Reference no: EM131288437

Lipman Bottle Company

In November 1982 Robert Lipman, vice president of Lipman Bottle Company, was wondering what pricing strategy he should recommend to his father. Located in Albany, New York, Lipman Bottle began operations as a bottle distributor in 1909. Distributors maintain a close working relationship with several major bottle manufacturers (e.g., Owens-Illinois). In return for acting as a sales representative, distributors receive a discount of 5-8 percent off regular prices. This permits distributors to charge users of bottles the same price as if a purchase were made directly from the manufacturer.

Typically, distributors maintain a warehouse with an inventory of commonly used bottles and closures. For special or large orders, distributors arrange for an order to be shipped directly from the manufacturer to the distributor's customer. The manufacturer bills the distributor at factory price less 5-8 percent, and the distributor bills the user at factory price. The advantages for the manufacturer are that a smaller sales force is required and that the distributor will service accounts too small to be served by one manufacturer. The advantages to the user are that the distributor can provide immediate delivery of many items, can offer the advantage of greater buying power, and can serve as an expert who is familiar with bottles and closures from many manufacturers.

In the past 20 years the growing use of plastics had increased business for bottle distributors for at least two reasons. First, the choice of bottles had expanded greatly, making expert advice more valuable. The growing variety of caps, lids, and spray pumps handled by distributors had had a similar effect. A second reason was that distributors began specializing in printing labels directly onto plastic bottles. For many users it was convenient to have both purchasing and printing of plastic bottles handled by one vendor.

THE PROBLEM

Mr. Lipman asked Thomas Shull, a consultant, to review the firm's pricing policy:

We publish a price list for simple jobs printed on our bottles. Since we earn a commission on the bottles, prices aren't all that important for printing. However, I'm not sure that the industry pricing is correct. Prices decrease with order size and increase with bottle size. I think that the decrease in price with order size is reasonable, since we don't have to search for more business to keep our shop full if we have large orders. Bottle size pricing doesn't seem quite right, however. It does take longer to print a large bottle than a small one, but the difference isn't all that great. Maybe the price differential shouldn't be as large as it is.

A second factor is the new automatic machines that print both sides of an oval without reloading. Most of our competitors use semiautomatic machines. Maybe we shouldn't be charging as much for ovals with the new machines.

The final problem is our custom decorating. We are trying to expand in the New York-New Jersey area, and almost all of the business we might get would be custom decorating. We would have no commissions on bottles, so our profit would be entirely from printing. We would also have to pay freight.

I would like to see our published price list revised to reflect our costs. However, I don't want it to vary greatly from the ones published by major manufacturers. I would also like to know variable cost for bidding on custom decorating. That won't be published, since I have to adjust each price for difficulty of the order; but I'll use the cost list as a guide. Finally, I'd like costs adjusted for transportation to New York-New Jersey. My goal is to earn 30 percent on sales before tax when we're at capacity.

Before preparing price lists, Mr. Shull, Mr. Lipman, and the operations manager agreed that the scrap and shipping costs in Exhibit 3, and the operating information in Exhibit 4, would be used in pricing calculations.

Abstract

Give a very brief description of your assignment and what you concluded. You do not have to write this as an introduction, not do you have to support your claims here. Just tell the reader what you found. Please note that this document can be used as a template; the formatting is correct. However, you may have to include additional parts not shown.

Case Title

A case analysis is not like a research paper; it is typically designed to answer one or more specific questions. Your case analysis should have the following parts laid out in approximately the following order. It is not absolutely necessary that you follow this format; however, where appropriate, it will make your case analysis much more easy to read and allow you to earn a higher grade.

Case Contents
You should have the following parts to your case. It should be formatted correctly with Your case analysis should begin with a brief description of the case problem.
o The case problem description should also include any points of analysis which you have been asked to address, such as questions, reports, forms of analysis, and so on.
o Not all cases are designed the same way, so no one can tell you exactly what needs to be included. Use your imagination, but be thorough.
• Your case analysis should clearly lay out the steps you followed to address the questions raised.
o Do not write the case in a question and answer format. Although this is not a research paper, it is also not a short-answer exam.
o Uses a logical approach to address the problems raised in the case and describe your process of solving it.
• Provide your case analysis
o Clearly state your evidence for each step in your solution.
o If you are asked to do a specific task (e.g., complete an income statement) then use Excel (or some other spreadsheet) to complete the statement and include it in the document.
- Make sure you reference specific numbers you include in your case analysis. Use complete sentences to draw attention to those numbers and explain what they mean.
o If you are not asked to complete a specific task (e.g., you are told to perform ratio analysis) then select the accounts you want to include with a brief description of why you are including them.
- Make sure you give the account values and the resulting ratios.
- Make sure you sum up what each ratio means and tie that to your analysis
o Continue this process until you substantively complete your analysis.
- Make certain that all of the issues raised in the case have been addressed.
• Provide a summary of your analysis and state clearly what this implies. For example, if you have been asked to evaluate a compensation system, use the steps in your previous analysis to show the good, the bad, and the consequences.
• Make a clear recommendation!
o Use your previous work to make a clear recommendation based on your analysis of the case.
o Almost all cases are looking for you to make a recommendation.
- If you believe that a case does not require a recommendation, contact your instructor; she or he may have more detailed instructions to help you complete the case.
• Write a conclusion. The conclusion should substantively support what you said in your abstract.
• Include an APA Reference sheet.
o Remember to cite your references in the body of your analysis.
• Include any supporting documents you need to in an appendix.
o This would be any detailed document that you should not include in the body of your paper, but you might want to include as supporting documentation.
- Often you do not need to include any appendix material.
Once you have completed your analysis, be sure to check for spelling or grammar errors. Your instructor might let you submit your case early for comments, or allow you to resubmit your paper after corrections have been made. In any event, it is expected that first attempts will not be as good as later attempts; you will be expected to improve.

Attachment:- case and exhibit.rar