Answer — Exercise 7

Item 1

• Henry stated that the company is set to make a substantial loss this year.
• Reasons: volatile year for everyone in the industry; also the company underperformed
• Rachel pointed out that sales in Eastern Europe exceeded targets.
• Henry feels the way forward is to cut back on costs by renegotiating deals with suppliers and scaling back operations, with only voluntary redundancies.
• Peter asked Henry to put together some costed proposals for cutbacks to present at the meeting next week.

Item 2

• Alex presented a prototype of the Shoe Saver – a compact box that removes all shoe smells. It uses tiny particles of silver to kill the microbes that cause odours.
• Alex stated that unit costs are between €35 and €45.
• Marta looks to retail at between €100 and €120.
• Alex hopes to outsource production to bring significant savings.
• Rachel estimated sales in the region of 10,000 units in the first year, followed by 30,000 in year two, 100,000 in year three and a quarter of a million by year four.
• Henry questioned whether people want to pay €120 euros for the Shoe Saver.
• Marta argued that the Shoe Saver is far more effective than sprays and insoles currently on the market. It could extend a shoe’s life by up to 50%, so it’d pay for itself.
• Marta pointed out that the initial market is not actually homes but health clubs and gyms. Longer term, growth would come from high-end consumers and already had some positive feedback from focus groups.
• Alex said that they had patented a couple of the manufacturing processes involved to give the company an edge over any competitors.