Lady M Confections Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Introduction
Lady M Confections deals in wholesale cakes and it was founded in 2001. It mainly sold cakes to large restaurants and luxury hotels in the New York City and it also opened its first boutique in east side of the New York City. The company has been famous for its sleek white design since it also has won the design award in 2006, and was at the cover page of the Interior Design Magazine. The products of the company are different than the traditional products being offered by the competitors in the market.
The boutique in New York became successful due to its designs and unique offerings and it opened two new boutiques in the New York City. The company enjoyed huge growth in the market due to its product line being favored over the competitors’ offerings. Increasing popularity and demand of company’s products influenced many investors to ask for franchise rights from the company.The Chinese investors were offering around 10 million for equity stake in the company, and exclusive franchise rights in China.
So, it was a concern for the company that how should it deal with these issues, so it was vital to know the value of the firm, and how much equity stake should be given to Chinese investors against an investment of 10 million. Meanwhile, it also looked open for boutique at the World Trade Center since it would be one of most dynamic locations for the company but it was not cheap. So, if the company invests into new boutique at the World trade center then in what years would it get its initial investment?
Lady M Confections Harvard Case Solution & Analysis
1. Howmanycakes wouldLadyM need to sell in ayear in order to break-even?Does thisnumberseemfeasible?
The break – even analysis shows that if the company sells around 23600 units of cakes in the market then it would be able to reachthe break-even point at which its revenues and expenses would be equal. If the sales exceed the break-even point, then it would be profitable for the company. Similarly, if the company’s sales do not even reachto the break-even point then it would be in loss. The break-even analysis has been done assuming that variable cost would be 50% of selling price, and fixed cost would be actual costs of World Trade Center boutique costs, and assuming that average selling price of the unit would be $80. See Exhibit 1 The number seems to be feasible because the World Trade Center is not a cheap place so company would incur huge fixed costs in the boutique. Therefore, the break-even point inunits seems to be feasible and realistic.

2. Assumingsales inyear one arebreak-even, how quicklysalesneed togrowafter the firstyear to paythe start-up costs within 5years?In thisgrowth rate feasible?
The feasible rate growth rate is 10% for the company to recover its initial investment of around 2.5 million dollars. Two assumptions are made that revenues of the company would increase by 10%, and cost of goods sold would be around 50% of the revenues. Then company would be able to recover its initial investment in 3.1 years..........................

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