You are to create an evidence-based recommendation for Crawly Wizards.
One key challenge then would be the limited availability of information: you may make logical assumptions regarding projected sales or any other parameters of interest. Given the uncertainty surrounding this proposal, you may also want to conduct a “sensitivity analysis” to qualify your recommendations.
State and assess any risks involved. Include the identification of measurements and milestones to be applied in the execution of your recommendation. In essence, prepare a persuasive business case that demonstrates your understanding and application of relevant theoretical concepts in relation to the evaluation of both the short- and long-term considerations, while appreciating the factors applicable to the broader context in which the recommendations are made. Provide all information used, including assumptions, in an appendix.
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Case Study (Crawly Wizards Brewery)
You have been requested by a local family-run brewery, Crafty Wizards, to help them with evaluating their expansion options interstate.
Over the past five years, the business has been operating in the Illawarra region as a boutique craft beer manufacturer and have established a name for themselves among the local pubs and retailers. Given their limited geographical coverage and marketing capacity, up to this point, the company has been distributing their products with a small fleet of own trucks. Recently there has been growing interest shown by some intestate pubs and small businesses in Crafty Wizards recently introduced cider range, which has prompted the company to consider expanding interstate. However, the company is not in a position to accurately estimate the demand for their products and the prices they can charge, due to the product has not been there in the local market for long. They are also not quite sure of how the market would respond to this new product and, therefore, somewhat hesitant to invest in a distribution network on a large scale. That being said, if proven successful, this expansion could potentially end up in Crafty Wizards brand been established on a franchise network, as well, though everything is Ă˘â‚¬Ĺ“up in the airĂ˘â‚¬Âť, right now.
You have been asked to undertake a thorough analysis and evaluation of three options for expanding the distribution of the new cider range in Vitoria and Queensland, as well as the whole of New South Wales.
The three Options
Given that this is all hypothetical at the moment, there is only limited information available on the proposa
Option One: Use own employees and rent warehouses and transport fleet. The cost of renting warehouses and transport fleet is $600,000. Per-employee costs would be $60,000 as base salary plus 10% commission as sales incentive; these costs are estimated to be 16% of gross sales.
Option Two: Engage external sales reps and contract out distribution A marketing firm will be engaged to provide locally sourced staff who will work as manufacturerĂ˘â‚¬â„˘s reps and serve a defined set of outlets within their designated territory and work on a commission basis. Crawly WizardsĂ˘â‚¬â„˘ costs for the reps would be proportionate to the volume of product sold. The commission would be 10% of gross sales. Cost of contracting out distribution will be $840,000.
Option Three: Outsource everything (marketing, sales and distribution) to a third party. Contacts will be signed off with a reputed third party service provider. The cost of marketing, sales and distribution to Crawly Wizard will be 22% of gross sales.