Our Company And The Market Needs example essay topic

EXECUTIVE SUMMARY. CosmoCosmetics. 1389 Sunshine Ave. Fort Lauderdale, Fl 34587 CosmoCosmetics has decided to create a new foundation make up line for African American women exclusively.

We believe there is a niche for this type of business since no make up brands specialise in this target. CosmoCOsmetics would be the exclusive manufacturer that sells to cosmetic retailers. Not only would emphasise on the variety of colours but also the packaging of the product. 1.

The colours would be adjusted to this type of skin (a wide variety of darker colours) 2. The make up would be offered as a spray, a completely new format in the make up industry. A Compact size that doesn't occupy any space in the hand bag, extremely easy to use and achieves the best natural and professional results any woman would dream of. After studying the cosmetic market we can identify a series of needs in this market: 1. EASE OF USE 2. AVAILABILITY 3.

PORTABILITY 4. VARIETY OF COLORS 5. DURABLE Our Spray Foundation would meet these needs by offering: 1) Spray packaging with a diffuser. 2) Big cosmetic retailers across South Florida, near business areas and suburbs (Miami Downtown, North Miami Fort Lauderdale, West Palm Beach. 3) Compact size: 30 ml. (doesn't occupy much space in the lady's purse). 4) Variety of colours adjusted to their type of skin tone.

5) Long Durability: Just needs to be applied once a day, for long lasting results. The combination of powder + minerals will make the makeup last longer leaving a moisturized and natural look. Market. Household and personal care product companies are making efforts to stimulate sales in a variety of ways, such as entering new markets, creating new product categories, adding new distribution channels, and acquiring (and divesting) businesses to be able to compete in this highly competitive industry. Over the last decade, sales at general merchandise stores, pharmacies and drugstores, have grown at average annual rates of 6.0% and 7.5%, respectively, according to US Census Bureau retail trade data. The US and Western European markets are reaching saturation- therefore cosmetic companies see the future markets for their products in Central and Eastern Europe, China, and India- where recent trends in economic and population growth have increased consumption of health car products.

Strategy. We have chosen to build our strategy upon a focused strategy, since it allows a much more narrow approach towards the market segment. In this case we have chosen focused differentiation. We count on the expertise of our professional to direct the company towards expansion and recognition of CosmoCosmetics.

Add warranty... ?? FINANCIAL REQUEST? VISION AND MISSION STATEMENT CosmoCosmetics is a new creative, innovative company that has discovered a niche in the market after exhaustive market research. COsmoCosmetics member's hard work has created a product that we believe will enter the market with strong impulse and succeed due to a creative marketing campaign, packaging and specially because of the superior product we are offering.

Cosmo Spray is a new type of foundation targeted exclusively for African American women offered in a unique format, spray. We posses the necessary resources to begin this new venture successfully. We believe in this project, it's members and specially in Cosmo Spray, CosmoCosmetics star product. The success of Cosmo Spray will determine CosmoCosmetics permanence and the growth of CosmoCosmetics range of products. We are hoping to extend our brand name in a period of 5 years to other major outlets across the country such as Sephora, CVS, Beauty Supply Stores, Burdines, Bloomingdale, and Body Shop.

As well as this, we would increase our advertising on tv commercials, billboards, radio... to increase CosmoCosmetics brand awareness. Innovation is CosmoCosmetics essential ideal. The cosmetic industry is not familiar with this new product, offered as a spray, a completely new format in the make up industry. In the following pages the reader will be able to appreciate CosmoCosmetics values of innovation, creativity, dedication and. CosmoCoemtics product and business strategy posses these values, vital standards of CosmoCosmetics.

DESCRIPTION OF MANAGEMENT TEAM. CosmoCosmetics has the privilege of possessing a team of professionals with significant qualifications and experience. As the chart shows, the company follows a centralized structure?? Where all departments must respond directly to the CEO.

