Proctor and Gamble - Product Cost Estimate - Essay Example

?A business report on the forecasted analysis of “your” company with two products Company Overview Proctor and Gamble is an international company which specializes in personal care products and cleaning agents. The company has origin in the United States but it has subsidiaries all over the world. The products of choice in this paper are Ariel and pampers. Ariel is a cleaning agent while pampers is a personal care product which is applicable mostly to babies to protect them of baby rashes as a result of wetting themselves. The products have been launched in various countries with the aim of diversifying the marketability and scope. Ariel soaps and detergents target all households including offices (WHITE, 2009)). Both high end and low end customers are targeted. The new products for Ariel and Pampers will be launched into the maturing market considering the fact they have been in existence for some time. P & G faces several threats from other companies such as Unilever and Henkel which are firms that are growing very fast. However, there are various opportunities which prevail such as the strong marketing mechanisms that the firm uses and its reputation which makes its product very firm and stable (HOLLIS, 2010).). Price sensitivity of pampers and Ariel detergents Ariel and Pampers products are all less sensitive to price. This is because each company has the liberty to sell its product at the price it desires given the different materials required to make the product. The other competitors such as Johnson and Johnson, Unilever have their own products which do compete with the case products hence it can price them according to their own estimation. Product Cost Estimate The product is estimated to be priced according to the size or quantity offered to the customers. It should be noted that Ariel and pampers comes in various sizes and quantities to be able to distribute to various market niches according to the demand in place. It is therefore, important to note that Pampers falls in various sizes and quality similar to Ariel which also falls in different quantities (AMERICAN UNIVERSITY IN CAIRO, 2011). Variable Costs The variable cost in the manufacturing of Ariel is the cost of raw materials which vary due to the economic conditions prevailing in the United Kingdom. Other variable costs include the costs of transportation, the costs incurred on payroll of senior management, costs of floating shares on the stock exchange (HOLLIS, 2010; 33.). Fixed Costs Some of the main fixed costs include; the costs of insurance, costs of advertisement and the costs related to distribution of the products within the country. Other fixed costs include; the cost of utilities such as electricity, water and communications. These costs can be predetermined in advance before costing the products ((KAPFERER, 2008; p. 79). Cost leadership aspects of the products In an attempt to beat rivalry in the market and the increasing level of threats in the market, the company puts more emphasis utilization of the economies of scale. This is because of the high fixed costs incurred in the manufacturing sector which is required to be spread throughout the numerous units (CHERUNILAM, 2010; p. 57). By pulling down the costs incurred per unit cost of the product the ultimate product is then sold at a lower price which fosters the company’s competitiveness in the market (KAPFERER, 2008; p. 79). Market Price The market price is determined by the law of demand and the competitors’ quality of products. The market price of pampers and Ariel depends highly on the consumer preferences and tastes and according to the level of income. The products might have a higher price due to quality but the population does not have the cash to buy the products (DYER, DALZELL & OLEGARIO, 2004; p. 227). Break Even Analysis The breakeven analysis of Ariel and pampers arises when costs of production is exactly equal to the revenue acquired from the sales of the products (Drury, 2008; 2006). At this point the sales revenue equals the expenses or costs incurred. Five Year Income Statements Assuming all the economic conditions the same every year the following projection can be drawn for the products under the case study 2013 2014 2015 2016 2017 Net sales $ 98,455 $ 103,010 $ 109,015 $ 116,005 $ 127,765 Operating income $ 17,985 $ 19,990 $ 23,445 $ 25,554 $ 29,473 Net earnings 13,895 $ 14,008 $ 16,886 $ 24,889 $24, 679 Net earnings from continuing operations 14.3% 13.9 % 13.9% 14.2 % 13.2 % From projected income statement above, it can be noted that the projected net earnings from the continuing g operations might not be a walk in the park. It is estimated that by 2013 the net earnings will increase to 14.3 % from a previous low of 13.2 recorded in the past. The net sales are projected to increase or to rise with the margin shown in the chart above (DYER, DALZELL & OLEGARIO, 2004; p. 143). The diluted earnings from the two products are set