MANAGEMENT REPORT ON BUSINESS RUNNING CASE Solution
A business is comprised of many functions and it is the coordination and integration of all of these business functions which help the business to achieve its goals and short term objectives. Two of the key functional areas for the craft beer industry are the marketing management function and the innovation and technological function. Both of these functions have a significant influence on the business and changing certain variables or inputs of these functions can transform the business completely. Therefore, a detailed analysis has been performed for both of these functions or the BrewPub operations so that specific recommendations could be made to the owner and the value of the business could be enhanced. First of all the marketing management function has been analyzed.
Marketing management is one of the core business functions and it helps to oversee the planning and development of the products, promotions, advertising, distribution, pricing and sales of the new products or the business units of the company. More usually, marketing management serves the purpose of developing an advertising plan and then implementing that plan(Keller, 2006).
Under the marketing management analysis we have tested the prices levels and analyzed the sensitivity of increasing the price levels from their current price levels which have been estimated on the basis of the industry estimates and assumptions. Secondly, we have also analyzed the influence of the advertising expenses and the increase in the advertising expenses on the penetration of the in-house sales of the craft beer for all the 9 products of the company. The decision support tools which we have used here are sensitivity analysis, break-even point and the decision trees,
First of all, sensitivity has been performed for the selling prices of the 9 products which would be sold by the company. The current selling prices for all the 9 products of the company based on industry estimates have been taken and the total variable cost per unit for each of the products has been subtracted to calculate the contribution per unit. The average contribution for the company is 51%. Based upon the projected sales volume, the total $ sales have been computed along with the variable costs and total contribution.
The initial in-house sales penetration based upon industry estimates is assumed to be 20% and the advertising expense is $ 38000. The current total fixed costs for the new operation would be $ 297132. However, the total contribution for the BrewPub operation is $ 210356. However, we see that the contribution is not enough to cover all the fixed costs for the company and therefore, these results in a loss for the company of $ 86776. Next, the break-even analysis has been performed for the BrewPub operation. The break-even point is 12 months and the breakeven sales in $ are 678189. However, it could be seen that the current sales level is lower than the break-even sales level which results in the loss for the operation.
However, sensitivity has been performed for the selling prices of all the products and the prices of all the products have been increased by 50%. The current total fixed costs for the new operation would be same as $ 297132. However, the total contribution for the BrewPub operation is now $ 450418. This shows that the contribution of the company covers all the fixed costs of the operation and it makes a significant profit. The profit figure now is $ 153287. Next, the break-even analysis has been performed for the BrewPub operation. The break-even point is now 5 months and the break even sales in $ are 475094. Now, it could be seen that the current sales level is higher than the break-even sales level which results in a significant profit for the operation…………….
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