Marketing and Management Analysis of GoNuts Company

This assignment presents a comprehensive analysis of the GoNuts company's marketing and management strategies. It begins by examining price elasticity of demand under different pricing scenarios, determining the impact of price changes on sales volume. The analysis then evaluates various pricing strategies to identify the optimal price point for maximizing revenue and profit, considering factors such as cost per unit, fixed costs, and gross margins. Financial metrics like net profit, return on capital employed (ROCE), and economic value added (EVA) are calculated to assess the company's financial performance under different scenarios. The assignment further explores the impact of advertising expenses on sales and profitability, recommending the optimal investment level. Finally, it compares two cost structures (Case 1 and Case 2) to determine the best scenario for maximizing profitability and EVA, considering fixed and direct costs. The analysis provides insights into pricing, investment, and cost management decisions to improve the company's financial performance and market position.

Running head: MARKETING AND MANAGEMENT
Marketing and Management
Name of the Student:
Name of the University:
Author’s Note:

1MARKETING AND MANAGEMENT
Table of Contents
In Response to Question 1..........................................................................................................2
In Response to Question 2..........................................................................................................2
In Respect to Question 3............................................................................................................4
In Response to Question 4..........................................................................................................4
Reference....................................................................................................................................7

2MARKETING AND MANAGEMENT
In Response to Question 1
The price elasticity of demand was determined in order to find the change in the
quantity demanded for a product if the price of the product changes. There were certain price
level determined and the level of the price in each of the scenario was determined in order to
find out the change in quantity demanded with respect to change in price change. As
evaluated it is crucial to note that if the price of the GoNuts changes by 0.5 the sales per
tonne will change respectively1.
Price Sales Price Elasticity Elasticity
2.5 405 0.80 inelastic
3 350 1.44 elastic
3.5 280 2.5 elastic
4 200 8 elastic
4.3 110
In Response to Question 2
The price which gives the highest sales value is under scenario 2 when the price of the
product is determined at 3.00 and the total revenue inflow is around 1050. The price which
gives the highest sales volume is under scenario 1 when the sales volume per tonne is around
405 tonne. In calculating the finance charge the equity charge of 13% was considered in order
to determine the finance cost and the Economic value added.
The price at which the GoNuts should be sold is at 3.50 so that the company earn
better net profit and generate better economic value. The company has a slight amount of
1 Agostini, Lara, et al. "Does patenting influence SME sales performance? A quantity and quality analysis of
patents in Northern Italy." European Journal of Innovation Management18.2 (2015): 238-257.

3MARKETING AND MANAGEMENT
space to play within the price band of 3.5-4 so that the net profit and the gross margin of the
company remains at the optimal value.
Particulars Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5
Price 2,500 3,000 3,500 4,000 4,300
Sales per Tonne 405 350 280 200 110
Selling Price 10,12,500 10,50,000 9,80,000 8,00,000 4,73,000
Cost Per Unit 6,07,500 5,25,000 4,20,000 3,00,000 1,65,000
Gross Profit 4,05,000 5,25,000 5,60,000 5,00,000 3,08,000
Gross Margins 40% 50% 57% 63% 65%
(-) Fixed Cost 3,15,000 3,15,000 3,15,000 3,15,000 3,15,000
(-) Direct Cost 6,07,500 5,25,000 4,20,000 3,00,000 1,65,000
Net Profit 90,000 2,10,000 2,45,000 1,85,000 -7,000
Capital Investment 22,50,000
20,50,00
0
16,50,00
0
12,20,00
0
6,00,00
0
Return on Capital Invested (ROCE) 4.00% 10.24% 14.85% 15.16% -1.17%
Capital Cost Covered 45% 51% 59% 66% 79%
Capital Investment 22,50,000
20,50,00
0
16,50,00
0
12,20,00
0
6,00,00
0
Weighted Average Cost of Capital 13% 13% 13% 13% 13%
Finance Charge 2,92,500
2,66,50
0
2,14,50
0
1,58,60
0
78,00
0
NOPAT 90,000 2,10,000 2,45,000 1,85,000 -7,000
Finance Charge 2,92,500
2,66,50
0
2,14,50
0
1,58,60
0
78,00
0
Economic Value Added -2,02,500
-
56,500
30,50
0
26,40
0
-
85,000

