Foxy Originals

Topics: Variable cost, Management accounting, Costs Pages: 6 (1763 words) Published: May 19, 2013
Foxy Originals

Team 1: Van-de-lay Industries
Ruwanthi Herath, Manasa Varalakshmi, Gabriela Chassagne, James McDougall, Aaron Layden

Executive Summary
Foxy Originals hopes to gain successful market entry into the United States within six months. The U.S. market is significantly larger than the Canadian market that Foxy currently operates in and has substantially less brand loyalty and demand for classic jewelry. Foxy’s two potential methods of market entry are: (1) Tour their products at ten U.S trade shows and make direct sales to retailers or (2) Hire four sales representatives in fashion hubs across the U.S. We, Vandelay Industries, recommend Foxy implement the first alternative. The contribution margins for the sales representative method is $216 per order, with a break-even point of 118 orders. The trade show’s contribution margin, $302, and break-even point, 313 orders, are significantly higher because of their fixed costs. To reach Foxy’s $100,000 target profit, the sales method would require 581 sales, while the trade show method would require 645 sales. This shrinking disparity in the number of orders necessary to reach the $100,000 target profit highlights the power of the contribution margin over time. Jen and Suzie have tremendous product expertise and relationship building abilities. These core competencies would be put at significant risk if sales responsibilities were shifted into the busy schedules of sales representatives handling 15 different brands at once. Turning their brand and product presentation over to sales representatives has unjustifiable risk. We recommend that Foxy choose the trade show method, reduce its classic jewelry inventory to 15% at their booth, and target the “Chain Lovin’ Ladies” demographic in the four major fashion hubs of the U.S. The contribution margin of trade shows and the specificity of their efforts with retailers will result in sustainable growth in a new market. Case Background:

Jen Kluger and Suzie Orol are the co-founders and owners of the popular Canadian jewelry brand Foxy Originals. Both Jen and Suzie have a family background in the jewelry industry and upon meeting at The University of Western Ontario, developed some of the early designs for Foxy. As the brand became popular through sales at outdoor festivals and concerts, the founders decided that upon graduation they would continue developing Foxy Originals and launch into retail. Sales to retailers were natural for Jen and Suzie because of their collective knowledge and charisma and subsequently, sales doubled for each of the first three years. As relationships with retailers strengthened, the brand grew in popularity in Canada and reached over 250 boutiques. Jen and Suzie sold the jewelry, managed the inventory, and ran every aspect of the company. In doing so, they cultivated a unique brand that was affordable without sacrificing boldness and trendiness. In June of 2004, Sarah Gibson, one of Foxy’s early retail customers, called and complained to Jen and Suzie that many of her competitors now carried the Foxy brand. Jen and Suzie realized the significance of this complaint; the organic business they had cultivated was now at risk for becoming saturated in the relatively small Canadian jewelry market. With a strong entrepreneurial spirit and acknowledgement of the opportunity for Foxy, Jen and Suzie decided this was a time to expand to the United States, whose jewelry industry is 10 times larger than Canada’s.

Jen and Suzie’s goal is to launch Foxy Originals in the U.S market by January of 2005, a fast approaching deadline. The owners will either (1) tour their products at ten U.S trade shows and make direct sales to retailers or (2) hire sales representatives in the key fashion hubs of the U.S. We, Vandelay Industries, have been hired to consult Foxy on market entry analysis to the U.S. Alternatives:

Trade shows undoubtedly play to the core competencies of both Jen and Suzie. Foxy...
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