Dansk Minox Case Study Essay
Advantages My name is Kevin Chen and I am a senior specialist of the Boston Consulting organization. Per the request of the A/S Dansk Minox, a food products maker, I i am preparing this kind of analysis to identify the existing problems within the organization of A/S Dansk Minox and provide conceivable recommendations. As being a consultant, Let me present the analysis with no bias and for the best benefits of A/S Dansk Minox. In the following examination, I am going to solution the following question: Should A/S Dansk Minox bring the new product, complete meal, to the market? Company backgroundThis case is set in Denmark in 1967 when the вЂњboomвЂќ in buyer food products was just starting more operating mothers, more disposable profits, more choices in ease food products. A/S Dansk Minox, a company in Denmark, specializes in manufacturing various vacuum-packed beef and other products. DM provides about 30 products and has a great position and brand in the market. A/S Dansk Minox provides the vacuum pressure packed products and consumers combine the vacuum pressure packed packages along with the handmade salad for their meal. Through consumer research, A/S Dansk Minox recently identifies there is a huge marketplace potential for vacuum pressure packed total meals. The meal includes a standard вЂњsliced pork in gravyвЂќ, the merchandise that A/S Dansk Minox is making, with 550 grams of red cabbage salad. Vacuum PackingVacuum Taking is a storage method that preserves number of food. For example , pork, beef or vegetables. If correctly refrigerated or frozen, vacuum pressure packaging is useful in to get food new for longer periods. The plastic material bags are usually used to vacuum pressure packaged. Air is eliminated creating a vacuum pressure in the handbag and the food is kept in the bag. In order to keep vacuum, the bag is definitely sealed. By the researches via FanteвЂ™s Kitchen Wares Shop, there are a lot of benefits for vacuum pressure packing: 1 ) Longer storage space life of foods. Relating to researches, foods keep their freshness and taste 3-5 occasions longer compared to conventional storage space methods, because they donвЂ™t come in contact with fresh air. Due to the elimination of air to absorb the moisture in the food, vacuum packing stops dry out of moist food, Because bacteria mold and yeast are not able to grow in a environment without oxygen, foods maintain their particular original overall look. Insect invasion is eradicated because thereвЂ™s no o2 coming in the bag. The production process of vacuum-packed products can be illustrated by the flow chart 1) cemented to appendix. Business environment: The current business environment that A/S Dansk Minox operates in may be analyzed the following. Threat of New Entrants and Barriers to EntryAs the customer research done by A/S Dansk Minox exposed, there is even now market chance for the vacuum pressure packed items. In order to create vacuum jam-packed products, for example pork, fruit and vegetables, it is necessary for companies to acquire the production gadgets for the process of vacuum pressure packing, meats cutting, sorting and the labels. It is crucial to acquire the equipment that decrease production time and cost, boost efficiency. Consequently , in order to access this market, the initial capital expenditure in purchasing equipment could be substantial and it creates obstacles to entry. However , the equipments will be relatively easy to work, so the training cost and time to the workers could be minimal. Moreover, the food product production industry can be not technology intensive and the equipment could possibly be purchased in many distributors, this factor in switch makes the new entry simpler. Also, as soon as the initial machines purchased, it will be fairly easy to expose new product lines. Strength of Rivalry Among CompetitorsThere are a quantity of vacuum-packed grilled products manufacturers also in the commercial. Certain rivals of A/S Dansk Minox are increasing aggressively and had already present the redВ cabbage salad in vaccum-packed, discontinued or iced form. There exists low differentiation among rivals and price is the key element in this particular market. Due to the substantial initial expenditure, the potential exit barriers could be high in this kind of diverse competitive industry. Item SubstitutesFor this particular product of vacuum-packed crimson cabbage greens, the Danish housewives frequently make that on their own. Consequently , the friends and family could choose make the greens or get it via A/S Dansk Minox. The switching costs are fairly low and the family could have a choice of purchasing the products from all other manufacturers in case the price and quality match their standard. In term of food storing strategies, the reddish colored cabbage greens could be inside the canned or frozen form as well. These are the substitutes depend on the familyвЂ™s preference and evaluation of price and quality. SuppliersThe suppliers of A/S Dansk Minox are the vendors that offer raw material of pig, cabbage and also other possible materials for the process of packaging. As pork and cabbage are consumption items, the price