Khang Huynh ACCT 511 Dr. Vijay Karan February 17th, 2015 Case 5-2 Colombo Soft-Serve Frozen Yogurt Case Brief:
The cometiti!e en!ironment "or Co#ombo change$ chang e$ $ra%tica##y "rom the ear#y 1&'0(% )hen the "irm origina##y $e#i!ere$ their %o"t*%er!e "ro+en yogurt to in$een$en t yogurt %ho%, a then major maret %hare "or Co#ombo. -n"ortunate#y, Co#ombo(% %hare in the "ro+en yogurt )a% hea!i#y imacte$ in the ear#y 1&&0(% 1& &0(% )hen "ranchi%e "irm% "irm% %uch a% TC/ an$ Fre%hen% %tarte$ to %tream#ine the "ro+en yogurt bu%ine%% )ith the aarent a$!antage % o" uni"orme$ bran$ing% an$ mareting e""ort% %ub%euent#y, a #arge number o" in$een$ent yogurt %ho% cea%e$ to ei%t a% they cou#$ not comete )ith the e""iciency o" the yogurt "ranchi%ee%. The maret %hi"te$ again in the #ate 1&&0(% )ith the ri%e o" the imu#%e %egment o" "ro+en yogurt a% Foo$%er!ice oerator% %tarte$ to %er!e %o"t*%er!e yogurt a% art o" their oeration%, an$ u#timate#y became the $ominant cu%tomer% "or "ro+en yogurt at 753 maret %hare. 4n or$er to %tri!e in the maret $ominate$ by "ranchi%e oeration%, the in$een$ent yogurt %ho% in the #ate &0(% "o##o)e$ the $i""erentiation bu%ine%% %trategy through $i!er%i"ying their ro$uct o""ering% )ith $i""erent $i""erent item% %uch a% %moothie%, boo%ter%, boo%ter%, an$ granita%. 4n contra%t, %o"t* %er!e yogurt i% on#y con%i$ere$ to be an a$$*on tra$e "or Foo$%er!ice #ocation% #oca tion% thu%, e%%entia##y "o##o)ing a co%t #ea$er%hi %trategy, the%e oerator% are not inc#ine$ to ean$ their bu%ine%% )ith other ro$uct% comare$ to the in$een$ent yogurt %ho%. Current#y, the main "ocu% o" enera# 6a##% 4nc. a"ter acuiring acu iring Co#ombo Fro+en /ogurt /ogurt i% on the 4mu#%e %egment, e!i$ent#y $i%#aye$ through the $e$ication o" the %a#e%"orce time, "ree merchan$i%ing it%, an$ rice romotion%. hi#e the merchan$i%ing an$ ricing romotion% are a#%o a#%o a#icab#e "or the 8ho%, )ho $o in$ee$ tae a$!antage o" them, the enthu%ia%m o" %a#e%eo#e "or the 8ho %egment i% uite mie$, )ith a number o" the %a#e%"orce a!oi$ the %ho% com#ete#y. Segment Profitability Analysis Statement: Profit and Loss by Segment – ABC
Category
Impulse Segment
Yogurt Sops
!otal
8a#e% in ca%e%
1,200,000
900,000
1,500,000
8a#e% :e!enue
;
29,''0,000.00 ;
5,&70,000.00 ; 2&,'50,000.00
rice >romotion%
;
?9,@00,000.00 ;
et 8a#e%
;
20,2'0,000.00 ;
; ?11,B00,000.00 ; ?2,'50,000.00 ; ?1B,250,000.00
ic E 8hi en%e% ?Aen$i
;
?2,@25,000.00 ;
ro%% 6argin
;
@,255,000.00 ;
;
?1,@'0,000.00 ;
?B5,000.00 ; ?1,725,000.00
;
?9,'@1,000.00 ;
?9&,000.00 ; ?9,&00,000.00
et 4ncome
;
71B,000.00 ;
?&00,000.00 ; ?B,500,000.00 5,070,000.00 ; 25,950,000.00
?975,000.00 ; ?9,000,000.00 1,'B5,000.00 ;
1,7@1,000.00 ;
',100,000.00
2,B75,000.00
-n$er Acti!ity a%e$ Co%ting metho$, the ro$uction co%t% remain the %ame "or the t)o %egment%. Ho)e!er, )ith AC ana#y%i%, there are a$ju%tment% to be ma$e "or icGac an$ %hiing co%t%, merchan$i%ing co%t%, an$ a#%o 8EA co%t%. -n$er AC, the ic an$ %hi een%e% co%t% are $ri!en by the number o" ca%e% in "u## a##et% an$ the number o" in$i!i$ua# ca%e% "or the t)o %egment%. ith the merchan$i%ing co%t, there )ere &0 it% %ent to /ogurt 8ho% )hi#e the 4mu#%e 8egment recei!e$ %igni"icant#y more at 9,9@0 it%.
a%e$ on the ana#y%i% abo!e, there are %e!era# co%t "actor% that 64*Co#ombo can imro!e uon= •
Fir%t, the ic an$ %hi co%t cou#$ be re$uce$ "or the 4mu#%e 8egment a% that maret account% "or '03 o" 64(% re!enue yet the %hiing co%t "or tho%e Foo$%er!ice oerator% rere%ent% '7.53 o" the tota# %hiing co%t. 8ince the 4mu#%e 8egment re"er to or$er in in$i!i$ua# ca%e% in%tea$ o" "u## a##et%, 64 cou#$ o""er a acage o" 10 to 20 ca%e% o" "ro+en yogurt )ith the o%%ibi#ity o" minima# $i%count to thi% grou o" cu%tomer% thi% he#% narro)
$o)n the %hiing co%t% "or 64 )hi#e a#%o incenti!i+e the 4mu#%e 8egment to or$er in a •
#arger uantity )ithout bu# an$ %torage incon!enience o" the "u## a##et%. 8econ$, merchan$i%ing romotion i% ob!iou%#y a huge co%t %in "or 64 un$er AC ana#y%i%. The 4mu#%e 8egment account% "or &7.B3 o" 64(% merchan$i%ing, yet it )a% i$enti"ie$ that many o" the 4mu#%e #ocation% ha$ not at a## uti#i+e$ the%e $i%#ay%. 4ne!itab#y, 64 %hou#$ on#y ro!i$e merchan$i%ing o""ering% to the 4mu#%e #ocation% that $e"inite#y u%e tho%e $i%#ay% or on the con$ition that the 4mu#%e #ocation% or$er a %eci"ic number o"
•
bun$#e% to recei!e the%e $i%#ay%.
-n$er the hyothe%i% that 64 im#ement% the%e recommen$ation%, 64 can o%iti!e#y eect the ro"it to a#mo%t tri#e in the %hort term ju%t by #e%%ening the mareting e""ort% on the 4mu#%e 8egment% ?Aen$i D. 4n the #ong run, a% 64 gear% their e""ort% to)ar$ bui#$ing the re#ation%hi% )ith the /ogurt 8ho%, %a#e% "rom thi% %egment can be eecte$ to increa%e but enera# 6i##% mu%t ro$uce more uniue "#a!or% or inno!ati!e "actor% in or$er to comete )ith the "ranchi%e oeration%.
