A price reduction strategy being contemplated by the company requires that the firm finds more cost effective ways of running operations without compromising on the quality of the products. Tis cost might cause an increase in sales and thus improve profitability despite reduction in the operating profit margin. Fom the cost card above it can be noted that the net profit per unit is €2.69 which is above all other current male t-shirt brands and therefore at the onset it seems like a viable idea. Hwever, te main that the shirts have to be invoice in US dollars which exposes the cash to translation risk during forex exchange.
Hwever, tis can easily be mitigated by a variety of risk mitigation processes such as currency hedging and use of forwards and futures. Aother critical element to consider is that despite having higher margins the operations would be based in the united states which has higher levels of taxation that might eat into the company’s profitability. Fom the options provided and the calculation I would recommend a two fold increasing profitability for the Murphy shirt company.
T begin with the company needs to streamline its non manufacturing process to ensure there are as optimal as possible and this could involve outsourcing their non core activities to more affordable specialist firms. Scondly, te company should plan to enter the united states women’s sport tshirt market as it’s a viable business opportunity despite the exposure to the foreign exchange risks. Te company was quite success in its customer management with a lot of emphasis on the quality check and were in place to ensure customer satisfaction.
Te company also conducts market research to ensure that they are constantly meeting what the customers demand. Te company also has a diversified product range and focuses on a diversified customer group which increases group sales by offering and “all under one roof” appeal to potential customer who might want to order a variety of products from the. ..
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