can be affected by the necessity and supply in the material. The good news is for A/S Dansk Minox, the suppliers will not have huge bargaining electrical power since the materials of chicken and cabbage is extremely available in the market as well as the supply sequence is considered to be fairly stable. BuyersSince the chicken and salad are very well-liked food in Denmark, so the potential buyers with the product could be anyone near your vicinity. Since people now have more disposable cash flow to spend on food products, also the vacuum-packed products just like pork and cabbage are wildly viewed as more convenient products, More specifically, the ladies in the work force, working moms, represent the increasing area of the potential buyers. Since this greens is quite time consuming to prepare in the home, the working mother prefer to buy pre-prepared vacuum-packed products. The full meal products are the ideal products to them. Company Technique: The approach of the A/S Dansk Minox is Cost leader. A/SВ Dansk Minox is operating in a big market as well as the potential customers could possibly be any friends and family in the country. The demand of vacuum packed product by is extremely elastic, which means the demand in the products are quite influenced by the price. To be able to maintain a competitive cost and compete with the competitors, A/S Dansk Minox creates the products enormously. Strength: Biggest strength of the organization is the brand devotion that previously exists. Having 30 goods in the market, A/S Dansk Minox is extremely recognized by the consumers and is also a trusted identity. Once the new items introduced, it could enjoy the benefits of being a type of the company. Prospect: By doing a consumer research, A/S Dansk Minox just lately identifies that there is a huge chance for vacuum loaded complete meals, even the opponents already expose the ready-made red cabbage salad to the market. The chance came from the reality that the non reusable income of men and women increases, leading to more spending on food products. A lot more people prefer practical food in order to it on their own. In addition , the ready-made combo of вЂњcomplete mealвЂќ is particularly to operating mothers, who would like to reduce their very own time within the time-consuming greens dish. The proportion of operating mother inside the work force can be expecting to increase in the future, highlighting the great prospect of bringing out the new total set product. The major issue that A/S Dansk Minox facing now is: Should A/S Dansk Minox bring the cool product, complete meals, to the marketplace? If yes, then how much the machine price should be? The price is usually uncertain due to the cost share problem raise by the new product, leading to long discussions between marketing and financial departments. Company identifies the fee driver as вЂper kilogramвЂ™ of material plus the new product price at Deb. Cr eight. 20 is usually proposed by simply finance section. Marketing division suggests that the price driver neglects the price of cabbage is more cost-effective than pork, however allocating a similar overhead cost. Consequently they recommended a price of D. Cr 6. 85 for the combo pack. In order to find the perfect solution for the condition above, Let me examine theВ following three alternatives: Summary of alternativesABCStatus Quo: Not expose the вЂњcomplete meal productвЂќ; abandon the modern projectIntroduce the вЂњcomplete meals productвЂќ at a consumer value of Deb. Cr. 6th. 85Introduce the вЂњcomplete meals productвЂќ for a consumer price of Deb. Cr. almost 8. 20Alternative A: Status QuoAlternative A is usually to abandon the brand new project of recent Pack вЂ“ not to present the вЂњcomplete meal productвЂќ. As the new product will not be introduced, it will eventually generate no additional earnings to the company, i. elizabeth. the profit in 1966 will be the net earnings without the launch of the new product. Consequently, the pricing disputes between the marketing and finance departments of the Danish company will no longer exist. In addition , since the new product is not introduced in to the market, the purchasers of the regular pack will remain with the goods. Accordingly, the sales with the old item will keep rising in response for the increase in the marketplace demand. Option A: Not introduce the вЂњcomplete meals productвЂќ Fresh PackSales: 0Total variable costs0Allocated fixed costs0Profit0Alternative B: Introduce at a consumer price of D. Cr. 6. 