Hart Schaffner & Marx: The Market for Separately Ticketed Suits Case Study Solution
Quantitative Analysis
The quantitative analysis based on the breakeven point calculations, given in Exhibit A shows that the company would have to earn a total revenue of $1725000, $387036, and $586683 from its separates sales of slack, coat and vest respectively to be at breakeven. However, the estimated revenues would take a long time to be earned as the company would face a huge competition. This can also lead to the company’s failure in separates market in short run. A deep analysis of the decision is required.
Alternatives
| Alternative 1: Go with the Expansion | Alternative 2: Continue with Current Product line |
| Pros | Pros |
| · Avoidance of risk of loss and failure, deteriorating company name, compensation of losses from current revenues.
· Maintaining current consumer loyalty. |
· Increased number of consumers.
· Increased sales. · Higher returns · New exposure · Ability to capture more market share. |
| Cons | Cons |
| · Loss of potential market segment.
· Loss of the chances of increasing number of customers. · Loss of substantial expected returns after breakeven. |
· Risk of failure due to high competition
· Risk of deteriorating current corporate culture. · Risk of declining sales of traditional clothing. |
Recommendations
If the company decides to expand its product line then it should revise its marketing mix i.e. revising its pricing strategy, distribution channel etc. Along with that, it should also increase its current advertising budget to compete in the market, since a fierce competition exists in the market. Also, alternative 1 provides far greater benefits for the company as compared to second alternative; therefore alternative 1 seems more feasible for the company.
Exhibits
Exhibit A: Breakeven Analysis
| Computation For Breakeven Point | ||||
| Selling Price | 20 | 50 | 15 | |
| Slack | Coat | Vest | Total | |
| Ratio | 3 | 2 | 1 | |
| Fixed Cost | ||||
| Equipment | 375000 | 250000 | 125000 | 750000 |
| Plant | 600000 | 666666.7 | 333333.3 | 1600000 |
| Fixed Overhead | 1500000 | 1166667 | 583333.3 | 3250000 |
| Rent | 150000 | 100000 | 50000 | 300000 |
| Salaries | 175000 | 116666.7 | 58333.33 | 350000 |
| Marketing | 8000000 | 5333333 | 2666667 | 16000000 |
| Selling and Admin | 3000000 | 2000000 | 1000000 | 6000000 |
| Total fixed Cost | 13800000 | 9633333 | 4816667 | 28250000 |
| Variable cost per unit | 12.00 | 25.11 | 6.79 | |
| CM | 8.00 | 24.89 | 8.21 | |
| Breakeven | 1725000 | 387036.3 | 586682.9 | |
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