Reference no: EM132842625

Question - LoginTecha, a manufacturer that sells computer accessories wants to enter the phone case market in Canada. The total demand for phone cases in Canada is 20 million cases per year.

Here is the list of costs:

Material: $0.60 per case

Labor: $0.05 per case

Packaging: $1.05 per case

Maritime transport and custom costs: $0.35 per case

Ground logistics and distribution cost: $0.55 per case

Other variable costs: $1.80 per case

Rent and Utilities: $600,000 / year

Managerial Salaries: $1,200,000 / year

Other operating expenses (excluding marketing): $400,000 / year

Here are three alternative strategies they are considering selling their products:

Strategy 1: Implement heavy marketing, and sell at a higher price through brick-and-mortar retailers:

Marketing cost = $390,000

Retail Price = $35 per case

Retailer Margin: 25% on cost

Strategy 2: Implement lower marketing, and sell through Amazon:

Marketing cost = $220,000

Selling (retail) Price = $25 per case

Amazon margin= 30% on selling price

Strategy 3: Implement no marketing and sell at the lowest price directly through its Instagram page.

Marketing cost =$0

Retail Price = $15 per case

Required -

a) Calculate the number of cases that they should sell under each strategy to break even.

b) Assume that they select Strategy 2. According to their marketing research, they can launch new Google ads campaign to sell 75,000 more cases. This costs $200,000. What is ROMI?