PROJECT ENERGY GEL Harvard Case Solution & Analysis

PROJECT ENERGY GEL Case Solution

OVERVIEW

 The main issue in presenting this product are its the expected growth, costs associated with launching the product and whether the launch of this new energy gel will destroy market of an existing product called “Energy Bars” .The question here is whether there is a potential demand and separate market for this new product? Alternatively, is there anything Wickler and his team can do in the development of product to differentiate it considerably with the existing energy bars market, so that energy bars remains untouched?

 Another situation that may arise is whether there are any reliable market estimates and data that show the extent to which the launch of new product “energy gel” will affect the current and future market of energy bars. The business teams at HPC are also expecting a strong business performance and growth with the introduction of new “energy gel” product based on the cultural and fitness trend that is at its peak in the country. Now the question is how long this trend and mindset of people will continue? Or the people of this mindset will increase in future or decrease how good the research is on social factors in the country because the information over this matter will make the case for energy gel product even stronger. Other divisions at HPC had launched several products, some of them showed great growth. There has always been one product in every division that has shown tremendous growth and some of them are still popular like energy bars and energy drinks. Such products have lifted the overall financial performance of HPC time and again. Currently HPC needs another product to rule the market for coming years now ‘Energy gel’ product should fill that place to boost up the financial performance of HPC and take HPC further up on the food and drink industry. The question of whether HPC should launch “Energy Gel” or not? Still stands and needs justification, which will allow HPC to launch this new product.

DOES WICKLER NEED TO CONSIDER THE COST OF OVERHEADS AND MIXING MACHINE USAGE WHY OR WHY NOT?

Currently, Wickler is of the opinion that the cost of using the existing facility should not be included in the business case for Energy gel product. However, the counter argument is that when it is expected that Energy gel product will affect the market of energy bars and some of the facilities and production process will be same then the cost related to existing facilities should also be included in the business case to reflect all cost associated with the production of Energy gel product.

The exclusion of the costs related to existing facility will also increase ROCE specially the return which is associated with Energy gel product because eventually, by not including all the costs of using existing facilities will increase returns on the expense of unrecorded costs.

Exhibit-1

Return on Invested Capital (ROIC)—10-Year Average 
Net income3.77
Invested capital5.21
ROIC0.72
Hurdle rate0.15

As it can be seen that the calculated ROCE from the financial evaluation of Energy gel product is 72%. When the calculated ROCE of the HPC is 44.82%, The ROCE of the product Energy gel appears to be overstated and reflects that the associated cost and capital employed should be included to show true picture of the return related to energy gel product..............................

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