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Problem Framing

Individual assessment
Seminar Group





MS. Mehak Bansal Problem Framing 19th March 2012

Q-1 Start Up Costs: Start-up costs pants Plants Start-up Costs Hoodie and Tee-shirts Plant Equipment Pants Plant Equipment Hoodies and Tee-shirts Plant Launch-PR,Advertising Fixtures for Company Stores ($50000*50) Total Start-Up Cost Annual Depreciation Start-up Costs Annual Ongoing Operating Costs-Fixed: Overhead Pants Plant Overhead Hoodie and Tee-Shirt Plant Rent Pants Plants Rent Hoodies and Tee-shirt Plant Management / Support Advertising Total Fixed Operating Costs Direct Variable Costs Sew and Press Cut Other Varaible Labor Fabric Findings Total Direct variable costs translated into "Unit" Cost

$1,200,000 $2,500,000 $2,000,000 $2,500,000 $2,000,000 $2,500,000 $12,700,000 $2,540,000

$3,000,000 $3,500,000 $500,000 $500,000 $1,000,000 $2,000,000 $10,500,000 Hoodies $3.25 $1.15 $3.20 $9.10 $3.85 $20.55 Hoodies $20.55 *.5 $10.28 TeeShirts $2.00 $0.40 $2.40 $2.20 $0.50 $7.50 TeeShirts $7.50 *1.5 $11.25 Pants $2.85 $0.70 $3.05 $7.50 $2.30 $16.40 Pants $16.40 *1 $16.40

Indirect variable Costs Wholesale "Unit" price Total variable costs as % of Wholasale Price Indirect variable costs per "Unit" Direct Variable costs per"Unit" Indirect variable costs per "Unit" Total variable costs per "Unit"

$95 9.09 8.64 $37.93 8.64 $46.56

Q-2 What is the potential competitive reaction? Main competitors for Harrington are Jones Apparel Group and Liz Claiborne which captured significant market share with their with their diverse brand portfolio. Every new product launch will force your competitors to start planning strategies for the launch of their own design of the product. If any company enters the market than they have to introduce the same ranges of product. They are promoting their goods, so they may offer that goods at lower price. They would focus on the quality and will try to provide apparels at lower price to retain their market share. So the potential competitive reaction would be on the peak.

Will both department and specialty stores enthusiastically support this new product line? Yes as margins of profit will be higher and sales of women apparels are increasing rapidly. Both department and specialty stores must support the new product line. There are a lot of opportunities in the market to increase the sales. Can active wear be folded into the existing vigor division or should a brand new division be created? The active wear line can be folded into the Vigor division as it also sells out better category apparels and also emphasized on comfort and fashion. Hence Vigor is the most appropriate division to sell out the active-wear line. And also active wear should be launched as new product as it will lead to expansion of customer base and market penetration along with share would tend to increase. What sales are needed to break even? Is this attainable? Can we achieve the sales needed to capture an attractive profit margin?

Needed sales units are 269255 units. As per the calculations and the forecasting the total sales for active wear in 2009 is 15000000 units out of which 40% i.e. 6000000 units account in the better category. Vigor account for 7% of the total market share hence there is a target of 420000 units for Harrington. As per the cost analysis done in the 1st question the sales required to break even are 263807 units which are easily attainable as per the projections. Hence Harrington can easily add an attractive profit into its account if it can capture the available market

Is this attainable? Yes, because there has been costs such as advertising which would enhance the existing brand image of the product and a new product would mean addition of more customers to the already existing customer base which would increase sales and in turn profits.

Ques 3 In March 2008, Huey thought that Harrington could be ready to launch a new active wear line by January 1, 2009. By the end of September 2008 recession hit US economy badly. On a real time basis, how would this new situation possibly change Harrington's focus on framing the problem of "drop in sales and profit" and solving it?
When recession hits any economy it leads to slowdown in growth Harringtons Focus on enter

in a new product line. And they are expecting some support by customer. The data which they collected and behalf of these data they are planning to take decisions. But these data was taken when economy condition was normal. People have enough cash and purchasing power. But after recession purchasing power will get down and people will spent less on status symbol apparels and they may purchase apparels which cost lower than Harrington apparels. So if economy gets down than definitely they should not launch new product line. It would cost a lot to the company. So all marketing research may be failed and company may bear losses due to this decisions. So they should not introduce new product line in that type of situation because even they cannot meet the required sales.