85Since there was spare capacity designed for the production from the new вЂњcomplete mealвЂќ product, the total amount in the fixed costs will not transform due to the suggested production from the new product. Likewise because these fixed expenses are costs that have recently been incurred and this cannot be restored, they are viewed as sunk costs. In business decision-making such as the decision to add or drop a product or assistance, only gradual costs (variable costs) will be relevant to a decision. Therefore , the entire costing method (the regular cost accounting) вЂ“ the attempt to spend the companyвЂ™s fixed costs to the different products created during a selected period of time, is usually not suitable for this type of managing decision making. The appropriate approach to support decision making to improve a companyвЂ™s profitability is known as a contribution evaluation: Revenue вЂ“ Variable Costs = Contribution Margin per unit(Contribution Margin per unit x total units produced) вЂ“ Total Fixed Costs = Incremental Profit/LossAs an effect, the companyвЂ™s profit in 1966 will probably be increased simply by $99, 400 (See Desk 1 to get detail) if the new product can be introduced in a consumer value of G. Cr. six. 85. When compared to Alternative A, A/S Dansk Minox is better off by increase of $99, 400 in profit. In the event that the organization is not capable to produce 85 tons of new releases, the profit increased above will not be achieved. Through the table demonstrated below, to be able to achieve the money by selling 35 tons new products at D. Cr almost eight. 20, we need to at least sell 52 tons of cool product at M. Cr six. 85. Contribution Margin to get a consumer price of M. Cr. six. 85 by Minimum revenue volume= gradual profit to get introducing the item at a consumer price of D. Cr. 8. 201. 17X sama dengan 60, 900 *X = 52, 051* see option C pertaining to detailLong term decisionHowever, the contribution analysis is generally useful for initial decision-making. Pertaining to the long lasting purpose, the company still needs the full priced at analysis to calculate the net income of each merchandise. Within companyвЂ™s capacity, the production Fixed Charge for the modern вЂњcomplete mealвЂќ will be the same as existing products as M. Cr. zero. 54 every kilo. All the other overhead will be the same as the current product as well. In the event of go beyond capacity, need to allocate further Production Set Expenses. in order to get the correct number of profitability, A/S Dansk Minox needs to you should find an appropriate cost driver to allocate the availability fixed expenses. As suggested by the marketing department, the total sales quantity (expressed in kilograms) may not be a proper way to designate the fixed costs. A/S Dansk Minox could consider using the selling price of product as the allocation basis, since the customer price is more relevant to the fixed over head and better matching expenditure with profit. Therefore , from the following desk, we proportionate apply the Production Fixed Expense: new packStd. Pack6. 854. 85X0. 54X=0. 76Therefore, in the long run, 0. seventy six production set expense needs to be allocated to one particular Kg of вЂњcomplete mealвЂќ. Please note we assume selling price at M. Cr. 6. 85. When it comes to retail value as M. Cr. six. 85 and with an allocation of D. Cr. 1 . 20 for development fixed expenses, the total product cost will be D. Crystal reports. 5. twenty-two. The profit in 1966 will be increased simply by $60, 900. Compared to Option A, A/S Dansk Minox is better away by the boost of $60, 900 in profit. ConclusionsIn order to better evaluate and compare every one of the qualitative and quantitative alternatives we examined above, we have to take into consideration of certain crucial decision-making requirements: 1 . Boost profitability (measured by contribution analysis, immediate decision making)Increase profitability and improve shareholder equity may be the primary goal of a firm. By bettering profit, the companyвЂ™s earnings is quite possibly increased, so that companyвЂ™s capacity of conference liability is usually enhanced. In the case of possible investment opportunity arises, the company will probably be financially versatile enough for taking it. 2 . Consistent with the company strategyThe substitute we take must be consistent with the technique of the company, so that the actions will be towards company aim and will be environmentally friendly. 3. Misplaced of customers by the Standard PackTo better measure the alternatives, a few important qualitative factors should be considered, potential misplaced of buyer by standard pack as a result of the introduction of the new product is one. 4. Within capabilityAre the alternatives attainable? Or they may be out of the ability of the business and will be unable to achieve? This table reveals how we review the different alternatives by applying these types of criteria: ABCStatus Quo: Not really introduce the вЂњcomplete meal productвЂќ; abandonВ the new projectIntroduce the вЂњcomplete meal productвЂќ at someone price of D. Cr. 6. 85Introduce the вЂњcomplete meal productвЂќ at someone price of D. Crystal reports. 8. 20Improve profitability using contribution examination (short-term decision making) NoAssuming 85 plenty of new products can be purchased at value of M. Cr 6. 85, hence the profibility will probably be improved by D. Crystal reports. 99, 450Assuming 30 a great deal of new products are sold at selling price of D. Cr almost eight. 20, hence the profibility will probably be improved simply by D. Crystal reports. 60, nine hundred. Consistent with strategyN/AThe companyвЂ™s technique is price leader, the price tag on D. Crystal reports. 6. 85 is consistent with the companyвЂ™s technique and increase the competitiveness from the company. The companyвЂ™s strategy is expense leader. the price of D. Cr. 8. 