Srimanti Costing

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REPORT ON: - RIVERDALE

PREPARED BY: - SRIMANTI BASU (PG II B)

FACULTY-IN-CHARGE: - MR. PIYUSH BAID

DATE: - 25/05/07

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CONTENTS

Topic Page No.Introduction 3

Background 4Internal Environment Analysis 5External Environment Analysis 7

Recommendations 8Appendix 9

Bibliography 9

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INTRODUCTION

I am Srimanti Basu pursuing PGDBM (Post Graduate Diplomain Business Management) from Wigan & Leigh College. I havecompleted my ICSE from M.P.Birla Foundation and ISC fromM.P.Birla Foundation.

I intend to take up Marketing as my specialization and want to build my career in Financial Service Industry because it has lotof scope to succeed in future.

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BACKGROUND

Riverdale is an established company manufacturingwatches, with the backing of 10 decades of experience.They sell their watches through personal contacts and

serve to the established clientele. This is a very brand-sensitive company.

The company is planning to expand its market share byserving to the new generation peoples. Archie Andrews,one of the new generationemployees in Riverdale,came up with the conceptof establishing new brandunder the name of

RIVERDALELITE which wouldcater to the needs of massmarket.

According to Betty Cooper,Manager of Riverdalelite,they can manufacture andsell 1,00,000 watches permonth at $14/watch.

Veronica Lodge, CEO ofRiverdalelite, received aproposal from a sportsstore chain to supply10,000 watches per monthat $15/watch on acondition that the name ofthe sports store would be printed on the watch and not ofthe brand. $1 which the sports store is paying extra isthe printing cost.

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INTERNAL ENVIRONMENTAL ANALYSIS

The analysis of the internal environment is done by usingKaplan and Norton’s model of “ BALANCED SCORECARD ”.

Balanced Scorecard is a concept for measuring a company'sactivities in terms of its vision and strategies, to givemanagers a comprehensive view of the performance of abusiness. The key new element is focusing not only onfinancial outcomes but also on the human issues thatdrive those outcomes, so that organizations focus on thefuture and act in their long-term best interest. It wasdeveloped by Robert S. Kaplan and David Norton in the year 1992.

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http://en.wikipedia.org/wiki/Robert_S._Kaplan

http://en.wikipedia.org/w/index.php?title=David_Norton&action=edit

http://en.wikipedia.org/wiki/Robert_S._Kaplan

http://en.wikipedia.org/w/index.php?title=David_Norton&action=edit



The four aspects of the company which are measured/evaluated/ analyzed are:

1. Financial .2. Customer .3. Internal Business Processes .

4. Learning and Growth .

These factors are analyzed below-

1. Financial : As is evident from the budgeted financialstatement (refer appendix) that the company can earna good amount of profit from the Riverdalelite branditself and so the success of the niche market brandcan easily be judged. Thus, the shareholders andstakeholders both will be satisfied with the companyif company can achieve its budgeted figures.

2. Customer : The Company’s first brand, that isRiverdale, is being sold only through personalcontacts and to the established clientele only. So,it is evident that the niche market customers aresatisfied with the company. Now, as the company isplanning to come out with a new watch for theyounger generation, so the mass market customerswill also be satisfied to get branded watches verycheaply.

3. Internal Business Processes : In order to satisfy thecustomer and shareholders, the company, according tome, should try to decrease its fixed costs and alsoincrease its labor productivity. After going throughthe case, there are certain areas where the companycan improve. Firstly, there seem to be a cold warbetween Veronica and Betty as both of them aregiving different views regarding the sales of thewatches.

4. Learning and Growth : The Riverdale company is a

decade old brand, so in terms of the number of yearsit is not a very old company, although it is wellestablished and so it is still learning as well asgrowing. The company is trying to build a secondbrand so it is clear that the company is stillgrowing as well as learning.

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EXTERNAL ENVIRONMENTAL ANALYSIS

The analysis of the internal environment is done by usingSWOT Analysis model. SWOT is an acronym for Strength,

Weakness, Opportunity and Threat.

1. Strength : The strength of the company is that italready had established clientele to whom they arecatering at the moment. They are also selling thewatches through personal contacts so they can easilyconvince the customers to buy the watches from them.

2. Weakness : The weakness of the company is that theyhaven’t yet sold to any unknown customers, all their

customers are known to them and it is easy toconvince a person you already know before and sothey don’t have any experience in selling to massmarket, which can become a big hurdle when theystart selling Riverdalelite brand.

3. Opportunity : As they are catering only to nichemarket, so mass market is open for them and as theyare planning to come up with a new young generationbrand, so they have good amount of market open tothem because the young generation people like funky

kind of watches.

4. Threat : The biggest threat that lies in front ofthem is that of the much bigger and well-knowncompetitors in the mass market sector to which theyare planning to enter.

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RECOMMENDATIONS

Accepting the proposal :

If Veronica Lodge accepts the proposal then they arelosing the brand name because they can not give thename of the brand in the watch, although they aremaking a bit higher profits.

Not acceptingthe proposal :

If VeronicaLodge does not

accept theproposal thenthey are losingout some extraprofits butthey are ableto generatemore brandawareness whichmight help themin future tosell morenumber ofwatches andalso increasetheir marketshare.

My Views :

According to me, Veronica Lodge should not accept theproposal because the company is very brand sensitiveand it cannot afford to lose out on brand just to earnsome extra profit.

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APPENDIX

Accepting theproposal

Not accepting theproposal

Sales 1,68,00,000 1,69,20,000COSTSMaterial (60,00,000) (60,00,000)Labor (42,00,000) (42,00,000)Printing Costs (1,20,000) (1,20,000)Die Charges (4,000) (8,000)Contribution 64,76,000 65,92,000

FIXED COSTS (1,00,000) (1,00,000)Profit 63,76,000 64,92,000

BIBLIOGRAPHY

1. http://www.balancedscorecard.org/basics/bsc1.html

2. http://en.wikipedia.org/wiki/Balanced_Scorecard

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http://www.balancedscorecard.org/basics/bsc1.html


http://en.wikipedia.org/wiki/Balanced_Scorecard




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