. The financial information such as transportation and exporting costs should also be estimated.

Opportunities– The market of US is huge and therefore it offered them the opportunities for expansion as their product is unique in nature. The price point is lowered which offered them the opportunity to attract initial buyers for establishing brand loyalty. In the long run they can increase the price of the products and cover the initial cost of exporting. As the products of the company are mainly for college women they can hire sales representatives for creating awareness in the college campuses.

Threats– The US market is tough because of the many large competitors already ruling the market.  The high budget advertising of the large corporations will impact the business of Foxy and the classic jewellery offered by the company was also not popular in the US. For an effective competition, the company should produce fashion forward designs.

Question 2 Assess each distribution strategy from a qualitative point of view.

The distribution in trade show required a more demanding work schedule. Direct communication can be made with the buyers during the trade shows that allowed for selling of high volume of products. After the expansion into the United States the company sold their products to the boutique owners directly and it accounted for 70 % of total sales of Foxy. After some time, the owners shifted their business online and they sold their products directly to the end consumers. As stated by Christmann et al (2017), this move of online sales allowed Foxy to reach the consumers outside of Canada and USA. The online sales required a lot of advertising and PR via social media for reaching the consumers and convincing them about the products.

Question 3 Identify all costs, other than variable costs, for the trade show distribution strategy. Categorize these costs as investments and fixed costs (per sale representatives and for fiscal 2005).

Expenses of trade shows:

Registration cost	$ 3000	per show
Shipping cost	$ 1500	per show
Travel Cost	$ 2000	per show
Product sample cost	$ 2800	per show
Total	$ 9300	per show

 

As Foxy planned to attend 10 shows, the total cost per year will be $ 93,000

Expenses for one time investments

Trade show booth cost

$ 4000

$ 133 per show

 

Total fixed cost = $ 9433(9300 + 133) per show and $ 94,330 annually.

Margin of contribution from the trade show

Product	Sales	Variable cost	Margin of contribution (= sales – cost)	CM ratio
Necklace	$ 17	$ 8.05	$ 8.95	0.5265
A pair of earrings	$ 12	$ 5.5	$ 6.50	0.4583

 

For every order, the company would sell 25 necklaces and 12 pair of earrings and the shipping cost would be $ 15. Therefore, weighted average contribution margin and total variable cost for an order at a trade show is as follows:

Total variable cost	$ 282.85 ( 8.05 × 25 + 5.50 × 12 + $ 15.00)
Weighted average contribution margin	$ 286.75 ( 8.95 × 25 + 6.5 × 12 – $ 15.00)

 

Question 4 Identify all costs, other than variable costs, for the sales representative’s distribution strategy. Categorize these costs as investments and fixed costs (per sales representatives and for fiscal 2005).

Costa for the sales representatives

Expenses

Rental space cost	For 12 months	$ 2400	Per representative
Sample boards cost	For 1 year	$ 2900	Per representative
Catalogues cost	For 1 year	$ 600	Per representative

 

Total costs = $ 5900 per representative

Foxy planned to hire 4 representatives, so the total cost per year would be $ 23, 600 ($ 5900 × 4)

Other expenditures

Cost for hiring bookkeeper

For 48 hours

1920 per year

 

Total fixed cost = $ 25, 520 (23600 + 1920) per year

Question 5 Do the variable costs for both products (necklaces and pair of earrings) differ between trade shows and sales representative?

Yes, the variable costs differ between trade shows and sales representative. The variable costs for sales representatives comprises of commission which is 15 % of sales.

Question 6 Calculate the variable costs per order received at a trade show and the variable costs per order received through a sales representative.

The variable costs received at a trade show is $ 282.22

The variable cost ratio at a trade show can be calculated by dividing the difference between worst and best case scenario costs by the difference in revenue. After that this ratio is multiplied by the revenue of one order and the variable cost per order at the trade show is derived.

