Report on DK.edited

docx

School

Mount Kenya University *

*We aren’t endorsed by this school

Course

115

Subject

Business

Date

Nov 24, 2024

Type

docx

Pages

Uploaded by KidWombat2214

Report on DK’s profitability and recommendations The purpose of this report is to suggest measures that will help Dusty Knuckle (DK), a bakery and café in London, increase its profitability levels and achieve the target gross profit figure of £3.5 million for the next financial year. The competitive forces in the bakery industry will be analysed using Porter's Five Forces model, and DK's gross profit for 2023 will be estimated. Some suggestions to improve its defence are given too. It will also consider if the profit target is practicable and analyse how some factors impact this value, among them political-legal, economic, social, technological and environmental factors. Strategic framework Examining the strategic framework of DK's current situation involves a comprehensive analysis using Porter's Five Forces model to scrutinise the competitive dynamics shaping the bakery industry and influencing DK's profitability. The competition within the industry is fierce, characterised by intense rivalry among existing players. Notably, the top 5 artificer bakeries control a significant 78% of the luxury bread market, while DK's main rival commands a substantial 28% market share in the freshly baked pastry market (North London). Although DK holds a commendable 42% market share in the same segment, its position is under pressure from the third and fourth largest rivals, as well as various small local bakeries. This high level of competition translates into lower prices, reduced margins, and elevated costs for DK, reflecting the industry's competitive landscape. Conversely, the potential of new entrants into the industry poses a low threat to DK, as the bakery sector exhibits formidable barriers to entry. Capital requirements, economies of scale and brand loyalty mean that new business is a long way off. Add to all this the need for compliance with heavy regulations; it can leave potential newcomers discouraged as they see their dream becoming increasingly difficult to implement. The fact that existing firms, such as DK, enjoy a strong brand image and customer base and reap from efficient control over supply chains and distribution networks also means the chances of newcomers rocking one's boat are slim. In terms of supplier power, there is a moderate effect in the bakery industry. Even for basic ingredients like flour and yeast, there are numerous suppliers. Still, because product details or differences affect bargaining power, a single supplier has greater strength in negotiations. As an example, DK's dependence on some suppliers for such fare as sourdough bread or pizza dough gives them a certain position of power within the system. Fundamentally, these forces, coupled with statistical results, are the strategic environment for DK in this intensely competitive bakery industry. Gross profit estimation and recommendations In assessing DK's gross profit estimation and offering recommendations for enhanced profitability, it is crucial first to understand gross profit as the profit remaining after subtracting the costs associated with producing and selling products or services. The revenue projection for DK in the financial year ending December 31, 2023, is estimated at £4,527,000, reflecting a 0.6% increase from the 2022 figure of £4,500,000. This projection assumes a revenue breakdown between the Dalston bakery and Haringey restaurant consistent with the 2022 distribution,

