Classic Knitwear wants to improve gross margins from 18% to at least 20%. 75% of Classic’s revenues come through screen-print channels and remaining 2...
Perfect A Reed ... and Beyond Famed Metropolitan Opera Orchestra clarinetist, Ben Armato authored this manual that discusses many topics relating to the clarinet, especially reed adjusting.
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Classic Knitwear Case Study
Knitwear Magazine First NumberDescription complète
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Classic knitwear case study analysis and calculations
Group-1 Section-F Classic Knitwear and Guarding: A Perfect Fit: Introduction: Classic Knitwear wants to improve gross margins from 18% to at least 20%. 75% of Classic’s revenues come through screen-print channels and remaining 25% come from knitwear sold through mass retail channels as private label merchandise, which typically carried the name of the retailer or of some inhouse brand the retailer had invented. Classic’s private label or unbranded knitwear had no branded recognition among retail customers, which limited its opportunity to differentiate its products. Classic heavily invests in T shirts and # 2 player in screen-print sector with 16.5% market share. Opportunity: Classic has got an opportunity to negotiate a licensing partnership with Guardian, a manufacturer of insect repellents and to manufacture insect repellent T-shirts. Due to growing national awareness of insect-borne illnesses, insect repelling clothing is a rapidly growing niche market with less number of competitors. It has below 3 options to launch this new product line of insect repellent shirts: 1. Launch new product line of T-shirts with name ‘Guardian’: Advantages: Guardian had recently received EPA registration for a newly patented insect-repellent technology that is 3 times better than competitors. Also 50% target audience (males in age group 18-35) already held positive perceptions of Guardian. So less marketing investment is required to launch this new product with name ‘Guardian’ and it can improve gross margins to 40%. Disadvantages: If Classic agrees with Guardian to launch the new product line with name ‘Guardian’, then Classic will not get any opportunity for its brand awareness among customers. It also need to pay license fees and royalty to Guardian. If Guardian decide to terminate the agreement, Classic would be in problem. 2. Launch new product line of T-shirts with name ‘Classic Knitwear’: Advantages: Classic will get any opportunity for its brand awareness among customers and will be able to improve its gross margins. Disadvantages: As customers are not aware of Classic brand, more marketing investment is required to reach to target audience. It also need to pay license fees and royalty to Guardian. If Guardian decide to terminate the agreement, Classic would be in problem. 3. Do not launch any new product line for insect-repellent T-shirts: Advantages: Classic doesn’t need to spend money on new product manufacturing. Also it need not spend on marketing and need not pay license fees and royalty to Guardian. Disadvantages: It will not be able to improve the gross margins and will miss the opportunity for brand awareness among customers. Consumer Survey Analysis:
As per consumer survey, 38% respondents will buy the new product and 24% respondents will probably buy the product. Also almost 50% respondents are ready to pay high price for the product.
Break-Even Analysis: Year 1 No. of units in display units(12 dozens per display unit) Selling price per unit Maximum Sales Revenue Target Population (15-35 males) Awareness of target population in two years Interested consumers in two years (by survey) No. of Potential buyers Variable Costs per unit cost price per unit royalty to Guardian(5% of Selling price) 5% off-invoice trade promotion allowance 10% advertising allowance to 20% retailers Total Variable Costs per unit Fixed Costs Salaries to 3 new sales representatives Advertising costs Retail displays(per display unit cost $100) Total Fixed Costs Contribution per unit(selling price-variable cost per unit) Break Even Point(in units)
*- Calculation is in the excel file attached in the mail. Assumptions for calculations: 1. Number of display units in first year are 5000 and 5000 in second year. 2. Calculations are done assuming number of units produced in year 1 will be 12 dozen shirts per display unit, so 12*12*(5000 display units) = 720000 shirts in year 1 and 2. 3. US population in 2006 is considered as 300 million. Age group 15-35 will be approx. 33% and half of that is considered to be male. 4. 12.5% average awareness level is considered for two years.
5. Probability of interested persons among the aware population is considered to be 0.185 as 185 persons responded the survey which was sent to 1000 persons. 6. Buyers will be increased by 50% in second year as mentioned in the case. 7. No royalty fees will be paid in first year. Conclusion: After doing the analysis, we think that the company should not launch the new product with name ‘Guardian’ because the estimated number of people wanted to buy the product is less than the break-even amount.
