Finance Decisions: Expanding Marline Entertainment in Switzerland

This report examines the financial decisions of Marline Entertainment plc, a UK-based tour and travel company, as it plans to expand into Switzerland. The report explores various sources of finance, including banks, venture capital, government grants, and issuing shares, recommending bank loans as the safest option. It analyzes cost behavior, distinguishing between fixed, variable, and mixed costs, and emphasizes the importance of Cost-Volume-Profit (CVP) analysis as a short-term decision-making tool for managerial planning, including pricing strategies and cost control. The report discusses different pricing strategies such as premium, economy, penetration, price skimming, and bundled pricing, ultimately recommending the penetration pricing strategy to attract customers and gain market share in Switzerland.

FINANCE DECISIONS
MAKING

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
LO 1.................................................................................................................................................1
Discussing and recommending various source of finance for expanding the business..............1
LO 2.................................................................................................................................................2
Discussing the behaviour of cost and importance of cost volume and profit analysis as a short
term decision making tools.........................................................................................................2
LO 4.................................................................................................................................................4
Discussing pricing strategies and recommending appropriate strategy to Marline
Entertainment plc........................................................................................................................4
CONCLUSION................................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The financial decision making can be defined as a process of managers in which they
analyse the actual condition of the company, compare it with the business objectives and
develops the most appropriate strategies as to develop the ability of the organisation in achieving
the goals. The Marline Entertainment plc company is the UK based business that was established
in the year 1998 and now provides the tour and travel services to its customers. The company has
an annual operating income of £327 million. The company wants to expand its business in the
Switzerland. The present study shows a discussion about various resources through which the
company can generate the funds, the behaviour of cost and importance of the cost volume and
profit in the business. Further, the study also shows the vreif discussion about various pricing
strategies available for the company along with recommending the business for choosing the best
pricing strategy for the business.
LO 1
Discussing and recommending various source of finance for expanding the business.
For the purpose of expanding the business, the major task of any company is to raise the
appropriate amount of funds for the company. Without arranging funds, a company can not
expand the business as the funds are the key element of a business.
For the purpose of expanding the business, the company can raise funds from numerous
sources like:
Banks:
Banks are one of the major source of finance. These can be considered as the safest
source of finance fort the purpose of raising funds. The company can approach to the bank and
provide it a detailed information about the expansion plan (7 sources of start-up financing,
2019). The bank will analyse the overall business position and its project and then it would
provide the funds on credit to the company.
Moreover, this source of fund can be considered as the most critical way of raising funds,
as it involves a lengthy procedure. Further, the company will also need to fulfil a lengthy
documentation and legal formalities for raising funds.
Venture capital investment
It is also one of the major source of finance available for the tours and travel company.
The venture capitalists provides the funds to the company. They take a sort of equity and
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ownership in the company as a consideration of their investment in the company. Raising funds
through this resource can help the company in raising funds by being cost effective, as the
company would not be needed to pay interest for their investment.
Although, there is a drawback of this source of fund that the company would be needed
to give up a sort of ownership and provide it to the venture capitalist. It would result in
enhancement of interruption in the decision making of the company as being the equity holder,
the investor would have right to interfere in the decision making of the business.
Government grants and subsidies
For the purpose of enhancing the interest of the companies to expand their own business,
the Government also provides grants and subsidies to various organisations (Gadenne, 2016).
Although, these grants are not available for each business organisation. For the purpose of
gaining the Government grants, the company needs to analyse its eligibility first. If the company
finds itself eligible for the grants and subsidies, it can raise the funds through this source as well.
Issue of shares
Further, the company can also raise funds by issuing its shares to the public. It can be
termed as the easiest way of raising funds. The company does not need to follow any lengthy
procedure or to fulfil any legal requirements of the business. The organisation can raise funds by
just issuing the sufficient number of shares to the general public.
Although, raising funds through this procedure, the diversification in the ownership and
the equity may rise. It may lead in enhancement in the interference in the business as well.
Recommendation
In this regard, it can be analysed that there are various sources of finance with the help of
which the company can raise the funds for its expansion purpose. Each source have its own pros
and cons. However, raising funds through the banks can be recommended to the company.
Although, itc involves a huge range of procedures and documentation as well. But raising funds
from banks is the safest source. It also reduces the chances of fraud with the company.
LO 2
Discussing the behaviour of cost and importance of cost volume and profit analysis as a short
term decision making tools
Behaviour of cost
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The behaviour of cost does not mean good or bad behaviour of costs. But, The term cost
behaviour refers to effect of change in a specific cost over the activity level of the company. in
other words, the behaviour of cost can also be defined as the cost sensitivity due to the change in
sakes volume of the business (Forrest, 2016). Various costs incurred by the company can be
categorised into some parts like, fixed cost, variable cost and mixed cost. Each type of cost have
its own behaviour that can be analysed as under:
 Fixed cost: Fixed cost have unchanged behaviour. That means it does not change with
the change in sales volume of the company.
 Variable cost: The variable cost can be termed as the most sensitive behavioural cost. it
has direct relationship with the sales volume (Cost Behaviour, 2018).. Therefore, it
changes in the same proportion of the change in sales volume.
 Mixed cost: Mixed costs are those costs a part of which have changeable behaviour and
other part keeps same. Therefore, these cost changes with the change in sales, but not in
same proportion.
In this regard, it can be analysed that the each cost has different behaviour. In this order it
effects the overall business performance in different ways.
Cost Volume and Profit analysis (CVP analysis)
Cost volume analysis refers to a process of analysing the impact of change in cost and
profit over the operating expenses and the income of the company. It can also be defined as
method with the help of which the company can calculate the contribution and the gross profit
margin of the company.
Importance of Cost volume and profit analysis
Marline company should involve the cost volume and profit analysis process in the
expansion plan of the company, as it can pkay a vital role in the managerial accounting system of
the country as a short term planning tool (Said, 2016). it could help the managers in numerous
ways like:
 With the help of this analysis, the company can analyse the contribution margin of the
expected sales. It could help it in developing the most appropriate pricing strategies for
the company.
 Further, by analysing the cost at each sales volume, the managers can also develop the
short term profit planning.
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 With the help of effective analysis of the cost, the managers of Marline can also develop
their cost budget and prepare the most appropriate cost control strategies as well.
 In addition, this planning tool can also help the managerial accountant in developing tax
plan for the business. As, it can make the managers in analysing and evaluating effective
plan as to incur various expenses and sale the products in such a way so that it coulfd be
tax beneficial for the business.
In this regard, it can be concluded that the cost volume profit analysis can help the
company in having better development of decision making and strategies for the company as a
managerial planning tool of the Marline Entertainment plc.
LO 4
Discussing pricing strategies and recommending appropriate strategy to Marline Entertainment
plc
Pricing strategy
Pricing strategy can refers to a tool of management accounting system with the help of
which the company sets the most appropriate price of its product and services to be provided to
the customers. Adoption of these strategies can help the company enhancing its profitability.
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there are various types of pricing strategies that can be used by the Marline for the
purpose of setting price of their projects:
 Premium pricing strategy: This type of pricing strategy is used by the businesses at the
time of launching new product or entering into new market. This type of strategy can be
used for those products or services that are new or unique for the market.
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Illustration 1: Pricing strategies
(Source: Types Of Pricing strategies. 2018)

