NMO S4 SPRINT ONE | BUSINESS CASE SCENARIO - 03
Submission BCS
Financial plan to enter into Great Britain
Submission Date & Time: 2021-11-21 11:25:01
Event Name: NMO S4 Sprint One
Solution Submitted By: Abid Rashid
Assignment Taken
Finance Department : Develop and propose a financial plan with allocated budget for International expansion.Case Understanding
The problems on the financial front facing the company are: • Allocation of the budget to different activities • Formation of an establishment in the new market or operate as a branch of existing organisation • Pricing strategy • Conforming to the financial regulations of the new market to avoid regulatory hassles The company has a choice to make on whether it will export its product from India set manufacturing units in the new market.BCS Solution Summary
We will exporting our products with the help of firms dealing in exports. For pricing we will add the per kg cost of shipping to the product price and the warehousing cost for our products and adding it to the price. As the currencies will differ we will use a fixed conversion rate with a mark up over the actual conversion rate of currencies so that we do not lose because of fluctuations in currency rates.Solution
Using the cost-plus method for pricing. The average cost of shipping our product would be INR 300 per kilogram, we will add this to the product price according to its weight. The exchange rate of INR and pound sterling was above INR 80/pound sterling in 2019 so we will assume a fixed rate of INR 75/pound sterling while pricing our products so that appreciation of the Indian currency does not make our pricing strategy loss making. We will build or buy a ten thousand square feet warehouse which will cost approximately 1,50,000 pound sterling and we will consider 1 pound sterling=INR 90 for this calculation to arrive at INR 1.35 crore on building warehouse.
The following will be the allocation of funds out of the budget:
Marketing: INR 12 crore
Human resource: INR 3 crore
Legal: INR 1 crore
Production: INR 20 crore
Shipping and warehousing: INR 6 crore
IT and analytics: INR 2 crore
Reserves for other unforeseen expenditures: INR 6 crore
The business is expected to bring in a revenue of INR 40 crores in the first year.
Conclusion
The business in first year will not bring in profits due to high spending on marketing the product. The marketing budget will be cut down in the subsequent year and understanding the new market better will also cut down on the legal costs which will be one time investments. The business is expected to become profitable from second year onwards.Attached File Details
Comments
Article Type: Business Case Scenario, Case Study Solution Submission
Business Case Detail
Title: NMO S4 SPRINT ONE | BUSINESS CASE SCENARIO - 03
Type: Case Study
Stream: Management
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