StepSmart Fitness Case Study Solution
Recommendations:
After performing detailed analysis, it has been concluded that the breakeven point in dollars of sales is 386,257 dollars, which shows that in order to reach the breakeven point, company must made sales of 386, 257 dollars, which will give the zero profits to the company.
While the current year sales is around 8.6 million dollars, which shows that it provides the good cash flows and profits to the company due to which the shutting down of the business operations is not recommended, but the authorities and owners should be ready to make some changes in the current operations for the purpose of boosting the sales and profits. In order to make some changes in its current operations; it should shift all of its sales on commission base and remove the salary system.
Conclusion:
To sum up, it is to conclude that StepSmart fitness is an equipment manufacturing company that got confronted with issues such as low productivity, reduced sales, under performance and lowered market share. The company has several strengths including strong product line of retail products, strong supplier network, high margins in sales and marketing. It is recommended that to reach the break even point, the company should make the sales of 386, 257 dollars. Also, the company should not shut down its business operations, instead it should make some changes in the current business operations to increase profits and sales. For this purpose, it should shift all of its sales on commission base and remove the salary system.
Exhibit 1:
SWOT Analysis:
| Strength | Weakness |
| · 18% share of industry in the dollar sales.
· Strong product line of retail products. · The supplier network of the organization is strong · High margins in sales and marketing among its competitors. |
· Alteration of business model by the artificial intelligence and internet
· Market share decreasing with increase in revenues. · Replacement of existing experienced employees. · Growing gross and operating margins. |
| Opportunities | Threats |
| · Adaptation of online selling services
· Lower the inflation rate, more will be the stability of organization. · Expansion of the business internationally. · Chance to grow its customer’s base line. |
· Approach of young customers is towards experimentation.
· Commoditization is the biggest challenge. · Growing expertise of local players. |
Exhibit 2:
| Financial Projections | Actual year | Forecasted year | ||||
| 2011 | 2012 | 2013 | 2014 | 2015 | 2016 | |
| Sales | 9,483,300 | 9957465 | 10455338.25 | 10978105.16 | 11527010.42 | 12103360.94 |
| Cardio | 3009051 | 3159503.6 | 3317478.728 | 3483352.664 | 3657520.297 | 3840396.312 |
| Strength | 2581354 | 2710421.7 | 2845942.785 | 2988239.924 | 3137651.92 | 3294534.516 |
| Technology | 2211506 | 2322081.3 | 2438185.365 | 2560094.633 | 2688099.365 | 2822504.333 |
| Small exercise equipment | 1681389 | 1765458.5 | 1853731.373 | 1946417.941 | 2043738.838 | 2145925.78 |
| Expenses | 843751 | 869063.53 | 895135.4359 | 921989.499 | 949649.1839 | 978138.6595 |
| Salary | 366832 | 377836.96 | 389172.0688 | 400847.2309 | 412872.6478 | 425258.8272 |
| Commissions | 320948 | 330576.44 | 340493.7332 | 350708.5452 | 361229.8016 | 372066.6956 |
| Other expense | 155971 | 160650.13 | 165469.6339 | 170433.7229 | 175546.7346 | 180813.1366 |
| Gross profit | 8,639,549 | 9,088,401 | 9,560,203 | 10,056,116 | 10,577,361 | 11,125,222 |
Exhibit 3:
| Break Even Analysis | |
| Fixed cost | 366832 |
| Variable cost | 476919 |
| Contribution Margin | 1 |
| Breakeven point | 386257.0222 |
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