group-9-william-oliver-bootmaker

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Group 9- William Oliver Bootmaker Applied capston (York University) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Group 9- William Oliver Bootmaker Applied capston (York University) Scan to open on Studocu Studocu is not sponsored or endorsed by any college or university Downloaded by 28.Halari Ayesha (ayeshahalari1@gmail.com) lOMoARcPSD|38713753

CSAC 2700- Applied Capstone Intensive Group Case William Oliver, Bootmaker Downloaded by 28.Halari Ayesha (ayeshahalari1@gmail.com) lOMoARcPSD|38713753

A. Introduction William Oliver, a luxury shoemaker, reported a loss of 400,000 pounds in 2005 and is looking to make up for the initial investment he made in the business in 2006. This will allow him to begin turning a profit once more. The company has a long and illustrious history of producing shoes of the highest possible quality, dating all the way back to 1849 in England. Throughout the course of history, a great number of well-known figures and royals have been spotted sporting these shoes. Because of William Oliver's expert craftsmanship, thorough attention to detail in the selection of materials, and indisputably unique design, his shoes have always had a reputation for having an extraordinary level of quality. It recognizes that their customary shoemaking technique generates shoes of greater grade that no other machine can coordinate. In any way, to boost advantage, John Phillips, the financial supervisor of William Oliver, thought of approaches of growing the brand via worldwide circulation. Unfortunately, this design appears to be purposeless owing of absence to productivity testing the organization. In this way, John Phillips sought the assistance of Geraldine Easton, an experienced administrator, to assist him in understanding and reorienting their business. As a direct consequence of the talks that John Phillips has been having with Geraldine, he is mulling over the prospect of using a strategy that is more market driven, should the opportunity present itself. Philips concurred that the reliable guideline was a better option than the progressive approach since the latter could not be attained because of the doubtful item request bends. John Phillips is currently tasked with determining how the company can refocus its efforts to meet its goal of repaying the initial investment in the year 2006. This goal was set for the company in 2006. B. Problem Statement How can a firm that works in the luxury goods market effectively align its business operations, pricing strategy, and costing methodology to increase profits and continue to function in such a fiercely competitive environment? C. Analysis C.1. SWOT Analysis Strengths  A high level of both quality and workmanship.  Strong brand name in the market.  Distinctive designs produced.  Consistent in quality of the products made.  Production of distinctive designs. Downloaded by 28.Halari Ayesha (ayeshahalari1@gmail.com) lOMoARcPSD|38713753

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 The ability to personalize the products. Weaknesses  75% of the capacity being used has idle of products manufactured capacity.  It charges very high prices for its items.  A shop for sale in London that consistently makes a loss.  Expenses that are relatively constant.  Not making enough profit. Opportunities  Increasing worldwide distribution channels.  Development of the international market.  Making use of idle capacity and increasing outcome volume.  Opening new stores in high profile locations. Threats  There is a lot of competition in the market.  There is a possibility that it will lose some of its customers. C.2. Questions in the Case 1. What were the most important issues that shaped the company's management method? William Oliver is completely dedicated to the sector of the luxury shoe business in the United Kingdom that caters to the most affluent customers. The manufacturing of their shoes involves both meticulous craftsmanship and the selection of high-grade materials, both of which contribute to the exceptional quality of the shoes that are produced. Because of their high-quality traditional skills in leather grading, color matching, and stitching quality, which ensure the exclusivity of the company, it is abundantly clear that the reason why the company charges high prices to its upper-class customers is because of the high-quality traditional skills that they possess because of their high-quality traditional skills in leather grading, color matching, and stitching quality. Nevertheless, despite being one of the most well- known shoe brands in the country, the company reported a loss of £400,000, and its turnover had been slightly higher than the amount at which it would have broken even for several years. This is despite the fact that the company has been in business for a number of years. The following is a list of the key elements that led to the establishment of the management technique that the organization now uses: A. Maintaining a high gross margin. Preserving a healthy gross profit margin In order to achieve the intended outcome of a wholesale price that included a profit margin of 40%, the pricing strategy of the firm necessitated adding a markup to the entire manufacturing cost. This was done in order to get the desired result. This mark-up price was the price that was paid to retailers, who then added another 100% mark-up to the price so that there would be a profit margin of 50% in the price that was charged to consumers. The total price that was charged to customers was thus three times the original price. As a result Downloaded by 28.Halari Ayesha (ayeshahalari1@gmail.com) lOMoARcPSD|38713753

