Trubrite dyes (Due in week 4 seminar)
• Monarch is in a large industry characterised by low growth and low profitability. The case relates to one division of Monarch called Trubrite which has developed some innovative dyestuff products. The case deals with the strategy of Trubrite and the appropriateness of measures of performance (a control) as well as pricing issues.
• Yellow dye
– originally all three (Trubrite, Ajax and Trojan were competing and selling the same product. – Ajax dropped out of the market
• Blue dye
– Originally Monarch and Ajax selling Blue Trubrite and Trojan selling Blue 79 (10% cheaper and poorer in quality). – Blue TB better than Blue 79 in light sensitivity segment – Monarch acquired Ajax’s share of joint venture factory (appeared to be two horse race) – Ajax commenced manufacturing Blue 79 and price war between Ajax and Trojan caused a drop in Monarch’s share of the market.
• Red dye
– Monarch (Red TB), Ajax (Red 66), Trojan (Red 79) – Red TB is historically technically superior but threatened by Red 79 which is superior in some lower temperature continuous spray dyeing applications (used for 70% of applications). – New technology could reassert the superiority of Red TB.
Return on assets
– – – – – Sales 32.15m* Less total costs 20.78m** Manufacturing profit 11.37m Share of selling and admin 1.85m*** Product line EBIT 9.52m
1,036,000kg) ** Yellow ($4.94*1,285,000kg) + Blue ($10.00 * 573,000kg) + Red ($8.40 * 1,036,000kg) ***(32.15/326)*18.8
*Yellow ($4.24*1,285,000kg) + Blue ($16.40 * 573,000kg) + Red ($16.70 *
– Accounts receivable 3.1m* – Inventory 10.6m* – Plant assets 10.8m** » 24.5m *Assumes 10% of sales **Fixed costs as a % of fixed manufacturing expense = [(4.94‐ 3.30)*1,285,000 + (10.00 – 7.22) * 573,000 + (8.40‐6.14) * 1,036,000] /119,400,000 = 5%
5% x 216.2m = 10.8m...
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