MAKING MANAGEMENT DECISION

Making Management Decision



Executive Summary

The feasibility analysis of new product is a tool for the owner of a company to evaluate a proposed change. This may be developing a new product, improving an existing product, change a marketing strategy to expand or enter into agreements. The objective of this paper is to recommend the Envchem Ltd to go for new product or not through the deep analysis of investments and expenses that the business will incur in order to generate future revenue. The development of a new product takes place in the field of business, engineering and design, is the entire process of creating and bringing a new product to market. There are two parallel aspects involved in this process: one involves product engineering, the other market analyzes. Those responsible for the marketing consider the development of new product as the first step in managing the product life cycle. Hence, based on the results provided by the assumed design, the product provided some interesting points on the target of the product, originality seen, the estimated frequency of purchase. The main problem of launching a new product is with the pricing strategy. These have tended to be expensive because of cost issues (raised on a small amount of production, technical problems, and strong margins necessary to cover promotional expenses.

Introduction

Overview of the company

Envchem Ltd is a medium-sized company which specializes in environmentally-friendly detergents and household cleaners. It has been working on developing a new laundry detergent (Emerald) that does not produce any harmful waste chemicals after use. It has been estimated that over the next five years, conditions of the environmentally-friendly detergents and household cleaners are expected to improve revenue rise at a marginal 0.4% per year to $9.4 billion. Looking at this estimation, there are various factors likely to influence the demand for an 'environmentally-friendly' product of this kind.

Discussion

Factors influencing Emerald (non-harmful waste chemicals)

Ability to compete on tender: It is important that companies in this industry are able to compete (profitably) for tendered contracts.

Effective cost controls: Because wages make up a large portion of the industry's costs, companies must ensure that effective cost-control systems are in place.

Access to multi-skilled and flexible workforce: Companies should have qualified staffs that are knowledgeable about a wide range of industries.

Ability to negotiate successfully with regulator: The ability to successfully obtain government contracts is important.

Access to secure revenues: The high capital cost associated with it means that contracts need to be in place prior to product production

Optimum capacity utilization: The high fixed cost nature of pipelines means that additional throughput adds considerably more to revenue than to costs

Ability to negotiate successfully with regulator: The high level of regulation prevailing in the other pipeline transport industry requires that firms be skilled in dealing with regulatory authorities

Having a large supply contract: A large supply contract ensures stable revenue for the company.

Breakeven Analysis of Emerald

Emerald New Detergent

Production capacity

150000 litres

Sales

130,000 litres

Selling price

£2 per litter

Variable costs

60%

Fixed Cost:

 

Advertising campaign

£40,000

Market Research

£20,000

Condition: If ...