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Student Assignment

TANSTAAFL

Let's Launch A Business

Who Are These Companies?

Truth In Advertising

Company:TANSTAAFL ="There Ain't No Such Thing As A Free Lunch" (REALITY)

Manufacturer:WAC ="We Are Cheap" (TRUTH)

Broker: AA-YSR="Ask And - You Shall Receive" (SERVICE)

Retailer:WAIJA ="We Are Incredible Just Ask" (BET ON IT)

Big Picture - An Opportunity For TANSTAAFL...

An Overview

UINDY Students - Seniors... three friends came up with an idea for an interactive software involving a business educational simulation game for children ages 8 - 12; the product will be sold in the toy department. In this game, children are exposed to the basics of business. This insight is considered useful, regardless of what profession these children end up pursuing. It includes insight into drivers of business decisions. Their intention would be to run this business while they complete one more year of school; then they will decide if/who will join the business fulltime

"AA-YSR" Broker Opportunity... a large broker of educational toys named "AA YSR" approached TANSTAAFL andexpressedinterestinrepresentingTANSTAAFL;they specificallybelievethattheycanobtaindistribution in a major retailer named "WAIJA" if the price point isattractive.

The Situation... the TANSTAAL team needs to gather information requested by the distributor anddetermine if they can justify borrowing money required from relatives andfriends.

What AA-YSR Shared...

1.BrokerMark-Up...theyrequire("workon")10%mark-uptotheretailerwithallvendorstheyrepresent;this is for account management (selling activity). They do not warehouse the product; they do not manage the accountsreceivable.

2.Retailer Margin... the mass retailers require a 35% margin on software in the toy department during non- promotional periods ("everyday"); they require a 25% margin during promotionalperiods.

3.Competitive Retail Price... the distributor knows that a price to the consumer of $9.99 will be required by the retailer.

4.Retailer Promotions... this product will be promoted for the winter holidays; they drop the retail price to the consumer by 20%; they require a promotional discount from the vendor to allow for a 25% retailer margin. The distributor estimates that 60% of the annual volume will be sold with during this promotionalperiod.

5.Projected Volume... assuming that TANSTAAFL can meet the requirements above, AA-YSR believes the retailer will commit to first year annual business of 10,000 units - and will be "an exclusive" retailer forone

year.