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Maintain your record sales

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You are the owner of a local Saturn dealership that competes against two other firms (Ford and Chrysler dealerships) Unlike other dealerships in the area, you take pride in your â??No Hassles, No Haggleâ? sales policy. Last year, your dealership earned record profits of $1.5 million. However, according to the local Chamber of Commerce, your earnings were 10 percent less than either of your competitors. In your market, the price elasticity of demand for midsized Saturn automobiles is -4.5 In each of the last five years, your dealership has sold more midsized automobiles than any other Saturn dealership in the nation. This entitled your dealership to an additional 30 percent rebate off the manufacturer´s suggested retail price (MSRP) in each year. Taking this rebate into account, your marginal cost of a midsized automobile is $11,000. What price should you charge for a midsized automobile if you expect to maintain your record sales?

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Below are my answers.

ANSWERS

Your profit last year = $1.5 million
Your competitor profit last year = $1.5 million x (100% + 10%) = $1.65 million
Price elasticity of demand for midsized Saturn = -4.5
Total rebate per car = ...

Solution Summary

What price should you charge for a midsized automobile if you expect to maintain your record sales?

$2.19
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How has the growth in globalization affected corporate strategy in the U.S.? Consider this growth from perspectives such as outsourcing, taxes, competition, finances, and so forth.

Riordan Manufacturing, Inc. is an industry leader in the field of plastic injection molding. With state-of-the art design capabilities, we create innovative plastic designs that have earned international acclaim. Attention to detail, extreme precision and enthusiastic quality control are the hallmarks of Riordan Manufacturing. With facilities in San Jose, California, Albany, Georgia, Pontiac, Michigan and Hangzhou, China, we have the capacity to fulfill your unique needs. Riordan Manufacturing is wholly owned by Riordan Industries, a Fortune 1000 enterprise.

Riordan Manufacturing
Riordan Manufacturing is a global plastics manufacturer employing 550 people with projected annual earnings of $46 million. The company is wholly owned by Riordan Industries, a Fortune 1000 enterprise with revenues in excess of $1 billion.
Its products include plastic beverage containers produced at its plant in Albany, Georgia, custom plastic parts produced at its plant in Pontiac, Michigan, and plastic fan parts produced at its facilities in Hangzhou, China. The company's research and development is done at the corporate headquarters in San Jose. Riordan's major customers are automotive parts manufacturers, aircraft manufacturers, the Department of Defense, beverage makers and bottlers, and appliance manufacturers.
________________________________________
Mission
Our Focus
? Six Sigma, leading edge R&D and exceeding ISO 9000 standards define the attitude and abilities of Riordan Manufacturing.
? We are industry leaders in using polymer materials to provide solutions to our customers challenges.
? Our R&D is, and will remain, the industry leader in identifying industry trends.
Our Customer Relationships
? We will strive to be a solution provider for our customers and not be a part of our customers challenges.
? Long-term relationships will be sought by maintaining rigorous quality controls, innovative solutions, a responsive business attitude and reasonable pricing.
Our Employees
? We will maintain an innovative and team oriented working environment.
? By assuring that our employees are well informed and properly supported, we will provide a climate focused on the long term viability of our company.
Our Future
? We must be focused in achieving and maintaining reasonable profitability to assure that the financial and human capital is available for sustained growth.
________________________________________
History
The company was founded by Dr. Riordan, a professor of chemistry, who had obtained several patents relative to processing polymers into high tensile strength plastic substrates. Sensing the commercial applications for his patents, Dr. Riordan started Riordan Plastics, Inc. in 1991.
Initially, the company's focus was on research and development and the licensing of its existing patents, but in 1992 Dr. Riordan obtained venture capital which he used to purchase a fan manufacturing plant in Pontiac, MI. At that time, the company's name was changed to "Riordan Manufacturing, Inc." In 1993, the company expanded into the production of plastic beverage containers when it acquired a manufacturing plant in Albany, GA.
The company's most recent expansion took place in 2000 when it opened its operations in China. At that time, the entire fan manufacturing operation was moved from Michigan to China and the Pontiac, MI facility was retooled for the manufacture of custom plastic parts.

