Business Case Study: DuoLever's Transition to Eco-Friendly Packaging

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Business case study
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Table of Contents
Memorandum...................................................................................................................................3
References........................................................................................................................................6
Appendix..........................................................................................................................................7
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Memorandum
The manufacturing businesses are emerging in many environmental issues related with their
packaging and in this study, a company namely Duo lever emerges in the same problem and the
production of plastic is also consuming higher energy than anything else. The duo lever is
providing products of personal care and they use plastic in their product packaging which is
creating hurdles in front of them. The duo lever is using a single usage type of plastic and the
single-use plastic badly effect on the environment. The oceans of the world are a prime example
of environmental issue, the product of plastic is seen everywhere in the oceans and due to this the
biodiversity also badly effect so overall this is a really big problem for the environment. The
plastic packaging products are also producing macro plastic in the water and which is adverse
effects on the environment. The customers are also continuously raising their voices against
plastic packaging products and prefer without plastic packaging more instead plastic packaging.
The duo lever limited company is critical analysis the environment issues and come up with two
ideas or options and they know it's quite difficult to select an option from two options.
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Analysis of option 1
The first option is to provide the net present value of the project and that required an investment
of $20 million in the first option. The given data of the first option is as follows, the rate of
salvage is not given and the interest rate cost that is occurring on the production is $1.4m. The
interest rate cannot change according to production and will remain the same for upcoming
years. The interest cost is just a small amount but when the overall profit of a company is
calculated than the interest cost plan an important role in the determination of profit. The eco-
friendly products always attract more customers and the society is getting educated day by day
due to this young generation is more aware of the environmental issues and if the duo lever
company is producing more eco-friendly products than this will also effect on the sales of their
products (Hoppmann et. al., 2014). The recycling of plastic is a good option from the duo lever
perspective because this will improve their goodwill in the market and also save the cost of the
company which increases the profit of the company. The estimated sales are around $200 for the
first year after that each year sales will be increased by 4% and if duo lever use recycled plastic
policy than the sales also increase by 2%, the extra 2% benefit come through recycled plastic due
to this the revenue of the company also increases. The cost of energy also decreases if the duo
lever is to use recycled plastic products and the virgin paper can be badly harmful to both
companies as well as the environment (Belfield et. al., 2015). The margin between the supplier
of raw material and duo Lever Company is huge through this the revenue of the company
decreases so if the duo lever will use recycled plastic than this decreases the level of margin. The
other expenses which cost $22 million which is include selling and administrative cost and the
other expenses grow at a rate of 3% every year. The overall profit after deducting every expanse
due lever gets around $562.83 million in the coming five years.
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Analysis of option 2
The outsourcing of operations to other company is also beneficial for a company, the outsourcing
of the operation reduces the burden from a company and they can expand their business into new
markets. The duo lever company is making a contract with clean world ltd in which duo lever
passes their entire operations of the business to clean world ltd. The production process of duo
lever is acquired by the clean world ltd and the clean world has a different process of doing
operation so clean world use duo levers process but work according to their own strategy
(Ballantyne et. al., 2012). The clean world ltd gets energy cost benefit and the margin benefit
after this deal because the production process executed by the clean world so it's obvious the
clean world every benefit of recycling. There are a lot of direct or indirect benefits duo lever get
from this deal such as no capital required, new market expansion and pressure free. The duo
lever can think out of the box after this deal because they have sufficient time to think about
other ways to develop a business and maybe they can start a new business. The second option
provides revenue of $610.96 that is around $48 million higher than the first option. The duo lever
is also free from interest cost in the second option so the second option is far better than the first
option.
Important Findings
The duo lever has two option and both the options provide enough profit according to the cost of
production but the second option provide $48 million more profit than first. The interest cost is
also a big factor that's come up in the first option but the interest cost cannot arise in the second
option so it's a big factor that comes up in the first option.
Recommendations
It's quite difficult for a company to compare each and every factor of these two options but a
company can compare these two options on the basis of revenue and the second option provide
$48 million higher return than the first option than so second option is better from duo lever
limited company perspective. The duo lever limited company can get many benefits from
outsourcing of business and it's beneficial for duo lever ltd company.
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References
 Ballantyne, A.P., Alden, C.B., Miller, J.B., Tans, P.P. and White, J.W.C., 2012. Increase
in observed net carbon dioxide uptake by land and oceans during the past 50
years. Nature, 488(7409), p.70.
 Belfield, C., Bowden, A.B., Klapp, A., Levin, H., Shand, R. and Zander, S., 2015. The
economic value of social and emotional learning. Journal of Benefit-Cost Analysis, 6(3),
pp.508-544
 Hoppmann, Joern, Jonas Volland, Tobias S. Schmidt, and Volker H. Hoffmann., 2014.
"The economic viability of battery storage for residential solar photovoltaic systems–A
review and a simulation model." Renewable and Sustainable Energy Reviews 39: 1101-
1118.
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Appendix
Option 1
Inves
tmen
t
Sal
es
Varia
ble
Cost
exp
ens
es
depre
ciatio
n
intere
st
cost
Profit
Before
tax
Profit
After
Tax
Net
Inflo
w
DCF
@
8%
Dicount
ed
Inflow
70.00 - - - - - - -
(70.0
0) 1.00 (70.00)
-
204
.00 18.70 2.00 4.00 1.40 177.90 133.43
137.
43 0.93 127.25
-
216
.40 16.37 2.00 4.00 1.40 192.63 144.47
148.
47 0.86 127.29
-
229
.56 14.33 2.00 4.00 1.40 207.83 155.87
159.
87 0.79 126.91
-
243
.52 12.55 2.00 4.00 1.40 223.57 167.68
171.
68 0.74 126.19
-
258
.32 10.99 2.00 4.00 1.40 239.94 179.95
183.
95 0.68 125.20
NPV
731.
40 562.83
Option 2
year Sales
Variable
Cost
Selling
Expense
s
Profit
Before tax
Profit
After
tax
DCF
@ 8%
Discounted
Inflow
1 204.00 22.00 1.00 181.00 135.75 0.93 125.69
2 216.40 22.66 1.00 192.74 144.56 0.86 123.93
3 229.56 23.34 1.00 205.22 153.92 0.79 122.18
4 243.52 24.04 1.00 218.48 163.86 0.74 120.44
5 258.32 24.76 1.00 232.56 174.42 0.68 118.71
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772.50 610.96
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