Underneath the CEO there are 4 departments: production, R&D, ... BUSINESS AND IND. NIKOLAS BUSINESS STRATEGY SWOT AnalysisA scan of the internal and external environment is an important part of the strategic planning process. In the following points I will try to figure out the strengths, weakness, opportunities, and threats. Strengths: After studding Cosmo in relation to our main competition, I find we have several strengths which can be used as a basis for developing a competitive advantage, The first one is the adaptation to black people needs, manufacturing a product based on our customer needs; this specialization is the basis for meeting our target. The second could be the Know-how our company has about the special product formula; this knowledge is the main different with our competition being a huge barrier of entry to them for entering in our niche.

The third point I find interesting to talk about is the favorable access to distribution networks which give us a nation-wide approximation to our target. Weakness: As we find several strengths we can figure out some weakness, being the weak brand name and poor reputation among our customers the main of them, we are trying to solve it developing a nation-wide advertising campaign, identifying our unique selling point as the quality and innovation. As well as using our distribution networks to promote our product in the push / pull Strategy, at least in the first six moths. Opportunities: In this industry we can observe many opportunities as the increase of international barriers or simply the lack of access to key distribution channels.

It is quite difficult if it is no impossible to access to this kind of industry due to the low cost structure this industry has, all this industry is based in economies of scale, without accounting the difficulty of entering a product in this market, before doing all the company business plan, we did a deep search about introducing a new product, we obtained a favorable result due to the niche we found, which has not been achieved effectively yet. Other main opportunity is how this society is developing in the way the people demands more this kind of product, showing a peek increase in these sector sales, overall I few account we are meeting high income Afro-American executive, who don't care about spending in products that can make them look like celebrities. Threats: As we do the company specialization we increase the risk factor due to our only focus on an individual target and depending on their constantly changing demands, but as we see we can also appreciate this sector always will need of our products, new regulations, or emergence of substitute products. Competitive Strategy.

After defining our product and making a clear picture of what our business will accomplish and what market we are targeting, we must decide which strategy we are going to follow. There are several options available: Cost leadership Differentiation Cost focus Focus on differentiation We have chosen to build our strategy upon a focused strategy, since it allows a much more narrow approach towards the market segment. This allows a company to identify customer s's special needs, want and interests and provide them with a product that will meet their requirements. We feel there is a niche in the cosmetic industry for our product since no make up brands specialise on African American women exclusively. Rather than attempting to serve the total market, we are centring on a specific target that we want to serve effectively. Our success depends on our differentiation from other powerful brand names and products in the market.

That is why we are emphasis ing on the packaging of the product - a spray - and the fact that we are aiming at African American women. With this differentiation we are seeking to build the customers loyalty towards CosmoCosmetics creating a special value our consumers perceive. The spray packaging is something completely new a unique in this industry, it would attract the customers attention and interest towards the company's products. Once we have their attention and they have bought the product, we want to keep their interest by providing them with a quality product. In this case the components of the make up have minerals and vitamins make it a long lasting product, that also reduces the excess grease leaving a moisturized and natural vibrant look. The compact size would allow the customer to carry around in the hang bag with out any trouble, notwithstanding the fact that it is extremely easy to use and achieves the best natural and professional results any woman would dream of.

Choosing our target has been an arduous task. We have based our decision on several aspects such as: Seek for individuals that have the same specialized interests and needs. Create a product that will attract a target group to eventually buy our product or do business with CosmoCosmetics. Have and use the appropriate resources to communicate Cosmocosmetics products and values to our customers. The group must be large enough to produce enough business volume. After researching the market opportunities we chose African American women as our target group: firstly, they are a growing minority that many companies have excluded.

We mustn't forget that all women want to look their best at all times. Also, we are creating a unique product that aims exclusively at this target which we believe will attract them to do business with CosmoCosmetics. Our ultimate goal is to define a specific target market that we can develop focused sales messages, where they can be identified and therefore increase out profits. We have discarded the other alternatives for several reasons. To begin with Cost leadership was not an option. We believe that to try an enter a market as a cost leader would be a grand mistake, manly because we don't have the resources to produce on such a scale nor do we have the brand awareness that other more powerful companies can take advantage of.

