Question
LoginTecha, a manufacturer that sells computer accessories wants to enter the phone case market in Canada. The total demand for phone cases in Canada is
LoginTecha, a manufacturer that sells computer accessories wants to enter the phone case market in Canada. The total demand for phone cases in Canada is 20 million cases per year. Here is the list of costs: Material: $0.60 per case Labor: $0.05 per case Packaging: $1.05 per case Maritime transport and custom costs: $0.35 per case Ground logistics and distribution cost: $0.55 per case Other variable costs: $1.80 per case Rent and Utilities: $600,000 / year Managerial Salaries: $1,200,000 / year Other operating expenses (excluding marketing): $400,000 / year Here are three alternative strategies they are considering selling their products: Strategy 1: Implement heavy marketing, and sell at a higher price through brick-and-mortar retailers: marketing cost= $390,000 Retail Price = $35 per case Retailer Margin: 25% on cost Strategy 2: Implement lower marketing, and sell through Amazon: marketing cost = $220,000 Selling (retail) Price = $25 per case Amazon margin= 30% on selling price Strategy 3: Implement no marketing and sell at the lowest price directly through its Instagram page. Marketing cost=$0 Retail Price = $15 per case a) Calculate the number of cases that they should sell under each strategy to break even (2 marks). b) Assume that they select Strategy 2. According to their marketing research, they can launch new Google ads campaign to sell 75,000 more cases. This costs $200,000. What is ROMI? (1 Mark)
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