Best case cost- worst case cost * best case revenue – worst case revenue

= 384,358. 33 – 207233 * 33512, 100-227,600

= 141,125284,500

= 0. 496 or 49.6 %.

Revenue of one order * variable costs ratio = variable cost at trade show

$ 569 * 0.496 = $ 282.22

The variable cost received through a sales representative is $ 367.57.

The variable cost ratio for sales representative is calculated and it is then multiplied by the revenue of one order.

= 290,192-201, 968409, 680-273,120=88, 224136, 560=0. 646 or 64.6 %

$ 569 * 0. 646 = $ 367. 57

Question 7 For each distribution strategy, calculate the unit contribution and contribution margin rate for each of the two product lines (necklaces and pair of earrings)

Total revenue for one order = $569. 00

Revenue for 25 necklaces @ $17. 00 = $425. 0

Revenue for 12 pairs of earrings @ $12. 00 = $144. 00

Percentage of total sales = Product line sales/Total sales

Necklaces: 425/569 = 0. 747 = 74. 7%

Earrings: 144/569 = 0. 253 = 25. 3%

Shipping cost allocation per unit

Necklaces: 0. 747($15) = 11. 205/25 = $0. 45/necklace

Earrings: 0. 253($15) = 3. 795/12 = $0. 32/pair of earrings

Unit contribution: Portion ($) of sales that are allocated to fixed costs

Necklaces: 17 + (0. 45 – 8. 05) = $8. 5

Earrings: 12 + (0. 32 – 5. 5) = $6. 18

Trade show: Contribution margin rate at trade show

• 496=0. 504 or 50. 4%

Unit contribution at trade show $569*(0. 504) =$286. 78

Sales Representative: Contribution margin rate for sales representative

• – 0.646=0. 354 or 35. 4%

Unit contribution for sales representative $569*0. 354=$201. 43

Question 8 Calculate Foxy’s breakeven point for each distribution strategy

Trade Show Profit = Revenues – Costs Profit

= 0= 569x – (97,000+ 282. 22x)

= >569x-282. 22x

= 97,000 Profit

= 0= x=97,000286. 78=338. 24=339 units

Sales Representative Profit = Revenues – Costs Profit

0= 569x –(25,520+569x * 0. 15+ 367. 57x)

=>569x-85. 35x-367. 57x

=25,520

Profit 0= x=25,520116. 08=219. 5=220 units

Question 9 Which distribution channel will be more profitable in 2005?

Trade shows	Sales representative
Worst case units 400	Worst case units 480
Profit margin 0.09	Profit margin 0.26
Average case units 650	Average case units 600
Profit margin 0.25	Profit margin 0.31
Best case units 900	Best case units 720
Profit margin 0.32	Profit margin 0.29

 

From the above, it can be justified that the best case scenario for trade show strategy is the most profitable. On the other hand, the chances are low because 50 % of Foxy Originals in the US is not trendy.  But the sales representative provides more profit for the average and worst case scenario.

Choose a distribution strategy (trade shows, sales representatives, or both) based on your qualitative and quantitative assessment.

The sales representative strategy would be chosen because of the follows:

• The fixed costs are less than trade shows strategy. Upfront payment should be made for the booth and the less expensive option would be chosen.
• As stated by Gollnhofer and Turkina (2015), trade shows can happen throughout the year and due to this the expansion into different locations would take up more time. On the other hand, the strategy of sales representative helps with the launching of product in different locations at the same time.
• The owners must be there during the trade shows and so the owners will have to spend the days travelling and will be unable to control their business.
• The profit margins for the average and the worst case scenario is higher for sales reps than trade shows.

Therefore, hiring sales reps would be preferable than trade shows as it is considered as a smart and safe choice with the profit margin for average case scenario is 31 % and the worst case scenario is 26 %. The breakeven point for sales representative is 220 whereas for trade show it is 339 units.  The profit with sales reps would be higher than trade shows.

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