We also reject the idea of a differentiation strategy because we have decided to narrow our market approach to a smaller target, African American executive women. A differentiation strategy seeks to build customers loyalty by positing goods in a unique way, in a completely different from the competition but directed to a bigger target group. A cost focused strategy centres on low prices tactics. CosmoCosmetics believes in creating value through other aspects such as quality, innovation of a new product and a superior image through creative marketing campaigns through a Focused strategy. Company product and Services.

Patent or trademark protection. Creating a product with a competitive advantage is not enough. Success is only obtained by creating a sustainable advantage. There are several threats that might destroy a company's sustainable advantage: external and internal External in case of a company's competition- growing and new company impose a direct threat-, technological changes, changes in the industry structure... are the most relevant. In relation to internal factors we have to mention inertia, that is, the reliance on past strategies as one of the most significant. To avoid any company from attempting to copy CosmoCosmetics Cosmo Spray we must set several barriers.

The first strategy we will pattern the formula and packaging of Cosmo Spray. The patent should defend our position in the market at least until it expires. Secondly we will try to take advantage of the path dependence of our patent. While the patent is in use CosmoCosmetics will invest in R&D to keep innovating and creative marketing campaigns to create brand awareness in order to be at the head of the market.

We might not be number one of the market at this moment, but we believe that we can be number one in our own segment. CosmoCosmetics will ask their employees to keep the company's "trade secret" in relation to the formula of the make up. When recruiting our staff they must sign a formal document that states the consequences of failing to keep the trade formula. This way we want to try to insure our uniqueness and permanence in the market. Find Mexican company, outsourcing ISA Marketing Strategy Market segmentation is the first step in marketing a product or service, which consists in dividing the market into different groups of people with similar needs and wants. CosmoCosmetics Co has decided to direct Cosmo spray mainly to African American women that feel a special needs when it comes to touching up.

It is important to understand what customers want when purchasing a certain product. For CosmoCosmetics to succeed in promoting Cosmo spray, we must understand everything about our consumer's needs. CosmoCosmetics is going to implement it's promotions at places where their Primary and Secondary customers are going to be found frequently. When it comes to Make-up, we automatically relate it to females. Women are the mayor target audience for these types of products. Before CosmoCosmetics was introduced to the market, most African American women felt unsatisfied when to the time of touching up came.

The normal ordinary makeup just doesn't seem to match African American women's skin tone. Most makeup is just designed and targeted to the white Caucasian women. This makes it quite difficult for the African American Women to shop for makeup that really suits their skin. White women's makeup just does not provide the same results for African American women. This makes it very difficult for them to decide on one that suits them best. So, this is where CosmoCosmetics is going to come into play, and will try to reach as many women as possible.

Now these women will become prospect users of Cosmo spray because of the different benefits CosmoCosmetics will offer them: CosmoCosmetics offers a wide range in colours that adjust to the different skin tones that these people have. This range in colours will provide the African American women with a wide selection so "she" can find the right colour for her face tone. 3.1. Different Marketing Tactics: For CosmoCosmetics' target audiences to become interested in Cosmo spray, they will be involved in different tactics so that the product will be differentiated among its competitors. Cosmo spray is new to the market, and comes in a new format -Spray- it will provide superior results than ordinary makeup would, even quicker and without having to spread it practically.

CosmoCosmetics advertising campaign will consist of promotions at different locations that will attract the target audience appropriate for Cosmo spray, who are African Americans from ages 25-45. Since CosmoCosmetics is focusing on this wide age range Cosmo spray is going to be found at different relatively high standing locations: Sephora, CVs Pharmacy, Burdines, The body shop, Bloomingdale... For CosmoCosmetics to attract this wide age range, they must have their products promoted at different types of paces, such as: o Beauty Salons: CosmoCosmetics will promote Cosmo spray in Beauty Salons where high income African American women tend to spend there money to get preened and pampered. In these Beauty Salons, CosmoCosmetics will try to attract the women in the upper age range. o Endorsements: our idea is to have Naomi Campbell endorsing our product. We would shut several photograph sessions with Naomi posing using the product, these would be used in retailer shops to promote Cosmo spray an draw the customers attention to our products. While at these locations, CosmoCosmetics will try to attract as many women as possible in order to create a database with their target audience's personal information.