comprising 67% and 33%, respectively. The corresponding cost of goods sold (COGS) projection, based on the assumption that direct materials and direct labour constitute the primary components, amounts to £905,400, with £606,618 allocated to the Dalston bakery and £298,782 to the Harringey restaurant. Consequently, DK's estimated gross profit for 2023 stands at £3,621,600, maintaining a gross profit margin of 80%, mirroring the previous year's performance. Feasibility of the profit target DK's profit target of £3,500,000 for 2023 is feasible but faces uncertainties tied to political-legal, economic, social, technological, and environmental factors. Brexit-related trade barriers, economic challenges, shifting social trends, technological advancements, and environmental concerns all impact the bakery industry. With UK-EU trade relations volatile, the economic environment changing all the time for pricing adjustments, customers' needs constantly evolving, and new technologies offering chances to be exploited while environmental constraints impose limits from above on what can be achieved in terms of costs and profits DK must keep up, or else He will go bust. Conclusion This report will help Dusty Knuckle (DK) attain a goal of £ 3.5 million in gross profits over the next fiscal year. DK gross profit for 2023 will be estimated using Porter's Five Forces model, and then the target feasibility of acquiring a state-owned enterprise will undergo evaluation. Finally, external factors that affect company profits are discussed to determine whether or not this achievement is plausible according to objective economic laws. Finding the Keys Highlights will report a projected gross profit of £ 3,621,600 with suggestions to resolve uncertainty points. An analysis of the industry will show a high degree of competition and low entry potential. Supplier power and customer power are both at moderate levels. The report will suggest such profit- enhancing measures as raising the average order value, cutting inventory costs, and expanding distribution channels and profits through establishing economies of scale. The information presented here is to help Dusty Knuckle's CEO make decisions that will bring future success. Recommendations The target gross profit of £ 3,500,000 for year 2holders appears realistic so long as it is all contingent on uncertain and tentative assumptions such as the rate at which UK GDP will advance this year after adjusting to value-added growth and uncertainties tied up with inflation. It is thus imperative for DK to implement strategic action, raising profit and lowering risk. Among the suggestions are increasing average order value (AOV) by selling more upsell items, lowering direct material costs through better purchasing terms with suppliers as well as reducing warehousing inventory to avoid overstock and dead stock issues, digitally developing another sales outlet--online or on third-party platforms of course; improving production efficiency standards and capacity scale. These measures strive not only to fulfil the gross profit target but even to exceed it--creating a stable way of doing business, solid as a rock in an ever-changing market.

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Related Documents

Group C.docx

IMG_2744.jpeg

BUS 4405 - Leadership Week 5 WA.docx

Assessment 3 Trust and Workplace Relationships.docx

BSBWHS521+Ensure+a+safe+workplace+Task+1-v2.2.docx

426585238_Common_Spirit_Dignity_Health_Mission.docx

Business Report sample.docx

Examen_ [AAB01] Cuestionario 3_ Valore su nivel de conocimientos sobre la Unidad 3.pdf

Plan Outline.docx

OIDD101 - Spring 2016 - R4 exercise - solutions.pdf

BUS 240 Case Outline Format.edited.docx

RODICA PIRVU PORTOFOLIO ITB - Copy - Copy.docx

Recommended textbooks for you

Management, Loose-Leaf Version

Management

ISBN:9781305969308

Author:Richard L. Daft

Publisher:South-Western College Pub

Purchasing and Supply Chain Management

Operations Management

ISBN:9781285869681

Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson

Publisher:Cengage Learning

Principles of Management

Management

ISBN:9780998625768

Author:OpenStax

Publisher:OpenStax College

Marketing

ISBN:9780357033791

Author:Pride, William M

Publisher:South Western Educational Publishing

Foundations of Business (MindTap Course List)

Marketing

ISBN:9781337386920

Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Publisher:Cengage Learning

Foundations of Business - Standalone book (MindTa...

Marketing

ISBN:9781285193946

Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor

Publisher:Cengage Learning

SEE MORE TEXTBOOKS

Recommended textbooks for you

Management, Loose-Leaf Version
Management
ISBN:9781305969308
Author:Richard L. Daft
Publisher:South-Western College Pub
Purchasing and Supply Chain Management
Operations Management
ISBN:9781285869681
Author:Robert M. Monczka, Robert B. Handfield, Larry C. Giunipero, James L. Patterson
Publisher:Cengage Learning
Principles of Management
Management
ISBN:9780998625768
Author:OpenStax
Publisher:OpenStax College
Marketing
Marketing
ISBN:9780357033791
Author:Pride, William M
Publisher:South Western Educational Publishing
Foundations of Business (MindTap Course List)
Marketing
ISBN:9781337386920
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:Cengage Learning
Foundations of Business - Standalone book (MindTa...
Marketing
ISBN:9781285193946
Author:William M. Pride, Robert J. Hughes, Jack R. Kapoor
Publisher:Cengage Learning