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2) Evaluate the various market segments given in the case on the basis of revenues,
profits & break-even points.
The evaluation of the 3 market segments on the basis of revenues, profits & break-even
are as follows:
Let us consider Mr. Glenn is charging $100 per Car to Old Car Owners & Mid-Priced Car
Owners & is charging $175 per Car for Expensive Cars. We are not considering
Advertising Cost. We are considering the machinery is depreciated 100% in the first year.
A) Old Car Owners:
Revenue & Profits:
No. of Working Days: 313 Days
No. of Cars Served per Day: 3 Cars
Total No. of Cars Served: 939 Cars
Prepared By:
UR14054 Harshvardhan
UR14072 Ruma Paul
UR14078 SomnathKejriwal
Page 1
Revenue
Particulars
Machinery
5000
Rent
14400
Telephone
420
Utilities
1200
Total:
21020
Operating Profit:
72880
Cars
93900
Total:
93900
Break Even:
Fixed Cost: 21,020/Variable Cost ($20/Car): 12,320/Total Cost: 33,340/Fixed Cost Contribution Margin per Unit: 80/Break Even: 21,020 / 80 = 263 Cars (Approx.) i.e. 88 Days
Mr. Glenn if served only this segment of customers needs to at least serve 263 Cars.
Evaluation:
These segments of customer are hardest to reach, thus Mr. Glenn requires to intensive &
effective advertisement expenses to reach this target group which leads to additional
costs, thus decreasing the Net Profit. Thus this segment is profitable but not viable at the
startup as he has fewer funds for investment.
B) Mid-Priced Cars Owners:
Revenue, Profit & Break Even:
Following the above assumptions it would be the same as the Old Cars Owners.
Evaluation:
The difference here is that this market is more approachable. With less investment on
advertising Mr. Glenn can attract larger consumer base. In this case the expense on
Prepared By:
UR14054 Harshvardhan
UR14072 Ruma Paul
UR14078 SomnathKejriwal
Page 2
Revenue
Particulars
Machinery
5000
Rent
14400
Telephone
420
Insurance
1200
Utilities
1200
Total:
22220
Operating Profit:
85580
Cars
107800
Total:
107800
Break-Even:
Fixed Cost: 22,220/Variable Cost ($25/Car): 15,400/Total Cost: 37,620/Fixed Cost Contribution Margin per Unit: 150/Break Even: 22,220 / 150 = 148 Cars (Approx.) i.e. 74 Days
Mr. Glenn if served only this segment of customers needs to at least serve 148 Cars.
Evaluation:
These segment of consumers are brand loyal, to attract this consumer base he needs the
proper advertising plan. The profit in this case is larger but this consumer base is harder
to achieve. These segments are more profitable but the investment for this segment is also
high. Thus he can prefer this sector for long term.
Prepared By:
UR14054 Harshvardhan
UR14072 Ruma Paul
UR14078 SomnathKejriwal
Page 3
There are both occasional and regular people in this segment which gives diversity
to the services provided.
They are not as price sensitive as low cost car owner group. They are flexible in
their spending for car servicing.
The advertisement medium like yellow pages, flyers are less capital intensive and
are very effective.
The customers dont need additional services like mobile unit which will incur extra
cost to setup.
Prepared By:
UR14054 Harshvardhan
UR14072 Ruma Paul
UR14078 SomnathKejriwal
Page 4