All the ads at these locations will have a consistent style, so that the target audience will easily relate CosmoCosmetics to each ad. This way the target audience will quickly identify the product. CosmoCosmetics will have a host representing the company at each one of these locations. They will be dressed in professional suits wearing the company logo. Once CosmoCosmetics has reached the audiences attention they will give out free samples in exchange for their personal information.

This information will create a database that will later be used to conduct direct marketing over the phone. After being called they will automatically receive another free sample delivered at home and directly to them where they through the nearest retail shop to purchase more Cosmo spray. These women will be so delighted with Cosmo spray that they are definitely going to want to know where they can repurchase more. Pricing Sale price In order to set the right price for our product we are trying to satisfy three objectives: 1. Get our product accepted. 2.

Maintain market share as competition grows by make use of special advertising and promotion techniques to try and retain our customers. 3. Earn a profit. In order to achieve these objectives, we are going to follow a skimming pricing strategy for our new product. By using this tactic we are trying to reach an elite group that is able to pay a higher price for a product which has been design just for this particular niche. Consequently, our price will be higher than the average in an effort to recover the investment in R&D and promotional costs of the product.

Our tactic will be to set a price well above the total unit cost and to develop a selective promotion campaign (Endorsement and Beauty salons) in order to appeal to the segment of the market that is not sensitive to price. With this price tactic we want to reinforce the uniqueness, prestigious image (to set a well recognize and prestigious brand image) and projection of quality. Moreover, this technique will encourage correcting pricing mistakes quickly and easily. Finally, due to a deep and accurate market research through different sources and trends analysis; we decide to set our price for Cosmo spray at $28.5 DISTRIBUTION (GUILLERMO) LOCATION AND LAYOUTNICOLASSephora, CVS, Beauty Supply Stores, Burdines, Bloomingdale, and Body Shop COMPETITOR ANALYSIS Justification of Business. After studying the cosmetic market, between all companies which have black people as target, we found these three: Sacha cosmetic, Maybelline New York and Mary Kay as our main competitors.

We have also based our entire project on eight needs our customers have: Frugality, Easy of use, Durable, Portable, Esthetic, Reliability, quality and wild available. Frugality Easy of use Durable Portable Esthetic Reliability Wide Available Quality. Sacha Cosmetic 5 4 6 6 4 6 7 4 Maybelline 2 6 7 2 8 2 6 9 Mary Kay 3 5 5 4 6 8 5 6 Cosmo 2 9 8 8 6 6 9 8 In relation to this we have represented a Value Curve that will determine our market in relation to the needs in the market: Sacha Cosmetic: This brand is well known among afro-american people due to their work in this market. This company works with a huge range of products from foundations to any type of make up and in any colors. All these products meet the African American needs, overall because it is an inexpensive product. Sacha Cosmetic is wildly available, using several channels to achieve its target.

It is possible to find them on-line, offering their products with totally free shipping or even in wholesalers such as Wall mart, in Mexico. This company sells under a really reasonable price without falling in the frugality aspect. It also offers an easy way of use, making its' customers life more comfortable. This way of use is based on a cream tube format. After studying how it works with our customers we appreciated it can be easily spread out over the whole face without having as many problems as with the use of the powders. However we have found an even easier way do it, so in this point we score over them with a reasonable score as you see in the graphics.

We located other good points in this product such as the reliability, durability and portability, if you compare these aspects between this cream and other products such as powders. When researched our customers for their needs, we found that all our target agreed in one point: "after keeping one week your powders in your handbag, you discover you don't have them any more, you just have small pieces of what it was". This apparent minor difference in the format could give us a really big competitive advantage among our executive business women or our high income target. Sacha Cosmetics didn't take this into account, so maybe this could be an interesting point to emphasize on.

This kind of high standing customer takes the product esthetic into account when buying- the tube make up is usually used in front of a the woman's companion and looks horrible, men like to think their companion look beautifully naturally and not by spreading on some brown cream that stains your clothes and wine glass. This aspect proves a big different between Sacha cosmetic and CosmoCosmetics, the frugality term makes this company less competitive. Maybelline New York: This brand is one of the most important of the market. Not only do they focus on our target (African american) but also all the whole market without differentiating race.

