Dragons Den Case Study
As a group you have worked very well to produce revision notes and explanations for the key information covering the above topic.
Today you need to apply everything you have learnt as a group and draw together the data and information used both pre and post dragons den.
You need to:
- Identify the pricing strategy you used as a group justifying why you chose this method. Evaluate whether another strategy could have been used.
- Show the work you did estimating costs and profit. For the purposes of this exercise I will be charging you 50DHS rent for your stall and you need to pay 25DHS for the machinery lease (FC's).
- Now work out your break even revenue level and your desired margin of safety. Justify how you reached these conclusions.
- Complete a basic profit and loss and work out the gross profit margin and the operating profit margin.
You must work as a group to put these together however to add extra challenge Suleyman and Brendan must complete section 3/4 and Harley and Medis must complete section 1&2. This means you will be working out areas which you did not study last lesson.
The figures for section 1&2 are needed for 3&4 so Suleyman and Brendan should spend the first 5-10 minutes revising these areas and preparing the graphs or spreadsheets they will need.
Follow up Starter
Medis to produce a student led starter of Margin of safety and its importance to entrepreneurs.
1. The pricing strategy that Crackle and Pop used was cost plus pricing. Cost plus pricing is when you calculate the cost of producing the product and add a markup to the cost and charge that as the selling price. We chose this method because our unit costs were very low meaning we could still charge a low selling price that was affordable to all but also ensuring profit on every unit sold. However the pricing could have still been higher than our competitors and we could have lost some customers due to that. Penetration pricing could have also been effective as we could have gathered customers through low pricing and then as we get more established, we could have increased the prices and gained more profit.
ReplyDelete2.To estimate cost and profit, our first move was market research . We handed out surveys asking questions regarding the preferred prices and demand of our product . From all those who answered, 89% said they would buy our product meaning we had relatively high demand. Also 55% said they would pay 3 dhs for every unit and with a variable cost of just 1.022 dhs , there was a markup of almost 2 dhs with every sale .The advantage of this was that we were able to estimate the output and produced the right amount of products with none left over . However if we would have given out more samples, there would have been a higher figure in demand as I think we would have made more sales if we had produced more. If we were given the same opportunity again, crackle and pop will definitely produce more products – at least 200 and we would start at a lower price, getting rid of our customers and as soon as we get established and gain loyal customers, we could begin increasing prices and gaining a lot of profit .
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