A business analysis of Alt Ausee Ice Cream
While initial results would seem to indicate a promising future for Alt Ausee Ice Cream further examination indicates that the proposed expansion should not be undertaken at this stage without further information or investigation. Historical data does run for past three years but a particularly good performance in 2001/2002 may have artificially inflated these figures. Also new products were launched last year further adding to the positive results. There is no information to show that this will be sustained in the coming years.
Committing to the expansion could reduce net profits by as much as 30 %. ( see fig 6 ) Company’s profits are reliant on an overseas market ( see fig. 4 ) which by itself is vulnerable to exchange rate fluctuations e. g. were sterling to drop 10% vs. Euro this may affect net profits by as much as 28%. 1. 5 Assessment of expansion proposal; In short proposed expenditure would greatly impact on net profits and could leave company vulnerable. ( see fig. 4. 5. 6; 7 ) Alt Ausee Ice Cream receive almost half of it’s net profits from overseas.
But this has been helped by a favourable exchange rate and new products which have sold well. Both of these are subject to change and are not completely within control of Company. There is no evidence of more products being launched which could replace any of the present ones, all of which are subject to the product life cycle curve. There is no evidence to contradict that present “new” products could have reached “saturation point “. There are the very real possibilities of costs being added to via pay-rises, legislation, shipping costs, increased marketing and inflation.
In the absence of such information it is impossible to justify the expenditure via a ” rigorous analysis of future sales & profits ” as required to do by the terms of reference of this report. 1. 6 Other Management options Investigate option of leasing vs. buying thereby reducing capital outlay. Initiate further, more thorough examinations of the future e. g. use of reliability analysis to determine more accurately if the risk is acceptable. All possible uncertainties must be accounted for where possible. Change of company structure e. g. raising of capital via limited company share issue.
Further Market research & Research and Development into new products and Markets. Further examination of up-to-date storage techniques. This would help utilise under capacity in leaner months and may even negate the need for capital out-lay Sub-contracting of work during peak periods. Competitors ….. what are they doing ? Why ? How ? Set up an ad-hoc committee to look into the expansion proposal with representatives from all dept. `s .. 1. 7 Conclusions / recommendations The proposed expansion cannot be allowed to proceed on the basis of current information available as this could jeopardise future profitability.
Also present information is inconclusive and requires further clarification. In the short term some of the options listed in section 1. 6 should be assessed and in particular leasing of necessary equipment and sub-contracting. This should be followed up by the additional methods out-lined in order to gather more detailed information before any final decision is reached. For the benefit of company development it is recommended that all necessary information be gathered within next three months at which time senior management should make a final decision and report back to appropriate employees.