LABELLISSIMO S.p.a. is an innovative Italian enterprise that has developed a machine for putting adhesive labels on wine bottles.

The new procedure is now well known to the European wine merchants and only the high price of the machines manufactured by LABELLISSIMO and a few competitors, particularly German and French ones, are impeding its generalisation. For the current year, its market share in terms of volume is 25%.

Three years ago, LABELLISSIMO opened agency in France in charge of importing and selling the machines. The machine are installed on the customer bottling lines by the French agency.

After some losses in the first years, the French agency should be profitable in year N.

Up to now, the marketing initiatives have mainly focused on participating in specialised regional trade fairs, in particular in Beaune and Bziers.

Possibilities in Bordeaux and Champagne have not yet been systematically explored but the notoriety of the Italian company is such that numerous customers, in particular cooperatives, are spontaneously making contact with the management in Lyon.

LABELLISSIMO S.p.a. is an innovative Italian enterprise that has developed a machine for putting adhesive labels on wine bottles.

The new procedure is now well known to the European wine merchants and only the high price of the machines manufactured by LABELLISSIMO and a few competitors, particularly German and French ones, are impeding its generalisation. For the current year, its market share in terms of volume is 25%.

Three years ago, LABELLISSIMO opened agency in France in charge of importing and selling the machines. The machine are installed on the customer bottling lines by the French agency.

After some losses in the first years, the French agency should be profitable in year N.

Up to now, the marketing initiatives have mainly focused on participating in specialised regional trade fairs, in particular in Beaune and Bziers.

Possibilities in Bordeaux and Champagne have not yet been systematically explored but the notoriety of the Italian company is such that numerous customers, in particular cooperatives, are spontaneously making contact with the management in Lyon.

In September of year N, the parent company starts the budgeting process for the following year. To forecast the sales volume, the company looks at the sales trends made by different departments within the company :

1. The forecast from the head office accounting service:

This service statistically analyses the sales made the previous years. For the French branch, it has calculated that since its creation, sales volume has increased by an average of 20% per year. Based on this, it has provided a sales volume forecast of 30 machines for the year N+1 (25 machines x 1.2).

2. The forecast from the head office marketing service:

This service makes estimations concerning the development of the European market. It is believed that the market should grow by 8% in N+1. If the French agency manages to maintain its current market share, it should sell 27 machines in N+1 (25 machines x 1.08).

3. The forecast from the French agency:

The 2 salespeople in the agency have heard a rumour, from their customers, about a big advertising campaign to be develope

Questions :

1 Present the income statement for each action plan.

2 If you were the director of the French agency what would you decide to present to the parent company? Comment your decision.

d by a German competitor. They are thus worried that the agency could lose some market share and have given a sales volume forecast of 23 machines for N+1.