Foxy Case Study free essay sample

Discuss the pros and cons to launching the foxy brand in the United States. Pros| Cons| U. S. market is 10 times larger than Canada. With right business model and price, foxy would gain additional revenue and profit. The brand seeks great opportunity to further develop the business, enhance product design as well as company’s brand image. | U. S market is different in terms of tastes for jewellery. American preferred the latest trend regardless of the product’s origin. It might take foxy some time to adapt to different customers and create new product to compete within that larger market. Foxy may face risk in controlling the business from far; where Foxy’s HQ based in Canada. These means that Foxy Original need to build their trusted teams to support business in U. S| 2. Assess each distribution strategy from a qualitative point of view Best appropriate method of distribution: * Attending trade shows Trade shows were one-stop market place for retailers to source products from wholesalers and importers. Therefore this will enable foxy to understand their customer needs and preferences. Foxy can also build brand recognition through the trade shows. As for Foxy, through trade shows, they will be able to know the current fashion trend in the U. S market and able to position their current designs or to enhance their designs to match the U. S. market. * Sales representatives This strategy will make it easy to enter the market quickly and form various connections with different salespersons and existing retailers. This advantage indirectly expands their business to the larger market. In addition, minimum amount of training they would require for this strategy. 3. Identify all costs, other than variables costs for the trade show distribution strategy. Categorize these costs as investment and fixed costs (per trade show and for fiscal 2005) Expenses | Type of Cost| Cost Per Show ($)| Fiscal 2005| Registration Fee | Fixed Cost| 3,000 | 30,000 | Booth Cost| Investment Cost| 133 | 1,333. 3 | Booth Shipping| Investment Cost| 1,500 | 15,000 | Travel Expenses | Investment Cost| 2,000 | 20,000 | Promotional Expenses | Investment Cost| 2,800 | 28,000 | Total Cost| 9,433 | 94,333. 33 | Notes: 10 potential trade shows in year 2005. 4. Identify all costs, other than variable costs, for the sales representative’s distribution strategy. Categorize these costs as investments and fixed costs (per trade show and for fiscal 2005) Expenses | Type of Cost| Cost | | Fiscal 2005| Rental Space| Fixed Cost| 200/month | | 2,400 | sample board| Investment Cost| 2,900/year | | 2,900 | Promotional Expenses | Investment Cost| 600/year | | 600 | Travel Expenses | Investment Cost| | | | bookkeepers Fee(work 48hrs/year)| Investment Cost| 40/hr | | 1,920 | Total Cost| | | 7,820 | Note: Above calculated total cost per year $7,820 is for 1 sales representative. For fiscal year 2005, there will be 4 sales representatives in major cities, = $7,820 x 4 = $31,280 5. Do the variable costs for both products (necklaces and pairs of earring) differ between trade show and sales representative? Yes. Other than production costs, difference between trade show and sales representative are shipping cost and sales commission. 6. Calculate the variable costs per order received at a trade show and the variable cost per other received at a sales representatives Trade Show | | | | | Product| Cost Per Unit ($)| Unit Produce | Additional Cost| Total Variable Cost Per Order| Necklaces| 8. 05| 25| 15| 216. 25| Earring| 5. 5| 12| | 81| Total variable cost per order at trade show = $ 297. 25 Sales Representative Product| Cost Per Unit ($)| Unit Produce| Sale| Commission| Total Variable Cost Per Order| Necklaces| 8. 05| 25| 425| 63. 75| 265| Earring| 5. 5| 12| 144| 21. 6| 87. 6| Total variable cost per order at sales representatives = $ 352. 60 7. For each distribution strategy, calculate the unit contribution and contribution margin rate for each of the two products line (necklaces and pairs of earrings). What is the weighted average contribution margin for an order at a trade show and an order with sale representatives? Trade Show| Sales ($)| Unit VC ($)| Unit Contribution Margin | Product Qty | Sales mix (Percentage)| Weighted-average contribution margin| Necklaces| 17| 8. 65| 8. 35| 25| 67. 57| 5. 64| Earrings| 12| 6. 75| 5. 25| 12| 32. 43| 1. 70| Total| | | | 37| 100| 7. 34| S. R. | Sales ($)| Unit VC ($)| Unit Contribution Margin | Product Qty | Sales mix (Percentage)| Weighted-average contribution margin| Necklaces| 17| 10. 60| 6. 40| 25| 67. 57| 4. 32| Earrings| 12| 7. 30| 4. 70| 12| 32. 43| 1. 52| Total| | | | 37| 100| 5. 84| 8. Calculate Foxy’s breakeven point for each distribution strategy Breakeven point for year 2005 a) Trade show Breakeven point TS=94,333. 337. 34 =12,852 units b) Sales representatives Breakeven point SR=31,2805. 84 =5347 units 9. Which distribution channel will be more profitable in 2005 From below estimation, Sales Representatives is more profitable compared to Trade Show in year 2005. Trade Show| Order per trade| 10 trade per year| Total number of | Total Units| | | | Necklace| Earring| | Minimum| 20| 200| 5,000 | 2,400 | 7,400 | Maximum| 45| 450| 11,250 | 5,400 | 16,650 | Average| 32. 5| 325| 8,125 | 3,900 | 12,025 | Note: Number of orders of Retailer repurchase no provided and this exclude in the estimation. Trade Show| Units| Units| $| $| $| $| | Necklace| Earring| Sales Revenue| Variable Cost| Fixed Expenses| Profit| Minimum| 5,000 | 2,400 | 113,800 | 59,450 | 94,333. 3| (39,983)| Maximum| 11,250 | 5,400 | 256,050 | 133,763 | 94,333. 33| 27,954 | Average| 8,125 | 3,900 | 184,925 | 96,606 | 94,333. 33| (6,015)| S. R. | For 1 SR | For 1 SR| For 4sr| Total number of | Total Units| | order/mth| order/yr| order/yr| Necklace| Earring| Â  | Min| 10| 120| 480| 12,000 | 5,760 | 17,760 | Max| 15| 180| 720| 18,000 | 8,640 | 26,640 | Average| 12. 5| 150| 600| 15,000 | 7,200 | 22,200 | S. R. | Units| Units| $| $| $| $| | Necklace| Earring| Sales Revenue| Variable Cost| Fixed Expenses| Profit| Minimum| 12,000 | 5,760 | 273,120 | 169,248 | 31280| 72,592 | Maximum| 18,000 | 8,640 | 409,680 | 253,872 | 31280| 124,528 | Average| 15,000 | 7,200 | 341,400 | 211,560 | 31280| 98,560 | 10. Choose a distribution strategy (trade show, sales representative or both) based on your qualitative and quantitative assessment. From quantitative point of view, the recommended strategy for Foxy is using sales representative which has higher probability to achieve target profit grows ($100,000) compare with trade show. However, selection of agents is crucial. Besides of provide key contact, local knowledge and intelligence in achieving sales, agents must believe in Foxy products. Even though Foxy can get first hand market trend and build relationship with retailer through face time interaction in trade show, the potential risk in business expansion should not be ignored.