Finance & Accounting
iordan Manufacturing has three operating entities...Georgia, Michigan and California...plus a joint venture in the People's Republic of China. Basically, the operating entities each have their own Finance & Accounting Systems and they provide input that is consolidated at Corporate...San Jose. The basic components of each system are as follows:
? General Ledger
? Accounts Payable
? Accounts Receivable
? Order Entry
? Procurement
? Sales and Purchasing History
? Invoicing and Shipping
? Payroll
? Financial Reporting
? EDI*
? Bar Code Reading*
? EDSS (Executive Decision Support System)*

*San Jose Only
Background:
During the due diligence process in which Riordan acquired the operating entities in Michigan and Georgia the matter of F & A System's compatibility was not addressed.
Current Situation Regarding F & A Systems:
? San Jose has a license for a fully integrated Windows based ERP manufacturing, distribution and financial management software application specifically designed for plastics processors and process and assembly manufacturers. The license does not include application source code.
? Michigan had purchased a vendor developed software application and the attendant source code for their Fd & A and process application. The vendor is no longer in business. The application runs on a pair of DEC Alpha's, using the VMS operating system, VAX4000 work stations and programmed in C.
? Georgia had purchased a vendor (different from Michigan) developed software application and the attendant source code for their F & A and manufacturing process applications. The systems run on a pair of AS400's, using UNIX operating system, use PC's (Windows) as workstations, and is programmed in RPG400.
Challenge:
The F & A Department has been unable to achieve anything remotely resembling "seamless compatibility". Some F & A data is provided to corporate via data files; some data is provided via hardcopy reports and must be re-entered; some data is provided via data files but must be converted (redirected) to the proper account codes and the list goes on. Subsequently, Riordan has the following situation regarding F & A system outputs at the consolidated level:
? Consolidated close of the General Ledger and subsequently the Income Statement and Balance Sheet is labor intensive and normally not completed until 15-20 days after month end.
? Audit (to include external auditors) is required each month and is costly and labor intensive.
? Compliance with new government required reporting requirements at the consolidated level is difficult at best.
? Riordan Enterprises finds the situation unacceptable and has mandated a solutions(s)/alternatives be recommended soonest.

NOTE: This situation is transparent to customers and suppliers as each operating entity has maintained invoicing, payments, etc., as was prior to acquisition.

Sales & Marketing
The firm is attempting to consolidate customer information to deliver better value to the customer. The firm has historical records in many disparate databases, as well as in paper files and microfiche. Below is a listing of information the firm has available to consolidate into a CRM system.
Historical Sales
Riordan has a system to track historical sales. In the past, most sales data was recorded using paper and pencil. In the last few years, the firm has managed the information electronically. Information available includes the following:
? Dates including order, delivery, and payment dates by order.
? Unit and dollar volume of each product including plastic bottles, fans, heart valves, medical stents, and custom plastic parts rolled up to be examined by product group and customer.
? Sales by customer to include price paid, cost, margin, and discount given.

Files of Past Marketing Research, Marketing Plans, and Design Awards
The marketing organization wants to build on past knowledge. As a result, past marketing plans and results from past market research studies are stored in a file cabinet in the marketing department. The firm has a showcase in the lobby to display the various design awards earned. The firm is assessing the possibility of hiring a part-time college student to scan the documents electronically.

Sales Database
The company has 15 - 20 major customers, including a government contract for fans. The firm has 12 minor customers. Each member of the sales force maintains his/her own set of customer records using a variety of tools. Some sales team members use paper and pencil, others sales management software such as Act, and others a hybrid. In order to better understand and anticipate customer needs, the firm is evaluating a new integrated customer management system to accompany the new team selling approach that will be soon rolled out.

Production Records
The production plan maintains records of the number of units produced of each item by shift, which can be rolled up to the product group and year.

Profit and Loss Statements by Item and Group
The marketing department, with the support of the finance and production departments, maintains profit and loss statements, by item and by group.

Marketing Budget
The firm has historical and current annual budget allocations for marketing communications and marketing research.

Marketing Communications activities include:
? Sales force promotions
? Price / volume discounts to key accounts
? Public relations
? Brand development
? Tradeshows, events, and sponsorships
? Customer user group underwriting
? Literature and other collateral material

Marketing Research expenditures include:
? Market size / opportunity studies
? Customer focus groups
? Brand development research

Marketing Budget Anticipated Results
Two year plan to reach the $50 million revenue mark. This objective was developed collaboratively with Dr. Riordan along with the executive team. It incorporates the input of the line managers closest to the day-to-day operations. The objective will be achieved through:
? Increased sales to existing customers by increasing sales force promotions, price discounts, and customer user group services.
? Expanded sales to new customers by implementing public relations activities, trade shows, brand development and sales force promotions.

Riordan Manufacturing's parent company, Riordan Industries, Inc., is a Fortune 1000 enterprise. The financial statements of Riordan Industries, Inc. are presented here for informational purposes only. These statements should not be relied upon for investment decisions. For investment information, please contact your broker and review the company prospectus.

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