MARKETING / 1ST YEAR / PBA

Case Study 2
Today (May the 20th 2023) you & your team have been assigned by the leading
business consultancy where you work the following project: you must urgently advise
Marco the owner of a small business located near Madrid which is involved in the
furniture business.
Basic information is:

 Company Furniture 2000, S.L. sells a special type of wooden storage shelves
100 % over the internet via its own web site. Customers are all over Europe.

 Company Furniture 2000, S.L. has a Eastern European supplier of wood /

timber which has proven very reliable in quality and price for over the last 10
years. (Apparently this type of wood/ timber does come mostly from that area of
the world and the supplier delivers by full road-truck to Spain so it is quite
convenient. Marco takes 2 or 3 trucks of wood / timber per year )

 The production of the wooden parts that build each shelves is actually fully
subcontracted to a local carpentry company near Madrid to which Furniture
2000, S.L. provides the raw material (wood / timber) that it has previously
purchased and received; therefore Furniture 2000 S.L. has not had to any
investment in any heavy machinery.

 Marco is 58 years old and founder and he has 2 employees :

 one employee full time is taking care of all computer, web site, google, social
media as well as assembling the packages of parts that are delivered by
subcontractor to prepare order of customers.
 another employee is part-time only for preparing orders
 Marco himself does a little bit of everything and pays himself a small salary as
well
The company will be selling 15.000 units this year which really very successful indeed;
sales really shoot up during COVID pandemic since most people could not go out
shopping.
The shelves are currently sold for 46 € / unit and in order to build a nice book shelf an
average customer needs at least 15 units.
Two events have caused Marco to be extremely concerned for the coming months:
1. Sales are slowing down a bit and at current rate 2023 might not even reach the
14.000 units
2. Costs are exploding : Timber price is increasing sharply since mid-2021 ; the
historical cost of timber that Marco has used and is currently using is as per the
following figure 1.
The sub-contracted carpenter has already informed Marco that the unitary price
will have to increase to 12 €/ shelf and DHL is charging 7 € / unit since January
1st and maybe more very soon…
Fig. 1: cost of wood / timber
€ / shelf
2020 and before 7,13
14/05/2021 7,70
30/06/2022 10,00
01/01/2023 12,53

Fig. 2: Simplified accounts with unitary costs 2022 & 2023 (forecast)

2022 2023

selling unit price (€ / unit) 46 46

unitary cost ( per shelf)

wood 10 12,53
outsourced production parts 10 12
transport to customer DHL 5 7
google 3 3

unitary gross margin 18 11

units sold / year 15.000 14.000

total sales 690.000 644.000

total gross margin 270.000 160.580

salaries 80.000 80.000

social security 24.000 24.000
rent work shop 18.000 18.000
paypal 11.000 11.000
other expenses 40.000 40.000
total fixed costs 173.000 173.000

EBITDA 97.000 - 12.420

 Fig 3. Simplified accounts year 2022 & year 2023 (forecasts)
2022 2023

Sales 690.000 644.000

wood 150.000 175.420

manufacture 150.000 168.000
transport 75.000 98.000
google 45.000 42.000

Gross margin 270.000 160.580

salaries / ss 104.000 104.000

rent workshop 18.000 18.000
paypal 11.000 11.000
other expenses 40.000 40.000
total fixed costs 173.000 173.000

EBITDA 97.000 - 12.420

You and your team are requested to

0.- propose your diagnostic of the situation

1.- propose and study different alternatives and options & design a contingency plan
When doing so try to imagine implications & consequences for
 Marketing
 Sales
 Production
 HR
 Financial
 and all area of the company
2.- Discuss P/L for the year 2023 according to those proposals
Present Marco your vision as effectively as possible: overview of the contingency plan
and any other medium / long term proposal if you think it is appropriate.
Your presentation might include all your ideas and proposal that you think are
appropriate.