THE COMPANYS SITUATION

At the end of first year, the company is suffering loss from its business activities. There are some reasons for this loss: the company is newly created and numerous costs must be spent for this initial business period. In order to continue its business, the company has to borrow from the bank 300,000 with the rate of 5%/year. Sales Cost of goods sold Gross Profit Purchasing of licensing rights Salaries and commissions Logistic Cost Social Budget Commercial Budget Communication Budget Equipment Research Loan (from the bank) Net Profit 2,900,000 2,045,000 855,000 300,000 136,000 58,000 16,350 136,000 180,000 150,000 35,000 (300,000) 143,650

THE COMPANYS STRATEGIES

The loss in the initial year is unavoidable to all companies and the company in this case cannot stand apart from this trend. Therefore, in order to face with the previous years loss, the company determines some effective strategies such as: Increase the price of its products Buy 2 additional machines 1 in order to ensure the companys business efficiency and expansion activities in the future Increase the Quality Level of System product Increase the Customers Credit of System product Increase Commercial Budget of System product Development the companys brand to attract more customers .. The company hopes that the above solutions may help it overcome initial difficulties in order to achieve more successes in the future.

THE COMPANYS DECISIONS

1. Alarm

At the end of first year, this product helped the company achieve 39.23%, higher than other its competitors. However, this products turnover was 550,000, lower than Intercom and System. According to a current market study, customers demand for Alarm in 2008 will be 35,000 units. The company hopes that it can maintain its market shares. Therefore, the company intends it may sell, during this year, 11,000 units with the price of 115. And the turnover that the company can earn will be 1,265,000, rapidly increasing (2.3 times) compared with last year. Furthermore, profit that the company may achieve is 13.09. Because the products price significant affect its sales. But this products price is quite high so the company cannot increase its price. Besides, commercial budget and communication budget do not affect so much to sales. Thus these budgets may be decreased to save cost. About the impact of Customer Credit on Sales, the company cannot increase it because 60 days is appropriate. 2. Intercom During the first period, the companys market shares in this products gained 25.14%. However, because there are many companies that take part in this product segment, the companys inventory was 75 units (actual sales of 6,425 compared with forecasted sales of 6,500). Albeit there are a number of units that cannot be sold during this period, this product created profits of 1,285,000 for the company, highest turnover. The market study implies that demands for this product in 2008 will be 45,000 units. In order to satisfy customers needs, the companys quantity of this product may be estimated of 12, 075 units, including 75 units in the inventory, with the price of 215. According to the company, in 2009, its turnover may be reached to 2,596,125, two-fold compared with 2007 and profit will be 33.90 Similar to Product 1 (Alarm), the price of this product cannot be increased and both of commercial and communication budgets will be decreased. 3. System In 2007, because the companys competitors does not participate this product segment, the company totally took market shares in this product (100%) as well as gained a turnover of 1,050,000 In this product segment, suppose that in 2008, five companies will be ready to take part in, means that each company will obtain 7, 5% market shares. Therefore, in order to maintain its leading position in this product segment, the company intends to use maximum production capacity to produce 7,429 units at the price 395. The company in 2009 may reach to 2,934,286. Moreover, this product is hoped to create profit of 41.63 for the company.

Because this product is newly launched, Commercial Budget is very necessary. Thus the company will increase its budget 15%. Moreover, the Customer Credit may be increased to 30 days in order to attract more customers for the company. Due to the high impact of Quality Level on this products Sales, the company decides to increase its Quality Level to 105%. This means its cost will also increase. Because the companys brand is quite important to Product Sales, the company intends to increase its price in order to increase its quality level. In order to ensure the companys efficiency and expansion activities in the future, the company will buy two additional machines 1 with the cost of 50,000 per machine.

OVERVIEW OF THE COMPANYS BUSINESS SITUATION IN THE SECOND YEAR.

Sales Cost of goods sold Gross Profit Overhead expense Equipment Cost Inventory Cost Logistics Commercial Budget Communication Budget Production Wage Market Research Sales force Wages Commission Cost Training and fringed benefits Hiring and lay-off cost Equipment Depreciation Intangible Assets Depreciation New Machine Cost Net Profit 6,795,410.71 3,159,285.71 3,636,125.00 200,000.00 65,000.00 75.00 135,908.21 136,000.00 180,000.00 975,000.00 35,000.00 367,500.00 339,770.54 26,850.00 22,500.00 130,000.00 60,000.00 100,000.00 862,521.25