Page 1. Additional Operative Information: Alt. A
FOREX rates: fixed ratio AUD/EGP 0.095; EGP/AUD 10.5.
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Once off- and up-front costs for Entry Mode Alt. A: capital requirements to expanding home operations 3x (times) for direct export to Egypt is $7.65mn. This amount is to be viewed as Fixed Assets (FA). Note that the MENA operations pays interest only on the above investment. The cost per SKU should be calculated using production-, marketing-, sales- and overhead costs as they occur in both Home Market and Host Market for this alternative.
Cost of Capital: the market provides the investment at 3.48x the nominal interest rate 4.25% due to the perceived risk, and the lower salvage value of an extended plant should the expansion fail.
Sorbet servings: each serving equals one SKU; each SKU weighs 125 gram; SKU’s are packaged in boxes of 4; one standard (Australian) pallet takes 125 boxes. The box size is 200mm x 200mm x 200mm. Each fully loaded pallet equals 1m3 in volume. The three product types are similar in all and every aspects (e.g. cost, size) apart from the flavour.
Current production: 30% of total capacity (home base operations).
Corporate Tax Rate: ___% on EBIT (apply the 2017 Tax % of the GDP as proxy).
Transportation concerns: ensure to use proper TEU’s or ULD’s (regardless of shipping method).
Additional costs: Include all costs associated with producing at the home production plant.
Mark-Up 1: (MU1) is 175% for products sold by SALSA-CREAM in MENA (FGI export).
Mark-Up 2: (MU2) products sold by Retailers in MENA use factor 1.10 (Sea).
(MU2) products sold by Retailers in MENA use factor -0.10 of the Sea MU (Air).
Financial Comparison: to enable comparison between all entry modes, you must:
a) complete an Income Statement for export when shipping by sea; and,
b) complete an Income Statement for export when shipping by air; and,
c) compare the Income Statements for export when shipping by sea with air; and,
d) make your decision regarding shipment methods; and,
e) complete a Strategic Profit Model for your selected method of shipment; and
f) compare the NPM and ROA and reflect upon the outcomes vs. the Income Statements.
Customer Locations: map the locations of the Customers in the target market and assess their approximate distance (in Km) to where you decide to locate the Egyptian headquarter.
Inventory & Asset values:
– Inventory is described here as: [‘Inventory $’ = ‘Safety Inventory #’ * ‘Sales Price SKU$’]
– Accounts Receivables have a credit time of 21 days:
[‘Accounts Receivables $’ = (‘# Customers ‘ * ‘# Deliveries per week’ * 3) * ‘Sales Price SKU$’]
– Cash (e.g. current assets) is here calculated as the value of:
[‘Current Assets $’ = ‘Inventory Replenishment Point’ * ‘Sales Price SKU$’]
All blue boxes = a field where you need to create the formula / insert the correct value.