of this, the price that is shown to clients already includes a substantial profit margin in addition to the actual cost of producing the product or service being sold to them. B. Surplus manufacturing capacity and unrecovered costs. Excess production capacity and costs that have not been recouped A significant amount of capital was put into a prominent location in London in anticipation of an increase in income, and the location in question was quite visible. As a direct result of this, higher start-up costs and expenses linked to people, as well as additional costs associated with product training, were spent. But revenues did not increase to the degree that was projected, and as a consequence, the company was unable to repay all of these expenditures. Because of this, the corporation now has an abundance of available manufacturing capacity. 2. Given their historic position in the market, based on superior quality, craftsmanship and exclusivity, how should the company position itself strategically? As the company has a capacity that is idle for 25% of the time, it has a potential to capitalize on this by creating range shoes at more moderate rates and extending its customer base by catering to people in the middle income bracket. This would allow the company to make a profit. Because of this, the company will be able to lessen the amount of money that it invests in its overhead expenses. In addition to that, they may also provide a fresh assortment of products made of leather, including belts, handbags, and gloves, among other things. Keeping their products in the elite category of customers may also enable them to charge a premium price for things that have been specifically tailored to the customer's needs. They are also able to advertise their items to clients situated in other nations, such as those located in Asia and the United Arab Emirates. 3. How can the company reconcile its accounting methods with a more focus niche strategy? CVP Analysis PARTICULARS TOTAL COST COST PER UNIT Direct Material 1,100,000.00 45.83 Direct Labor 800,000.00 33.33 Dispatch Cost 100,000.00 41.67 Variable Selling Cost 1,000,000.00 41.67 Total Variable Cost 3,000,000.00 125 The normal output of the company is 24000 units while it is presently operating at 75% capacity which is 25% less than the optimal level. That means the company is producing 18000 units at present. Total Variable Cost = $125 X 18000 = $2,250,000 Sales = $442 X 18000 = $7,956,000 Contribution = Sales - Variable cost = $7,956,000 - $2,250,000 = $5,706,000 Downloaded by 28.Halari Ayesha (ayeshahalari1@gmail.com) lOMoARcPSD|38713753

Contribution Margin ratio = Contribution / Sales = 5,706,000/7,956,000 = 0.717 Fixed Expenses = Fixed Overheads + Fixed Administration cost = 500,000 + 3,000,000 = $350,000 Break even Sales Volume = Fixed Expenses/ Contribution Margin ratio = 350,000/0.717 = 4880089.24 Break Even Selling Price = 4880089.24/18000 =$271.11 Budgeted Revenue = $6,500,000 Desired Selling Price (operating at 75% capacity) = 6,500,000/18,000 = $361 Desired Selling Price (operating at 100% capacity) = 6,500,000/24,000 = $271 Therefore, it is recommended that they should increase their price. D. List of Alternatives  Providing shoes at a reasonable price.  Introducing a competing brand while maintaining more reasonable prices in order to broaden their customer base.  Enabling their outlets to expand geographically.  Attempting to reclaim lost customers by adding a new line of low-cost footwear.  Adding automation to their manufacturing line to lower the cost of each pair of shoes. E, Conclusion The findings of the research project indicate that William Oliver's current method of costing, which has a negative impact on the amount of money that can be made through the operations of the company, has a negative impact on the amount of money that can be made. On the other hand, many prosperous businesses are run with the objective of achieving the highest possible level of profitability. This is the driving force behind most prosperous businesses. As a result of this, to improve the financial performance of the company, this study investigated the ways in which William Oliver could improve its business plan, in addition to the fundamental components of its costing approach and pricing policy, in response to the changing preferences of its customers. This was done to improve the company's overall financial performance, which was the primary motivation. Because of this, the company will be able to win back the trust of its clientele and repair the damage done to its reputation in the past; as a result, it will be able to maintain its market share and increase its profits. F. Recommendation Business should adjust its cost method since it is delivering loss to firm. It would be best for the company to adopt the CVP and job order costing method. It would also be beneficial for the company to produce lower-priced goods for the middle class, as this would attract more Downloaded by 28.Halari Ayesha (ayeshahalari1@gmail.com) lOMoARcPSD|38713753

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customers to the business. The business should also provide specialized training to its employees so that they can perform a variety of tasks to improve the performance of machines and by doing things manually. Both practices can be used efficiently and effectively. In this method manufacturing expenses and leftover trash may be reduced. Company can also produce customized items. It would lead to an increase in profits. The company could use the material it already produces to make a variety of other products in addition to boots. For example, they could produce leather bags, bracelets, and belts, among other things. The company should advertise on the internet and have an effective online platform to sell its products. It will make it easy for people to order its customized products. G. Implementation Eliminate the existing technique of costing and replace it with either CVP or the task order costing approach. It is possible for a corporation to start training programs for its employees. Awareness among individuals should be raised about bespoke items and its distinctiveness. Business is introducing a wide variety of products to production at a wide variety of pricing points. Business that promotes its wares via the internet. Downloaded by 28.Halari Ayesha (ayeshahalari1@gmail.com) lOMoARcPSD|38713753

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