Somerset Optical Case Analysis Essay
Somerset Optical Case Analysis
1. SITUATIONAL ANALYSIS
· Somerset is an optical services company with 5 stores which also produces state of the art lenses.
· The number of glasses sold was approaching 1700 sets of for every month with an average price of CND$145.00 per set.
· When Angelo (President of the Chicago based Human Eye Inc.) visited one of the Somerset stores, he made an offer to Somerset that he could supply 1800 frames at a price of approximately US $ 29.50 per frame.
· Angelo also offered to facilitate export of 4800 spectacles per annum at a flat rate of US $ 120.
· Somerset optical needs to place a minimum order of 1800 sets per month in order to import from Human Eye Inc.
· Importing from Human Eye Inc. could also open up the possibility for Somerset to export 4800 sets per year.
· The import-export transactions would be in multiple currencies and exchange rate fluctuations could affect profit margins.
· The owners were hesitating to take a decision because they were unfamiliar with importing and exporting.
· The average selling price of Somerset product is CAN $ 145 per set while Harley would be ready to pay US $ 120 per
Need essay sample on "Somerset Optical Case Analysis Essay"? We will write a custom essay sample specifically for you for only $ 13.90/page
· Harley Constructions would give an order to Summerset as they can supply good quality and cheaper sunglasses compared to the current supplier.
· The exchange rate of 1 US $ = 1.0526 CAN $ would on an average remain constant for a reasonable period of time.
2. GENERATE ALTERNATIVES
Alternative 1: Somerset can import frames from Human Eye Inc. and export its premium quality glasses to Harley constructions through Angelo.
Alternative 2: Somerset can import frames from Human Eye Inc. at a cheaper price and could pass on a portion of its price gain to its customers thus reducing the cost and increasing the sales of its products.
Alternative 3: Somerset can continue in its business without any changes.
3. EVALUATE ALTERNATIVES:
First alternative seems to be profitable to the company. Somerset could get the frames for its glasses at the cheapest price and it could also get a demand for an additional of 4800 units per annum. This makes it easy for the firm to cross the monthly sales target of 1800 units. The lesser selling price of the glasses to Harley constructions can be compensated by lesser buying price of frames from Human Eye Inc.
By second alternative company can earn a fair amount of profit; however it would have to generate an additional demand for 1000 more sets per month.
The last alternative is not a good option to Somerset.
4. FEED BACK:
· Somerset should opt for the first alternative.
· If Somerset could not bag the order from Harley it could still go for second alternative by reducing the price and increasing the sale of its glasses by 1000 units per month.