Zoecon Corporation sells a variety of animal-health-related and pest-control products. With a strong growth rate of 10% annually, Zoecon enjoys a 25% before-tax profit without a clear threat of declining demand. However, while the company’s trade relations with pest control operators (PCOs), veterinary clinics, and pet stores, stay strong; the company has found the profit from its consumer-market sector lacking. In an attempt to conquer the consumer market, some of Zoecon’s top executives have suggested heavy investment in marketing efforts for its new product line, Strike Roach Ender. Some other executives find the proposal too risky, and prefer to stay within the company’s comfort zone: the PCOs market. The other executives think that marketing efforts are irrelevant when the company can sell this new R&D project to national firms, such as S.C. Johnson and Son, Boyle-Midway Division of American Home Products, or d-Con Company. (Kerin and Peterson, 177)
After a long market test, these executives must come to a conclusion about how to distribute Strike Roach Ender.
The first option 1 is to expand the product to 19 cities in the Southern Tier area in 1986, and nationally in 1987. The option is the shortest answer to the covetous agenda to conquer the company’s lacking consumer-market sector. However, the option is also the riskiest one out of the three. Using the company’s market test result, this is the forecasted income statement for the 19-city rollout. Forecasted Pro Forma Income Statement for 19-city Rollout
Forecasted TOTAL sales $ 13,400,640.00
COSG $ (4,215,618.00)
Forecasted Gross Profit $ 9,185,022.00
Promotional and Advertising $ 10,000,000.00
Forecasted Profit after Marketing Expenses $ (814,978.00) Large marketing expenses are due to the up-front advertising cost to launch a new product (Kerin and Peterson, 190). If we use the average annual...