It is wildly available you can buy these products in more than six different channels: in retailers like CV's, Walgreen's, Walmart... or even on-line. We found that this company can not be our rival because of two differences: in specialization and in our product format. In relation to specialization we see that they have a huge range of products, but there is no definite focus on black people. They don't have such a specific product as CosmoCosmetics.

As for Product format, no company can fight with us in this field due to the fact that we offer a special formula and a format which is patented and unique in this market. In other fields we observe that Maybelline New York doesn't have competition: these fields are the frugality, Esthetic and Reliability. This could be due to the fact that this company has been long a time in the market which makes it really difficult for us to have a chance against them in these aspects: Frugality a company who is number one in the market can not fall into the frugality value. In Reliability and Esthetic, we can not fight against them because this is one of its most important points. It could also be one of their weakness because a product which has a good esthetic use to be poor in durability and portability is a definitive strength for us.

The last point I want to highlight is that all the product range of this brand is also aimed at African American women since an Caucasian and an African American appear in all the advertisements. As well as this, the products are centered on powders, not in foundations, that will give us an important opportunity to sell our competitive advantage of a spray foundation. Mary Kay: The main feature of this company is its specialization in African-americans, but not exactly towards our target. A person who has high income doesn't care about the money or the price of the product. After searching data about this company we can observe that this company has some important points where it is really competitive and others where it isn't so.

This company has some weakness in relation to frugality, ease of use, portability and wide availability: these points are some of our main competitive advantage. When searching for Mary Kay and its market, we found that its trademark has a poor image: Frugality, esthetic and the wide availability of the product make its prestige sink as deep as a paper ship on the sea. This is one of the points which we will use to make our differentiation, there is no way you can launch a new product into this market without trying to locate it in the highest status, without competing in price. Another point where they miss our target is in everything related to the logistics. How you can sell your product to an executive woman if you only give them chance to buy it in a beauty salon. We can also find that the packaging of the product is horrible, as we mentioned in Sacha cosmetics.

CosmoCosmetics will emphasize on the innovation and attractiveness of the product packaging. Some goods points where we can not compete is in relation to the reliability and the portability of the product: we find these needs are really close to our product transforming these points in a sample features of the market without giving us the possibility of using it in as our competitive differentiation. As a briefing, we can say that this company doesn't really give us a big headache at the moment, even if our target would consume their product since the frugality aspect is higher, which eliminated them from our main competition as we mentioned in Sacha cosmetic. CosmoCosmetics: As we can see in the graphic based on our competence, our company and the market needs, we find a niche among colored executive business women who don't have a good product that fulfills their needs. We can appreciate that this target has no been reached yet, so any initial movement will be substantial in deciding which company will remain longer in this niche. Our main points are centered on our company image due to our idea of locating our product in a high status retailers.

We also want to link to this idea the fact that it is ease of use and the wide availability. We will offer our product on-line and in the main beauty retailers after motivating our channel with push / pull strategies, consisting of buying stands in relations to our retailers and in our promoting campaigns to incentive our target as via famous people as Naomi Campbell using our powders. Another point where we will make a competitive advantage is the quality, one of our most important needs. We can do this because it is the centre of our specialization, we are investing a lot of money and time on developing the formula which best achieves our target needs which will be difficult for another company to copy. The strategy that we follow- focused differentiation- is the only way for a small company as ours to be competition with such huge companies as Maybelline New York.

