Team 1: Van-de-lay Industries
Ruwanthi Herath, Manasa Varalakshmi, Gabriela Chassagne, James McDougall, Aaron Layden
Foxy Originals hopes to gain successful market entry into the United States within six months. The U.S. market is significantly larger than the Canadian market that Foxy currently operates in and has substantially less brand loyalty and demand for classic jewelry. Foxy’s two potential methods of market entry are: (1) Tour their products at ten U.S trade shows and make direct sales to retailers or (2) Hire four sales representatives in fashion hubs across the U.S. We, Vandelay Industries, recommend Foxy implement the first alternative.
The contribution margins for the sales
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With sales numbers, cost of goods sold, and labor cost remaining constant between the two methods of entry, the only additional factor affecting contribution margin of sales representatives would be the 15% sales commission they will receive. Therefore, factoring out $85.35 in sales commission per order would bring the contribution margin per order to $216. Compared to the trade show contribution margin, this is a 30% decrease. Compensating for the decrease in contribution margin is a significantly lower fixed cost and break even number of orders. In this case, the risk lies within the fixed costs of trade shows, while the risk with sales representatives lies in undefined brand management ability and loyalty. Including boards, promotional materials, and a book keeper, the total fixed cost for hiring the sales force is $25,520. Dividing the fixed cost by the contribution margin per order, we see that the sales force method presents a significantly lower break even number of orders, 118 (Table 3). To reach a six-figure profit as Foxy Originals desires, we would need to achieve $125,520 in sales via a contribution margin of $216 per order. The sales force would need to sell 581 (Table 3) orders in their respective regions to justify market entry. This breaks down to an average of 145 orders per sales rep, or 12 per month per rep.
Upon extensive quantitative and qualitative consideration of both market entry strategies, we