4MARKETING AND MANAGEMENT
In Respect to Question 3
The company should invest in the scenario 2 when the return on capital generated by the
company is the highest and the net profit and the sale volume and the optimum utilisation of
capital is seen under the scenario 2. Thus the company should invest a 50,000 in the
advertisement expenses in order to earn better return and operating income of the company.
Particulars Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5
Advertising 25000 50000 100000 200000 400000
Sales (Tonnes) 180 210 280 360 420
Price 3500 3500 3500 3500 3500
Total Cash Inflow 630000 735000 980000 1260000 1470000
(-) Less: Advertisement Exp 25000 50000 100000 200000 400000
Net Profit 605000 685000 880000 1060000 1070000
Capital Investment 1100000 1250000 1650000 2050000 2300000
Return on Capital Invested 55% 55% 53% 52% 47%
In Response to Question 4
The fixed cost and the scenarios were evaluated in both of the cases were in CASE 1 (Direct
Cost of 1500/tonne and fixed cost of 320,000). The other case evaluated was the CASE 2
(Direct Cost of 2500/tonne and fixed cost of 50,000). Case 2 was determined as the optimal
case after the careful analysis of the same we saw that net profit and the economic value
added was the highest under the case 2 under scenario 4 when the return and the profitability
of the company was the highest2.
The analysis purpose was evaluated keeping all the price level scenarios given and the key
financial valuation metric and components were evaluated in order to get the best scenario
2 Hulthén, Hana, Dag Näslund, and Andreas Norrman. "Framework for measuring performance of the sales and
operations planning process." International Journal of Physical Distribution & Logistics Management 46.9
(2016): 809-835.

5MARKETING AND MANAGEMENT
and case under, which the profitability and the economic value added for the company is the
highest.
CASE 1 (Direct Cost of 1500/tonne and fixed cost of 320,000)
Particulars Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5
Price 2,500 3,000 3,500 4,000 4,300
Sales per Tonne 405 350 280 200 110
Selling Price 10,12,500 10,50,000 9,80,000 8,00,000 4,73,000
Cost Per Unit 6,07,500 5,25,000 4,20,000 3,00,000 1,65,000
Gross Profit 4,05,000 5,25,000 5,60,000 5,00,000 3,08,000
Gross Margins 40% 50% 57% 63% 65%
(-) Fixed Cost 3,20,000 3,20,000 3,20,000 3,20,000 3,20,000
(-) Direct Cost 6,07,500 5,25,000 4,20,000 3,00,000 1,65,000
Net Profit 85,000 2,05,000 2,40,000 1,80,000 -12,000
Capital Investment
22,50,00
0
20,50,00
0 16,50,000 12,20,000 6,00,000
Return on Capital Invested (ROCE) 3.78% 10.00% 14.55% 14.75% -2.00%
Capital Cost Covered 45% 51% 59% 66% 79%
Capital Investment
22,50,00
0
20,50,00
0 16,50,000 12,20,000 6,00,000
Weighted Average Cost of Capital 13% 13% 13% 13% 13%
Finance Charge 2,92,500
2,66,50
0 2,14,500 1,58,600
78,00
0
NOPAT 85,000 2,05,000 2,40,000 1,80,000 -12,000
Finance Charge 2,92,500
2,66,50
0 2,14,500 1,58,600
78,00
0
Economic Value Added
-
2,07,500
-
61,500
25,50
0
21,40
0 -90,000
CASE 2 (Direct Cost of 2500/tonne and fixed cost of 50,000)
Particulars Scenario 1 Scenario 2 Scenario 3 Scenario 4 Scenario 5

6MARKETING AND MANAGEMENT
Price 2,500 3,000 3,500 4,000 4,300
Sales per Tonne 405 350 280 200 110
Selling Price 10,12,500 10,50,000 9,80,000 8,00,000 4,73,000
Cost Per Unit 6,07,500 5,25,000 4,20,000 3,00,000 1,65,000
Gross Profit 4,05,000 5,25,000 5,60,000 5,00,000 3,08,000
Gross Margins 40% 50% 57% 63% 65%
(-) Fixed Cost 50,000 50,000 50,000 50,000 50,000
(-) Direct Cost 10,12,500 8,75,000 7,00,000 5,00,000 2,75,000
Net Profit -50,000 1,25,000 2,30,000 2,50,000 1,48,000
Capital Investment
22,50,00
0
20,50,00
0 16,50,000 12,20,000 6,00,000
Return on Capital Invested (ROCE) -2.22% 6.10% 13.94% 20.49% 24.67%
Capital Cost Covered 45% 51% 59% 66% 79%
Capital Investment
22,50,00
0
20,50,00
0 16,50,000 12,20,000 6,00,000
Weighted Average Cost of Capital 13% 13% 13% 13% 13%
Finance Charge 2,92,500 2,66,500 2,14,500 1,58,600
78,00
0
NOPAT -50,000 1,25,000 2,30,000 2,50,000 1,48,000
Finance Charge 2,92,500 2,66,500 2,14,500 1,58,600
78,00
0
Economic Value Added
-
3,42,500
-
1,41,500
15,50
0
91,40
0
70,00
0

7MARKETING AND MANAGEMENT
Reference
Agostini, Lara, et al. "Does patenting influence SME sales performance? A quantity and
quality analysis of patents in Northern Italy." European Journal of Innovation
Management18.2 (2015): 238-257.
Hulthén, Hana, Dag Näslund, and Andreas Norrman. "Framework for measuring
performance of the sales and operations planning process." International Journal of Physical
Distribution & Logistics Management 46.9 (2016): 809-835.