Page 1. Additional Operative Information: Alt. B
Once off- and up-front costs Entry Mode Alt. B: Capital requirements to erect a Wholly owned Subsidiary (WoS) in the Host Market is $13.8mn. The WoS will be capable of operations exceeding the Home Market production capacity by 5x (times) and to supply locally. This investment is a shared Fixed Assets (FA) with the Home Market operations at a factor of 0.60, yet, the MENA operations pays interest on the full investment amount. There’s no over-head type of costs per SKU from the Home Market to include in this alternative.
Cost of Capital: the market provides the funds at the nominal interest rate ____% (2020) inclusive adjustment for local inflation.
Sorbet servings: each serving equals one SKU; each SKU weighs 125 gram; SKU’s are packaged in boxes of 4; one standard (Australian) pallet takes 125 boxes. The box size is 200mm x 200mm x 200mm. Each fully loaded pallet equals 1m3 in volume. The three product types are similar in all and every aspects (e.g. cost, size) apart from flavour.
Current production: 30% of total capacity (home base operations).
Corporate Tax Rate: ___% on EBIT (apply the 2017 Tax % of the GDP as proxy: WorldFactbook).
Transportation concerns: ensure to use the proper TEU’s or ULD’s (regardless of shipping method).
Additional costs: Include all costs associated with producing at the home production plant.
Mark-Up 1: (MU1) is 175% for products sold by SALSA-CREAM in MENA (WoS and @ Sea cargo).
Mark-Up 1: (MU1) is 90% of MU1 Sea for products sold by SALSA-CREAM in MENA (WoS and @ Air cargo).
Mark-Up 2: (MU2) products re-sold by the Retailers in MENA use factor 1.10 (Sea) and 0.95 (Air).
Financial Comparison: to enable comparison between all entry modes, you must:
a) complete an Income Statement for WoS (with sea shipments from Home Market); and,
b) complete an Income Statement for WoS (with air shipments from Home Market); and,
c) compare the Income Statements for WoS when shipping by sea vs. air; and,
d) make your decision regarding shipment methods; and,
e) complete a Strategic Profit Model for your selected method of shipment; and
f) compare the NPM and ROA and reflect upon the outcomes vs. the Income Statements.
Customer Locations: map the locations of the Customers in the target market and assess their approximate distance (in Km) to where you decide to locate the Egyptian headquarter.
Inventory & Asset values:
– Inventory is described here as: [‘Inventory $’ = ‘Safety Inventory #’ * ‘Sales Price SKU$’]
– Accounts Receivables have a credit time of 21 days:
[‘Accounts Receivables $’ = (‘# Customers ‘ * ‘# Deliveries per week’ * 3) * ‘Sales Price SKU$’]
– Cash (e.g. current assets) is here calculated as the value of:
[‘Current Assets $’ = ‘Inventory Replenishment Point’ * ‘Sales Price SKU$’]
All blue boxes = a field where you need to create the formula / insert the correct value.