Foxy Originals - Case #1.docx

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Western University
Business Administration
Business Administration 2257
Stanley Dunn

Foxy Originals – Homework for January 9, 2014 – Business 2257 1. Identify the pros and cons to launching the Foxy brand in the U.S. Pros: 10x the market size than Canada, if selling at the same price but in US Dollars, it would negate risks associated with exchange rate fluctuations, greater opportunity for product exposure Cons: Market may not be as responsive to Foxy’s designs as the Canadian market; U.S. market less caring about where the product is made;Americans are less brand loyal 2. Assess each distribution strategy from a qualitative point of view Trade shows: Owners could directly market the product, easier to manage, great networking opportunity, diverse attendance at these shows. However, start-up costs are high, so it would only be worth it if there could be enough sales to offset these costs Sales Reps: Lower start-up costs; commission-based (thus it makes more sense to use this method if predicted sales figures are low). Less direct work from the owners; faster to penetrate the market 3. Trade-show fixed costs (per trade show and for fiscal 2005). Categorize these costs as investments and fixed costs Fixed costs per trade show: $3000 for registration, $1500 for transporting the exhibitor’s booth, $2000 for travel costs, and $2800 for promotional materials Total fixed costs per trade show: $9300 Investments: $4000 for the exhibitor booth (which lasts for approx. 30 shows) 4. Sales Representatives’costs (investment and fixed costs) per sales rep and for fiscal 2005 Fixed costs per year: - $200/month x 4 reps x 12 months = $9600 for rental space in showrooms; - 2 sets of sample boards @ $1450/each x 4 workers = $11,600; - Promotional materials: $600 x 4 = $2400; - Bookkeeper: $40/hour x 48 hours = $1920 - Total fixed costs per year: $25,520 5. Do the variable costs for both products (necklaces and pairs of earrings) differ between trade shows and sales reps? Variable costs for trade show: a) Necklace: $8.05 b) Earrings: $5.50/pair Variable costs for sales reps: a) Necklace: $8.05 COGS + 15%*$17 = 8.05+2.55 = $10.60 b) Earrings: $5.50 COGS + 15%*$12 = $5.50+1.8 = $6.30 6. Calculate the variable costs per order received at a trade show vs. variable costs received through a sales representative An average retailer order would consist of 25 necklaces and 12 pairs of earrings. - AVC for trade show: 25*8.05 + 12*5.5 = $267.2
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