Sukkur Institute of business Administration

Airport Road Sukkur, Sindh, Pakistan

Shaheen and Glow Cosmetic Ltd. Decision Tree

On August, 2019 Mr. Zahid Ali was his thinking in his office, how much time need to open his
another branch and which product is most essential and beneficial for his another branch. As
solving his problem. He was also thinking different probabilities which he can solve this
problem. Doing this he also thought about scenario based probabilities which he has determined
for the decision making process of new product launch. Mr. Zahid was assigned by the
management to determine the possible cost and overall feasibility report of two new products
that were announced to be launched for his new branch. Mr. Zahid has also 5 year experience in
this field and he has managed to identify the possible cost of production but the problem is the
implementation of probability in his decision making. Director of company gave the
responsibility of this to Mr. Zahid, the General Regional manager to prepare the feasibility report
of this project, forecast, demand and probability. He has different queries regarding the market
growth strategy and price strategy of new product and he also want to take decision which his
worth full for new branch.
Shaheen & Glow Cosmetics
Shaheen & Glow cosmetics was established in 2004 by Mr. Shakeel Soomro (director). Mr.
Shakeel started Shaheen & Glow Cosmetics with 100 million capital investment. Initially there
were 4 partners. In 2006 Mr. Shakeel did buyout from his partners and took control over the
business and management. It is located in Larkana city of Pakistan province Sindh, Shaheen and
Glow cosmetics has 2.6 acre area but covered area is only 1.5 acre area. Shaheen and Cosmetics
has simple hierarchy shows in Exhibit 1, it operate in Sindh and Punjab they have centralized
operation. They have well manner managerial and technical staff consist of 15 .In which 2 of
them are chemical engineer, 2 electrical engineer and 4 supervisor and 1 HR manager and 1 HR
assistant and 2 customer service officer, 1 desk officer and 2 are clerk and company currently
working in two shifts with 35 workers in each shift.
Shaheen and Glow cosmetics has four department 1) Production department 2) R&D department
3) Quality testing department 4) Administration department
New product
By looking the success of business and the competition in the market, management of Shaheen
and Glow cosmetics to launch a new product in the market as per demand of the customers. By
the analyzing the market demand, management decided to launch Glow cream with two new
products
a) Avene Crème 200 gm
Avene crème is a skin care recovery cream which is very mostly used to protect from black
dots and moisture for the face. This cream is suitable for the age group of 18 to 45. The daily use
of this is prescribed by the dermatologist and suggested for the skin care
b) CeraVe crème 200gm
This is the Crème powder form which will be used for the control from the sun. This is
especially used for the day and this is used for the 18 to 30 age group skin it also use for the
prescription of Doctors specialist of dermatologist
Cost Factor:
According to Mr. Zahid research different cost related to the product are given in Exhibit 2
Different cost related to the product the direct labor which is 45% of total Plant cost and sales
and general administration expense will be PKR 50000 of the total product cost. This product
This product expansion is the capital intensive as the machinery required for this project.so the
overall capital investment for this section is the PKR 45 Million. In which the equipment cost is
PKR 5 million. This will depreciated in straight-line basis for 10 year. The new equipment will
have the production capacity could be increased 60000 at the cost of additional PKR 1000000
yearly. There is the possibility of 60% that variable cost might be increase to 50 Avene and 59
for the CerAve cream.
Price Model
Mr. Zahid is determining the price of launched product. He has some possibilities related to
product price as the cost related to production are very different. GM has also determined by
GM has negative correlation with the demand forecasted. He has some concerns related to cost
as well. The current price are determined by adding 40% and 50% margin and their total
product cost (include F.C+V.C) see exhibit 3
Distribution Margin
Brothers Enterprise have been delivering distribution service to Shaheen and Glow cosmetics
on a reasonable margin. Brothers enterprise is working since 2004.They have been providing
distribution service on 15% margin and Mr. Zahid want to negotiate over the margin and want
it compensate in 12% over the total plant out price of the product. Distributors tells the
company to print the price containing 15% margin over the price at which they buy product
from the company.

Market competition
The Market completion plays an important role in this whole process as if the product
purchased by the distributor is having the trouble in selling due to competition then the
distributor will not make any further orders. Recently 2 product in the market one of them is
Sownder cream, its price is PKR. 220 and 2nd is vital crème its price is PKR 200 and it is the
price challenger in the market. If Shaheen and Glow cosmetics has to launch their product in the
market so they will get tough completion to beat.
Decision
Mr. Zahid is thinking to make decision tree to see the all the probabilities of the two scenario.
He has to set the correct pricing model for the future of the product. Mr. Zahid was thinking
and little bit worried about to the company will have to set the at this price or whether they will
need to cut down certain cost production.

Exhibit 1

DIRECTOR
 Director

GENERAL
MANAGER

mANA

PRODUCTION QUALITY RESEARCH AND

TESTING DEVELOPMENTM
MANAGER
MANAGER ANAGER

Exhibit 2
Avene Crème CeraVe crème
Raw material Rs.23.5 25.5
Wrapping Rs.22.5 Rs.22.5
Labelling and packaging Rs.5 Rs.5
Total variable cost Rs.25.5 Rs.24.5
Direct labor cost@45 12.0 15.0
Variable overhead @60 12.9 14.5
Total product cost 101.4 107

Exhibit 3
 Avene Crème Demand forecast
PKR 176 PKR 185
Normal 235500 40% 210100 42%
Worst 270600 35% 250150 33%
Best 295000 30% 268800 30%

CeraVe crème demand forecast

PKR 195 PKR 210
Normal 222100 30% 205250 35%
Worst 240100 40% 230100 50%
Best 300100 35% 270500 37%