By the time this company makes a movement we would hopefully have earned our customers loyalty or be ready to do another new alternative- "the first who arrives at the table is the first who eat the piece of cake". We know others companies will try to imitate us, as our product succeeds, but CosmoCosmetics will try to keep the market standards directly related to the needs. HR, R&D, FINANCE, MKT &SALES CosmoCosmetics has the privilege of possessing a team of professionals with significant qualifications and experience. PLAN OF OPERATIONS PLAN OF OPERATIONS A) FORM OF OWNERSHIP This decision will have long-term implications, Therefore, we have had to take into account the following issues: o Our vision regarding the size and nature of your business. o The level of control o The level of 'structure' we are willing to deal with. o The business's vulnerability to lawsuits. o Tax implications of the different ownership structures. o Expected profit (or loss) of the business. o Whether or not we need to re-invest earnings into the business. o Our needs for access to cash out of the business for ourselves. After Asses pros and cons, we have ended with the decision of become: GENERAL PARTNERSHIPS The four of us will share the ownership of this single business "Cosmo-cosmetics". Like proprietorships, the law won't distinguish between the business and its owners.

We will set up a legal agreement that sets forth how decisions will be made, profits will be shared, disputes will be resolved, how future partners will be admitted to the partnership, how partners can be bought out, or what steps will be taken to dissolve the partnership when needed it. We also must decide up front how much time and capital each will contribute. Partners, in this type of ownership, will divide responsibility for management and liability as their position description on the chart, as well as the shares of profit or loss according to our internal agreement. Equal shares are assumed unless there is a written agreement that states differently. REASONS Advantages of a Partnership o Partnerships are relatively easy to establish; however we will invest time in developing the partnership agreement. o With more than one owner, the ability to raise funds may be increased. o The profits from the business flow directly through to the partners' personal tax returns. o Prospective employees may be attracted to the business if given the incentive to become a partner. o The business may benefit from partners, like us, who have complementary skills.

On the other hand, there are some disadvantages that we cannot forget; Disadvantages of a Partnership o Partners are jointly and individually liable for the actions of the other partners. o Profits must be shared with the others partners. o Since decisions are shared, disagreements can occur. o Some employee benefits are not deductible from business income on tax returns. o The partnership may have a limited life; it may end upon the withdrawal or death of a partner. B) COMPANY STRUCTURE AND DECISION MAKIN AUTHORITY POSITION DESCRIPTIONS AND DECISION MAKING Chief Executive Office (CEO) The position of CEO centers on strategic management for the firm. The CEO coordinates decision-making and processes to assure compliance with the members' overall strategic plans. Chief Financial Officer (CFO) Our CFO will be a senior manager responsible for overseeing the financial activities of an entire company. This includes signing checks, monitoring cash flow, and financial analysis and planning. Chief Information Officer (CIO) Responsibilities include management of and planning all information-related issues within the corporation.

This includes facilitating the collection and transfer of key strategic information as well as developing mechanisms whereby organizational units can exchange and share critical competence-related information and skills. Chief Operating Officer (COO) Responsibilities include management and planning of corporate-wide manufacturing and service operations, scheduling, technical services, safety and plant logistics. Overall, it will be responsible for managing the company's day-to-day operations and reporting them to the CEO. Vice President - New Business Development (VP-NBD) Responsibilities include the identification of new market segments and new product or service areas the firm may profitably pursue. Where Innovation and R&D will be their primary patterns of operations. Vice President - Strategic Planning (VP-SP) Responsibilities include developing and managing the implementation processes of strategic plans such as media vehicles, promotions and other events.

The VP-SP is primarily responsible for managing the marketing budget. C) COMPENSATION AND BENEFITS PACKAGES Without the large numbers of employees required to negotiate favorable insurance deals and affordable financial services, small firms can't compete head to head with large companies for benefits. But we could offer a package that meets employee needs and is competitive with what other small companies offer. Our standard benefits package will include varying degrees of health coverage, a 401 (k) plan (Our company will have more than five employees, in order to receive a competitive rate on health plans and to be able to participate in a 401 (k) plans) and a few fringe benefits. Health coverage About 80 percent of the cost of medical insurance for employees and their dependents will be cover. Depending on the age and marital status of their workforce, we may cover 100 percent of the health insurance cost for employees and none for spouses and dependents.

