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Case: Pepe Jeans: Current Alternative 1 Alternative 2 Sales Revenue
Case: Pepe Jeans: Current Alternative 1 Alternative 2 Sales Revenue
Financial analysis for different alternatives aimed at improving current ordering system is
displayed below.
Additional investment is not needed for alternative 1. Therefore payback period analysis cannot
be carried out.
Payback period for the investment = (£1.3 mil. / £25 mil.)*52 weeks = 2.7 weeks
As seen from the financial analysis, Pepe Jeans should choose to build a finishing operation in
the United Kingdom, since change in profit before taxes is greater compared to alternative 1 and
the payback period for the investment is very small.
On the other hand, the company can consider working with a sourcing agent (use alternative 1)
temporarily for a short period of time in order to minimize complaints from independent retailers
and avoid losing their advantage against their competitors.
In the long term, the company should consider establishing its own manufacturing company.
This way they will have full control of their supply chain, which will ensure quality and
sustainability. Even though this alternative would require a substantial amount of investment, the
company is financially capable of an investment at this scale.