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Market Analysis
The margin per unit on the Australian market is between $2 -- 3.50. Although the United Kingdom market has similarities with the Australian market, it does not mean that similarities apply to margins. The U.K. And Australian grocery markets are rather similar, the targeted segment of customers of AAAB has almost the same eating habits for breakfast, that refer to muesli bars. In addition to this, the U.K. market seems to be a good idea regarding the sales volume. The weight loss trend in the U.K. appeals to more and more people, and muesli bars are one of the ingredients in weight loss diets. Therefore, this is a market where AAAB can significantly increase its sales levels.
Most muesli bars found in U.K. stores are prices around £2 -- 3.5 (Amazon, 2015). That is AUD 4 -- 7. Organic muesli bars are priced around £4. That is AUD 8. Probably AAAB's muesli bars are somewhere in the between: they are of higher quality in comparison with average muesli bars sold in the U.K., but they are not organic and AAAB cannot charge as much as organic producers.
Therefore, the RRP for U.K. should be on the AUD 6 -- 7 range. That is £3 -- 3.5.
In addition to usual cost price, the transportation...
A temperature control airfreight is recommended in this case, as muesli bars must be transported at lower temperatures in order to arrive in the U.K. In perfect conditions (DHL, 2015). This is one of the most expensive types of airfreights, but it is necessary in this case. It is expected that transportation would cost AUD 5,000, that is £2,500.
The cost price with the added transportation cost is:
0 -- 1000 units: $8.50
1001 -- 2,500 units: $5
2501 -- 5,000 units: $3.50
5001 -- 10,000 units: $2.5
If AAB sells the bars at RRP $5 -- 6 maximum, the margin is the following:
0 -- 1000 units: -$2.50 -- 3.50
1001 -- 2,500 units: $0-1
2501 -- 5,000 units: $1.50 -- 2.50
5001 -- 10,000 units: $2.5 -- 3.5
As it can be observed, the U.K. market is only profitable if AAAB sells at least 2.500 units.
Regarding the U.K. market viability, several issues must be addressed. AAAB must not only limit its analysis to initial margin it can benefit from, but to the potential of this market also. If properly branded, the muesli bars developed by AAAB can become a favorite for certain…
Reference list:
1. Air Freight (2015). DHL International. Retrieved May 10, 2015 from http://www.dhl.co.uk/en/logistics/freight_transportation/air_freight.html.
2. Muesli Bar Prices (2015). Amazon Inc. Retrieved May 10, 2015 from http://www.amazon.co.uk/s/ref=s9_dnav_bw_ir03_s?node=340834031,!344155031,358595031,360037031&search-alias=grocery&field-is_prime=419159031&bbn=358595031&pf_rd_m=A3P5ROKL5A1OLE&pf_rd_s=merchandised-search-2&pf_rd_r=146CEBFBZHK4NSV9TAPT&pf_rd_t=101&pf_rd_p=516504167&pf_rd_i=358595031.
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