Pepe JeansEssay Preview: Pepe JeansReport this essayAlternative #1: More Flexible Ordering System (10% Increase in Sales)Current Sales = £200MNew Sales: £200M x 10% Increase = £220MCurrent Annual Costs: £200M * 40% = £80MAdditional Annual Costs: £80M * 30% = £24MNew Annual Costs = £104MCurrent Profit Before Taxes: £200M * 32% = £64MNew Profit Before Taxes: £220M * 32% = £70.4MImplementing the more flexible ordering system would increase costs by £24M while only increasing profits before taxes by £6.4M. While the company wouldnt have to invest in additional equipment or renovation costs using this alternative (therefore there is no payback period), it still causes them to incur more expenses than revenue and doesnt appear to be the best option.
Pepe JeansEssay Preview: Pepe JeansReport this essayAlternative #2: More Flexible Orders (10% Increase in Sales)Current Sales: £200M New Sales: £200M x 10% Increase = £220MCurrent Annual Costs: £200M * 40% = £80MAdditional Annual Costs: £80M * 30% = £24MNext year i plan to have more items available for the next 7 months. In the mean time i plan to be able to sell 1 product a month, so at least one product will have a good chance at increasing the share price, which would be quite a few good things.
Pepe JeansEssay Preview: Pepe JeansReport this essayAlternative #3: More Flexible Orders (10% Increase in Sales)Current Sales: £200M New Sales: £200M x 10% Increase = £220MCurrent Annual Costs: £200M * 40% = £80MAdditional Annual Costs: £80M * 30% = £24MNext year i plan to have more items available for the next 7 months. In the mean time i plan to be able to sell 1 product a month, so at least one product will have a good chance at increasing the share price, which would be quite a few good things.
Pepe JeansEssay Preview: Pepe JeansReport this essayAlternative #4: More Flexible Orders (10% Increase in Sales)Current Sales: £200M New Sales: £200M x 10% Increase = £220MCurrent Annual Costs: £200M * 40% = £80MAdditional Annual Costs: £80M * 30% = £24MNext year i plan to have more items available for the next 7 months. In the mean time i plan to be able to sell 1 product a month, so at least one product will have a good chance at increasing the share price, which would be quite a few good things.
Pepe JeansEssay Preview: Pepe JeansReport this essayAlternative #5: More Flexible Ordering Systems (10% Increase in Sales)Current Sales: £200M New Sales: £200M x 10% Increase = £220MCurrent Annual Costs: £200M * 40% = £80MAdditional Annual Costs: £80M * 30% = £24MNext year i plan to have additional items available for the next 7 months. In the mean time i plan to be able to sell 1 product a month, so at least one item will have a good chance at increasing the share price, which would be quite a
Pepe JeansEssay Preview: Pepe JeansReport this essayAlternative #2: More Flexible Orders (10% Increase in Sales)Current Sales: £200M New Sales: £200M x 10% Increase = £220MCurrent Annual Costs: £200M * 40% = £80MAdditional Annual Costs: £80M * 30% = £24MNext year i plan to have more items available for the next 7 months. In the mean time i plan to be able to sell 1 product a month, so at least one product will have a good chance at increasing the share price, which would be quite a few good things.
Pepe JeansEssay Preview: Pepe JeansReport this essayAlternative #3: More Flexible Orders (10% Increase in Sales)Current Sales: £200M New Sales: £200M x 10% Increase = £220MCurrent Annual Costs: £200M * 40% = £80MAdditional Annual Costs: £80M * 30% = £24MNext year i plan to have more items available for the next 7 months. In the mean time i plan to be able to sell 1 product a month, so at least one product will have a good chance at increasing the share price, which would be quite a few good things.
Pepe JeansEssay Preview: Pepe JeansReport this essayAlternative #4: More Flexible Orders (10% Increase in Sales)Current Sales: £200M New Sales: £200M x 10% Increase = £220MCurrent Annual Costs: £200M * 40% = £80MAdditional Annual Costs: £80M * 30% = £24MNext year i plan to have more items available for the next 7 months. In the mean time i plan to be able to sell 1 product a month, so at least one product will have a good chance at increasing the share price, which would be quite a few good things.
Pepe JeansEssay Preview: Pepe JeansReport this essayAlternative #5: More Flexible Ordering Systems (10% Increase in Sales)Current Sales: £200M New Sales: £200M x 10% Increase = £220MCurrent Annual Costs: £200M * 40% = £80MAdditional Annual Costs: £80M * 30% = £24MNext year i plan to have additional items available for the next 7 months. In the mean time i plan to be able to sell 1 product a month, so at least one item will have a good chance at increasing the share price, which would be quite a
Alternative #2: Build Finishing Operation in the U.K.Equipment Investment: £1MAnnual Operating Costs: £500KRenovations: £300KCurrent Annual Costs: £200M * 40% = £80MNew Inventory Valued at 6 Weeks Worth of Yearly Cost of Sales:(6/52) * £80M = £9.23MInventory Carrying Costs are 30% of New Inventory Value:£9.23M * 30% = £2.769MAssuming Sales Still Increase by 10%, Profit Before Taxes will Still Increase by£6.4MAdditional Annual Profit: §6.4M – £3.269 = £3.131MAnnual Cost of Operations: £2.769 + £500K = £3.269MPayback Period = Cost of Project/Annual Cash Inflows= £1.3M/£3.131M * 52 Weeks= =21.59 WeeksBecause the company could recoup its investment in just less than 22 weeks and begin earning additional profit it should choose to go with alternative number two and invest in a finishing operation in the U.K.
Pepe should consider expanding its operations into other countries that could provide greater flexibility than the current sourcing agent in Hong Kong. Considering the current success of the business, it could also opt to continue using its existing business model. However, this would only be a short-term solution because Pepe will eventually have to provide its customers with more flexibility or risk losing their business.