Breeden Electronics Harvard Case Solution & Analysis

Breeden Electronics Case Study Solution

Case One:

Issues Identification:

The target profit that is imposed by the parent company is $210,000 while the total profit as per the forecasting of the management is almost $20,000 per month and $240,000 per year. The expected profit is marginally over the target profit, little fluctuations in the actual figure as compare to the budgeted figures might result in inability to meet the target profit requirement of the parent company. The primary root cause for this is the reduced profit margin on the RC2.

Key Success Factors:

It can be said there are many key success factor for Breeden Electronics in this case, firstly the most critical success factor for Breeden Electronics in this case is the accomplishment of profitability targets imposed by the parent company. Failure to fulfill the requirements of parent company might result in the loss of confidence of parent company on the U.S. Subsidiary. Inability to fulfill the profitability targets for consecutive years might enforce parent company to divest from the subsidiary or closes their U.S. operations.

On the other hand the quality of the products is also played an important role in the success of the organization, with poor quality of the product it would be very difficult for the Breeden Electronics to obtain desire profit margins. Furthermore, there is a direct relation between the quality and the profitability of the product, given the narrow margins and heavy demand of the parent company, it is very important for the Breeden Electronics to maintain the appropriate level of quality as it will play an important role in achieving the targets imposed by the parent company.

Alternative options:

The alternative which the Breeden Electronics can implement is that, they can increase their margins of profitability, there will be many positive and negative consequences of their decision to increase the profit margins. Firstly, increased profit margin ultimately increases the sales price of the products which might ultimately reduce the volume of sales. These lower sales volume can affect the profitability margins of the product. On the other hand, the profitability margin can also be improved if the company implements various cost cutting strategies as well.

Quantitative Analysis:

If the selling price is reduced by 10%, it might be very dangerous for Breeden Electronics, the profits of $20000 per month will be converted in to the loss of $(11500) per month. Total sales revenue would be $180000 and $103500 for RC1 and RC2 respectively. The total revenue after the decrease in the price would not cover all the associated costs. RC1 will be sale at breakeven and RC2 will generate loss of $11500. Furthermore, the profitability margin would be reduced to 0% for RC1 and (11%) for RC2.

As opposed to this if the prices are increased by 10%, it might be favorable for the organization as they will now have enough profits to meet the requirements of the parent company. The total profits would be $51500 which can be consider as huge given the profit requirements of the parent company. Particularly RC1 will be very profitable as it will generate almost 77% of the total profit of Breeden Electronics. The profitability margin will also be improved because of 10% increase in the selling price, the profit margin for RC1 and RC2 will be 18.18% and 9.09% respectively.

Qualitative Analysis:

The alternative to increase the selling prices can have positive implication for the group, along with some positive implications there might be some negative implications as well. The major positive consequences of the alternative is that the target profits of the parent company would be easily fulfilled and the reputation of Breeden Electronics might be improved in the eyes of group management. In addition to this the customers might perceive it as positive as well to some extent because they might consider that the quality of the products of Breeden Electronics is improved as they are charging premium for their products.

Apart from these positive implications, there might be some negative implications as well. The major adverse consequences of the alternative is that the volume of sales will be reduced because of the charging higher. Many customer will not purchase the products of Breeden Electronics because of the higher prices, this reduction in the customer base might be too dangerous for the U.S. subsidiary and for the group. Moreover, if there were quality issues in the products of Breeden Electronics after the increase in price might damage the reputation of the company drastically because the expectation of the customers will be developed regarding the higher quality of their products because of charging excessive.

Recommendation:

It is recommended that the management of Breeden Electronic should increase the prices of RC1 and RC2 by 10%. Although it have some adverse consequences on the performance of the company but there are more benefits than drawbacks of this approach. The profit constraints of the parent company can easily be met if the prices are increased along with the increased loyalty of the customers because of higher quality of the devices. It is further recommended that the management must also ensure that the quality of their products is up to the mark because the customer will now be more critical regarding the quality of products of Breeden Electronics.

 

Breeden Electronics Harvard Case Solution & Analysis

 

 

 

Circumvention of Potential Problems:

It can be argued that implementing the alternative to increase the prices of RC1 and RC2 by 10% will result in the severe problem for the company i.e. loss in number of customers. Usually, the increase in the selling price results in the significant reduction in the number of customers which might have an unfavorable results on the overall profitability of the organization. It is recommended that Breeden Electronics should have to critically assess the impact of the increased selling price on its customers...........................

This is just a sample partial work. Please place the order on the website to get your own originally done case solution.

Other Similar Case Solutions like

Breeden Electronics

Share This