Detailed Case StudyStatement of the situationGeorge Mann thee divisional director of the Domestic Products Division (DPD), Groningen, the Netherlands, DPD's main product is an electronic shaver. The division lost nearly €500,000 in the previous year and George Mann has been having discussions with four executives Tom Salman, the sales manager, Michael Advent, the advertising manager, David Marcus the marketing Services manager and Sarah Proctor, the product manager. Torn Salman recommends a price cut of 10% from list which, he contends, would result in the company selling the whole capacity of 160,000 and probably requiring either second-sourcing or double-shift working.
Michael Advent believes that DPD must expand overseas and adopt much more aggressive marketing. Advertising is to be increased to €375,000 a year. Further the price should be increased by 10% and the schedule restructured so that the product is priced at €165 but carries a 25% discount. As a further stimulus to international sales, he recommends that sales commission is raised from 5% to 10% and says that he is confident that, focusing on UK stockists with increased publicity, increased commission the division would sell a minimum of 125,000 units.
David Marcus tends towards Advent's opinion. However, he is adamant that the price of €150 should not be altered but considers that DPD should strengthen its strategy for the product, go for greater overseas turnover and aim to sell 80% capacity of factory output. Sarah Proctor is negotiating with a well-known retail chain in the UK. She explains that they wish to place an initial order for 50,000 units ex-factory, that is, no distribution costs would be involved, but they are asking for €37,500 towards the cost of promotion, and €30 per 100 packaging cost.
As it is an international sale, no commission would be paid. It is clear from her discussions with the prospect that the existing home market of 90,000 units at the current price would not be affected. IntroductionThe problem with this case study involves more than one discipline of management and more than one aspect of marketing and research. It involves financial, marketing and management problems including logistics and overseas trade concerns. All the aspects are interlinked and it is not possible to study and one aspect in isolation.
Bearing that in mind we approach the problem with the following views: We identify the keys of the problem and restate the problem to make it meaningful, and proceed to find the financial implications and the marketing strategies touted. We will also analyze the production problem in detail. The Costing SituationThe situation is seen through the eyes of the decision maker George Mann divisional director of the Domestic Products Division (DPD) of the company. We also consider that the company is at Groningen, The Netherlands, and the domestic market is the whole nation. Analysis of the problem. 1.
Price factor - considerationsThis has a direct bearing on the analysis. We have to first see if the pricing and the sale at the domestic market is so shaped as to yield a profit, regardless of the number of units sold at any time. The current price of the product, the electronic shaver at the local market is €150 per unit. There is a discount offered at 25% and the effective sale price is