Beruflich Dokumente
Kultur Dokumente
Chapter 9 (Part 2)
Learning Outcomes
Understand financial tools used to evaluate strategic options Application of evaluating and selecting strategic options
Cash-flow forecasting
The organization forecasts (predicts) the expected income from the strategic option Example 1: Lets assume you are going to purchase a machine to manufacture products to sell to customers
The
cost is $100,000, and the value of the machine after 5 years is $10,0000
Current
Year 1
Year 2
Year 3
Year 4
Year 5
Net Sales
$80,000
$96,600
$116,424
$141,453
$169,653
Variable Costs
$48,000
$57,960
$69,854
$84,872
$101,792
Fixed Costs
$12,000
$12,600
$13,230
$13,892
$14,586
Depreciation
$14,290
$24,490
$17,490
$12,490
$ 8,930
($12,310)
Pre-tax Income
$ 5,710
$ 1,550
$15,850
$29,591
$32,034
Tax Expense
$ 1,941
$527
$5,389
$10,060
$10,892
Net Income
$3,769 Adjustments
$1,023
$10,461
$19,531
$21,142
$14,290
$24,490
$17,490
$12,490
$ 8,930
$10,000 $40,072
Investment Appraisal
Cost/benefit analysis comparing the costs of the strategic option (including financial and opportunity costs), with the benefits (financial and intangible benefits)
Starbucks intends to open at least 10,000 new stores over the next four years and double its size within five years The chain had 13,168 stores at the end of 2006. Starbucks intends to have locations in Brazil, Russia, India and Egypt by the end of 2007 Strategies used here are market penetration and market development
Problem at Starbucks
Brand is becoming watered down The sameness of the stores are hurting the coffee shop feel Same store sales are slowing, growing by only 7% in fiscal 2006, compared to 8% in 2005 and 10% in 2004 Starbucks faces increased competition from Dunkin Donuts and McDonalds, which introduced premium coffee (Consumer Reports rates McDonalds premium coffee ahead of Starbucks, saying it tastes better and costs less)