Assume that you have just been hired as a financial consultant to a startup company that plans to introduce a new beverage to the soft drink market. Your company’s product is advertised as a healthier alternative to soda and other artificially flavored drinks. The all-natural sparkling beverage has only 25 calories, 5 grams of sugar, no chemicals or preservatives, and comes in four fruit flavors: orange, pineapple, apple and grape.
Two years ago the product was introduced in Florida. A phenomenal growth in sales since its introduction demonstrates that the product and its marketing possess tremendous potential. Accordingly, the company wants to explore possibly expanding sales of the product to the rest of the U.S. market.
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Write My Essay For MeAlthough the company has been highly profitable, the management group has little to no financial experience. Most decisions to date have been made on the basis of ‘does it feel right’ as opposed to rigorous, data based financial analysis. The company has no system of financial oversight and the managers of the company have a limited understanding of sound management accounting practices.
You have been asked to provide the company with a general analysis of this proposed project. Your specific task is to produce a report discussing the following key aspects of this expansion project:
A microeconomic analysis of the current state of the soft drink market in the U.S. and how any recent developing trends may affect the demand for this product.
A macroeconomic analysis of the state of the U.S. economy and the impact this may have on the demand for this new product.
A list of key management accounting practices that the company must put in place to support their planned expansion. Each item you list must be fully explained to the management group so they understand how and why the practice is necessary to manage the growth that will come with expansion of the product to different states. Be sure to consider the fact that the company will need outside financing and may even consider the possibility of going public in order to sell its stock on an exchange.
Based on the quality of your report, the management group will decide whether or not to hire you to then help them develop a full capital budgeting plan for this project. Because this is something you would like to do, mainly because capital budgeting consulting pays extremely well, you want to make sure your report is well written, organized, professional and convincing.
SAMPLE SOLUTION
The soft drink industry in the US has for long been described as a non-alcoholic sector dominated by Coca Cola Company and Pepsi (Rothacher, 2004). However, new industry players have begun introducing new product flavors dominated by noncarbonated beverages for growth. Several factors should be considered when analyzing the soft drinks industry in the US. Among these factors are the dominant economic factors, the current trends in the industry and the level of competition among dominant producers of the soft drinks. Dominant economic factors to be considered are the market size, the rate of growth of the market and the overall profitability. Currently, the market size of the soft drinks has…
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