HMO dental coverage will be included as a health benefit and follows a similar 80-20 pattern. 401 (k) and Savings Benefits Considering us, as an emerging company and Focus on trying to sign on a choice employee, we will make contributions max out at $1,000 per year to an employee's saving plan. However this benefit won't be effective after 18 months of permanence with the company. Other benefits and perks Offer assistance to new recruits. In addition to offering a relocation package, we have considered the option of providing services that help spouses of your new employees find jobs. Family transition packages will help family members find jobs, schools, activities, and churches or synagogues.

Other Benefits could be represented by prenatal care, smoking cessation and weight loss programs, gym subsidies, onsite flu shots. FINANCIAL FORECASTFIANCIAL STATEMENTSNICOLASIncome statement Balance sheet Cash Flow statement BREAK-EVEN ANALYSISA key component of our business plan is the break-even analysis. At this level of activity, sales revenue equals expenses, which it neither earns a profit nor incurs a loss. By analyzing costs and expenses, we will achieve the minimum level of activity required to keep our firm in operation. To begin the analysis, we must determine the Fixed and Variable costs.

Fixed Cost Our fixed costs are those expenses that do not vary with changes in volume of sales or production. We have stated here the most significant ones: - Salaries $18.700- Advertising (promotions & marketing) $12.000- Facilities (warehouse with office rent) $4.300- Insurances $1.600- Office and Lab Expenses $1.400- Utilities (electricity, internet, wireless) $800 Total Fixed cost per month... $38.800 TOTAL FIXED COSTS QUARTERLY... $116.400 Variable Cost On the other hand, we were looking to cut costs and we decided that the best option would be to outsource our manufacturing process to a Mexican Factory in order to take advantage of the NAFTA - North American Free Trade Agreement - and the low labor cost standards. We came to an agreement in price with this factory of a $5.8 cost per unit of our product Cosmo Spray. This includes all the production processes, shipping expenses and packaging supplies.

($5.8 will be our variable unit cost) The orders will be made monthly for the first year and we have set the amount to 2500 units / month. Expecting a gradual increased of this quantity as a result of good performance in sales. Total cost of goods will be $14.500 per month... $43.500 Q Total cost Total cost (Fixed cost + Variable cost) = $159.900 Sales price Finally, due to a deep and accurate market research through different sources and trends analysis; we decide to set our price for Cosmo spray at $28.5 Now, we are ready to calculate the Break-even point: Break-even (units) = Fixed cost / Per unit contribution margin per unit Break-even (units) = $116.400/$22.7 = 5.128 units per quarter The minimum amount of product we will need to sell in order to keep the firm in operation is 5.128 units per quarter, which represents 1.710 units per month. Margin contribution (per unit) = sales price per unit-Variable Cost Margin contribution (per unit) = $28.5-$5.8 = $23 per unit / product Translating this into Dollars Break-even sales ($) = 5.128 units $28.5 per unit = $146.148/quarter. At this point, sales revenue to cover cost and not incur loss is $146.148 Sales needed to generate a desired profit If we want to have an average net profit of $32.000 Q we will need to sale 6.453 units of product in 3 months (2.151 units a month), which could seem a bit optimistic for the first year but a good challenge for us.

Break-even (units) = ($116.400 + $32.000) / $23 = 6.453 units / quarter Break-even sales ($) = 6.453 28.5 = $183.911 Total Revenue from sales $183.911 Cost of goods sold $43.500 Gross profit $140.411 Calculating the ratio of variable expenses to net sales The percentage is $43.500/ $183.911 = 23.65%Cosmo-cosmetics Co. uses $0.246 out of every sale dollar to cover variable expenses, leaving $0.753 as a contribution margin to cover fixed costs and make a profit. (Note: 75.3% is the contribution margin as a percentage of sales) Break-even sales = $116.400/ 0.753 = $154.582 Thus, Cosmo-cosmetics will break even with sales of $154.582 Break-even Chart We would expect a sales level of $183.911 (Point A = Income) Income & Expenses Sales Volume The break-even point is located in the intersection between the total expense line and the revenue line. As it is shows, Cosmo-cosmetics operates at a sales Volume to the right of the break-even point (point A), this means that it would earn a profit because the revenue line lies above the expense line over this range "Profit area " RATIO ANALYSIS LOAN AND INVESTMENT PROPOSAL.