to go higher given the state of demand even though the economic conditions might not be over. Investment Appraisal The company should invest more in the developing nations which have slightly bigger birthrate which ranges from 50 per 1000 of every child to a low of 25 per every 1000 child. Investment in the detergents is especially the best project to be taken given that it is a common commodity that might be in need from time to time. The market demand can never change in the sense that children are born day and night. Moreover the Ariel detergent is used almost every day (PAGELL & HALPERIN, 1999; p. 87). Conclusion and Recommendations Conclusions In regard to the above discussion it is apparent that it is not easy to precisely determine the price of the product. This is because of the costs involved during the manufacturing process. Use of social to market the products by creating some form of competition. This is to ensure the products have penetrated well to the existing and pending customers. Recommendations In regard to the above discussion and conclusion it would be prudent for the company to keep on its strategy of using the online avenue and face book platforms. This to attract the current mothers and midwifes who are the main target customers due to their impulsive buying. This is part of the advertising and promotion campaigns that must be incorporated in the costing methods (PAGELL, & HALPERIN, 1999; p. 112). Environmental Impact Most of the disposable baby diapers-pampers are normally misplaced one they have been used. It must be noted that the wastes pollute the soil or through the air. Similarly the Ariel detergents are manufactured sing various toxic elements and when disposed off into the river or water, or even the soil they lead to the death of various civilians. Thus the company will have to sensitize the consumers on the safe disposal of the wastes products in the environment they cohabit (ANDERSON, 1977; p. 6). Reflective Essay The products described above are very significant in the current world where every community and individual is in need of a product that can enhance him or her in their daily chores. Successful marketing of these products is essential in ascertaining that the products reach the target market more conveniently. It is therefore important for the management to carry out its duties by conducting an efficient market study that will help in identifying the trend of consumers in buying the newly launched products. Suppliers are to supply according to the agreement to give more room for massive production in large quantities (MAHER, STICKNEY & WEIL, 2008; p. 57). Bibliography ABRAMS, R. M. (2003). The successful business plan: secrets & strategies. Palo Alto, Calif, The Planning Shop. AMERICAN UNIVERSITY IN CAIRO. (2011). Cases on business and management in the MENA region: new trends and opportunities. Hershey, PA, Business Science Reference. ANDERSON, D. J. (1977). Economics. London, Macmillan. CHERUNILAM, F. (2010). International business: text and cases. New Delhi, PHI Learning Private Limited. DONALDSON, B., & O'TOOLE, T. (2007). Strategic market relationships: from strategy to implementation. Hoboken, NJ, Wiley. DYER, D., DALZELL, F., & OLEGARIO, R. (2004). Rising tide: lessons from 165 years of brand building at Procter & Gamble. Boston, Mass, Harvard Business School Press. DRURY, C. (2008). Management and cost accounting. London, Thomson Learning Top of Form DRURY, C. (2006). Management accounting for business. London, Thomson Learning. WHITE, M. (2009). A short course in international marketing blunders: mistakes made by companies that should have known better. Brno, Tribun EU. CHERUNILAM, F. (2010). International business: text and cases. New Delhi, PHI Learning Private Limited. INSTITUTE OF MARKETING AND SALES MANAGEMENT, & INSTITUTE OF MARKETING. (1968). Marketing. London, Haymarket Press. HOLLIS, N. (2010). The global brand: how to create and develop lasting brand value in the world market. Basingstoke, Palgrave Macmillan. KAPFERER, J.-N. (2008). The new strategic brand management: creating and sustaining brand equity long term. London, Kogan Page. KAPFERER, J.-N. (2012). The new strategic brand management advanced insights and strategic thinking. London, Kogan Page. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&AN=429882. MURRAY, J., BEISKE, B., & WHITE, S. (2007). Procter & Gamble Europe: Vizir Launch. Mu?nchen, GRIN Verlag GmbH. http://nbn-resolving.de/urn:nbn:de:101:1-2010081216724. PAGELL, R. A., & HALPERIN, M. (1999). International business information: how to find it, how to use it. New York, AMACOM. WHITE, MICHAEL D. (2008). Short Course in International Marketing Blunders Marketing Mistakes Made by Companies That Should Have Known Better. World Trade Press. http://www.myilibrary.com?id=218471. Bottom of Form MAHER, M., STICKNEY, C. P., & WEIL, R. L. (2008). Managerial accounting: an introduction to concepts, methods, and uses. Mason, OH, Thomson/South-Western. Read More