20 might be way too high for certain buyer, resulting in losing the competition of the firm. Lost of shoppers by the Regular PackNoIt is usually confirmed there is still a fantastic untapped prospect of the new item so the customer will carry on and buy both new and old goods. Sales of standard load up will not be affected. Since there is certainly still a great untapped possibility of the new merchandise so the client will continue to buy equally new and old items. Sales of standard load up will not be afflicted. Within capabilityN/AThere are spare capacity readily available for the company as well as the production will not likely exceed at this time. If the new product keep increasing in the future, there exists possibility of going above budgeted capacityThere are spare capacity readily available for the company as well as the production is not going to increase a lot of due to the large selling priceIn conclusion, simply by comparing the alternatives against the key decision-making criteria, substitute B, which will introduces the вЂњcomplete food productвЂќ by a consumer selling price of G. Cr. 6. 85 is the best option for A/S Dansk Minox. Since the main goal for A/S Dansk Minox is generating higher earnings, improving earnings should be the primary criteria that we should consider in decision making. Alternate C improves profibility simply by D. Crystal reports. 99, 400, which is G. Cr 35, 550 higher than alternative N and D. Cr 99, 450 higher than alternative A. Moreover, substitute B can be consistent with the firm strategy. In the content we demonstrated previously, the business approach of the firm is cost leader. A/S Dansk Minox produces these products massively to keep a low value and complement the opponents. Therefore , launching the new item price for D. Cr. 6. eighty-five does a better job in fitting in companyвЂ™s approach than the other alternatives. Additionally , alternative N will not have enormous impact towards the existing companies it works inside the capability of the organization, comparing to other options. Recommendations A/S Dansk Minox can be facing an exciting opportunity of introducing a brand new product line that may possibly improve the profit very. We recommend the company introduce the new вЂњcomplete mealвЂќ in price of D. Cr. 6. eighty-five, also taking following measures: 1 . Bring in the вЂњcomplete mealвЂќ for the whole organization and the public at the earliest opportunity in order to allow more persons know about the new product. 2 . Inform the availability department through adding the new merchandise into development plan. Measure the difficulty of implementing the newest product line. a few. Inform the marketing section. Ask for conceivable promotion idea and plan that could associated with biggest revenue impact. some. Call retailers at each level of selling route regarding the launch of the new product. 5. following few months, perform customer exploration in order to evaluate the success of the new product or possible commandsNot only alternative C is known as a solution that relatively easy being implemented, also, it is expected to create highest cashflow to meet the companyвЂ™s working goal. By simply setting the cost of new product at as low as M. Cr. 6th. 85, the necessity of the merchandise remains excessive and the firm strategy of cost innovator will be maintained. Introducing the newest вЂњcomplete mealвЂќ increase the competition to utilizeВ the companyвЂ™s durability and help business to survive through this highly competitive market. Sortie: Flow graph and or chart 1)Table 1Alternative B: bring in the вЂњcomplete meal productвЂќ at a consumer price of D. Cr. 6. 85New PackConsumer Price6. 85Turnover Tax(0. 76)Consumer Cost Before Tax6. 09RetailerвЂ™s Margin (1. 31)Price to Retailer4. 78Variable Costs: Material: Chicken 1 . 67Labor: Pork 0. 25Material: Weight loss plans 0. 5Labor: Cabbage zero. 25Packaging 0. 26Transportation, Storage0. 2Margins and Discounts to Wholesalers 0. 38Sundry Varying Costs 0. 1Total Changing Costs(3. 61)Contribution Margin1. 17Sales volume snabel-a 85 tons 1x eighty-five, 000 kgIncremental Profit99, 4501 Assume using the sales volume of the вЂњcomplete meal productвЂќ is the same as the sales budget when the вЂњcomplete meal productвЂќ is launched at someone price of D. Cr. 6. eighty-five. Table 2Alternative C: expose the вЂњcomplete meal productвЂќ at a consumer price of D. Crystal reports. 8. 20New PackConsumer Price8. 20Turnover Tax(0. 91)Consumer Price Before Tax7. 29RetailerвЂ™s Margin (1. 57)Price to Retailer5. 72Variable Costs: Material: Pig 1 . 67Labor: Pork zero. 25Material: Diet programs 0. 5Labor: Cabbage zero. 25Packaging zero. 26Transportation, Storage0. 2Margins and Discounts to Wholesalers 0. 46Sundry Variable Costs zero. 1Total Changing Costs(3. 69)Contribution Margin2. 03Sales volume @ 30 loads 1x 35, 000 kgIncremental Profit60, 9001 The actual sales volume of the вЂњcomplete meals productвЂќ is 30 tons when the вЂњcomplete meal productвЂќ is launched at someone price of D. Crystal reports. 8. 20bibliographiesA/S Dansk Minox Gordon Shillinglaw, Columbia University ISBN 0-538-88967-5 to Accounting
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