JADE SHAMPOO (A) Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

jade shampoo (a) Case Study Solution

In addition to this, the volume of the product has been increased from 45.750 millionto 49.316 million, but the company is still generating the same amount of profits and before tax contributions. It is observed that the company’s earnings in the form of BT contribution have been from 16.470 million dollars increased to around 17.014 million dollars, and after tax profits have also been increased from 9.882 million dollarsto 10.008 million dollars. The reason behind the same NPV is the initial cost of the project, which is 1 million dollars with the depreciation of0.3333 million dollars, which is not allowing the net present value (NPV) of the company to grow. The same hurdle rate has been used there.

Apart from that, the management is still reluctant towards the change of the shape of the bottle’scaps, and is not allowing the production department to produce the new shaped bottles’ caps. However, the company has estimated two scenarios under the assumptions, which are:

The pessimistic scenario (3.9 percent increase in unit sales, a 50 percent increase inbreak-evenunits)
The optimistic scenario (15.6 percent increase in unit sales, a 200 percent increase in break-even units)

In the first assumption, the company made calculations on a pessimistic view and later on with an optimistic view, and the results that werefound, are described in Appendix 1 of the document. From this appendix, it can be seen that in the first step, the company made calculations with a pessimistic view and set an assumption that the sales would increase by only 3.9 percent and made an estimation that the unit volume would bedecreased from 49.316 million units to 47.534 million units,and the after tax (AT) profits would also decline to 9.640 million dollars from the previous 10.008 million dollars.

In addition to this, the calculations have been made on an optimistic assumption, which is that the sales will be increased by 15.6 percent and the findings suggest that the volume of the units will alsobe increased from 47.573 million unitsto 52.887 million units. In addition to this, the after tax profits became 10.784 million dollars,which showed a significant gain in the profits as well as the number of the units sold.

Alternates

There are two possible decision alternates, which are as follows:

The continued production with the old traditional bottle cap.
And, the continuing the production with the new dispenser bottle cap.

Evaluation of Alternates

The company can produce 45.750 million units with its present facility to meet the market demand in order to earn profits. Along with that, the company is earning huge Before Tax Contribution, which is 16.47 million dollars. Also, the company has high after tax profit, which is 9.882 million dollars. In addition to this, the company is also having good cash flow of around 9.882 million dollars, through which the company’s projected earnings will be around 21.486 million dollars, and represent the net present value (NPV) of company’s all future cash flows at the hurdle rate of 18 percent.

In addition to this, the volume of the product has been increased from 45.750 million to 49.316 million after it optedto replace the old traditional cap with a new dispenser cap,but the company is generating the same amount of profits and before tax contributions. It is observed that the company’s earnings in the form of BT contribution have been increased from 16.470 million dollars to around 17.014 million dollars, and after tax profits have also shown an increase of 10.008 million dollars than the previous rate of 9.882 million dollars. The reason behind the same NPV is the initial cost of the project, which is 1 million dollars and the depreciation is 0.3333 million dollars, which is not allowing the net present value (NPV) of the company to grow. The same hurdle rate has been used there.

Recommendations

By using the Appendix 2 of the document, it has been concluded that using the qualitative and quantitative analysis of the two available alternates to grow company’s sales and market share, it has been concluded that the idea to replace old traditional bottle cap with new tip top dispenser cap should be implemented, because it provides more cash flows, large sales in number of units, more contributions and after tax profits. Along with these quantitative analyses, the qualitative analysis will also be the favor of the replacement of old traditional bottle cap with new tip top dispenser caps, because it contains the higher response rate from the customer in the form of its convenience, cleaning and manageability............................

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