While adopting this strategy, the Marline Entertainment needs to create the image of its product
and services in the Switzerland having distinct and unique personality. so that it could set any
price of the product and attract its customers.
 Economy pricing strategy: Using this strategy, the company earns the minimum price
of the company and generates a small amount of profit. This strategy can be adopted by a
newly established business or at the time of expanding into a totally new market.
This strategy can help the company in attracting the customers with the cheapest priced product
or services and develop the brand image in the market (Bergo and et.al, 2016). in this regard, it
could help the company in grabbing the maximum amount of profit from the business.
 Penetration pricing strategy: In this strategy, the Marline would need to analyse the
price of products and services of the competitors of Switzerland. The company should set
price lower than the price of its competitors as to gain the attraction of the customers and
grab the market share in the new market.
 Price skimming strategy: This strategy makes the company to set the higher amount of
price of its product. This strategy concentrates on earning the higher range of profit.
Although, this strategy can be used by those business units that does not have large
number of competitors in the market.
 Bundled pricing strategy: By adopting this strategy, the Marline Entertainment plc
should sale a bundle of services or products to the customers at lower rate than if they
were been sold by the company at higher rate.
This strategy can help the company in selling the higher range of product or services to the
customers and make them experience them. With the help of this strategy, Marline Entertainment
plc could become able to attract the larger amount of customers towards its range of services and
products (Nagle and Müller, 2017).
Recommendation
From the analysis of the above pricing strategy, it can be recommended to the Marline
Entertainment plc that there are various pricing strategies and each provides different results to
the business. The company should use the most appropriate strategy as a part of expansion plan
of the business. Furthermore, it can be recommended to the Marline Entertainment plc that it
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should adopt the penetration strategy for setting its price. It could help the company in attracting
the larger number of customer in the Switzerland market and grab the market share as well.
Although, this benefit can be gained by the firm by adopting economy pricing strategy. but,
adoption of this strategy would amount in generating lower profit from the sales.
On the other hand, the penetration strategy can help the company in attracting larger
amount of customers along with generating the appropriate profit. In this order, the penetration
pricing strategy would be the best for the Marline Entertainment plc.
CONCLUSION
From the above discussion, it can be analysed that the Marline Entertainment plc wants to
expand its business in the Switzerland. For the purpose of raising funds for the company, it
should approach to tha banks, as it is the safest source of finance. Further, the company should
adopt the cost volume profit analysis in the expansion plan as it would result in helping the
managers in their decision making. Furthermore, the Marline Entertainment plc should adopt the
penetration pricing strategy for setting the price of its product. as it can help it in setting the best
price of its product and enhance its marketability and profitability as well.
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REFERENCES
Books and Journals
Bergo, G .S. Z. and et.al, 2016. Multiproduct Cost-Volume-Profit Model: A Resource
Reallocation Approach for Decision Making. Journal of Cost Analysis and
Parametrics. 9(3). pp.164-180.
Forrest, M., 2016. SEG Foundation's mission: Fund-raising for SEG programs. The Leading
Edge. 35(2). pp.124-125.
Gadenne, L., 2016. Tax me, but spend wisely? Sources of public finance and government
accountability (No. 2068-2018-1275).
Nagle, T. T. and Müller, G., 2017. The strategy and tactics of pricing: A guide to growing more
profitably. Routledge.
Said, H. A., 2016. Using Different Probability Distributions for Managerial Accounting
Technique: The Cost-Volume-Profit Analysis. Journal of Business and Accounting. 9(1).
p.3.
Online
7 sources of start-up financing. 2019. [Online]. Available through
<https://www.bdc.ca/en/articles-tools/start-buy-business/start-business/pages/start-up-
financing-sources.aspx>.
Cost Behaviour. 2018. [Online]. Available through
<https://community.plu.edu/~mgtacctg/cost_behavior.htm>.
Types Of Pricing strategies. 2018. [Online]. Available through <https://www.feedough.com/the-
10-types-of-pricing-strategies/>
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