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# Calculating the gross margins and reflections so far - PowerPoint PPT Presentation

Calculating the gross margins and reflections so far. For our 5-year plan, we now calculate the gross margin, at the same time getting the total sales volume. We add only one ingredient: a price erosion factor.

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## PowerPoint Slideshow about ' Calculating the gross margins and reflections so far' - jin-chen

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Presentation Transcript

• For our 5-year plan, we now calculate the gross margin, at the same time getting the total sales volume. We add only one ingredient: a price erosion factor.

• Reason behind price erosion factor: Increased competition forces a lower price. The figure of 5% per year is here chosen arbitrarily.

• All other figures are from previous sheets.

LMKmethod

• With these market estimates, and no export organization, we get after 5 years a yearly gross margin of

LMKmethod

• So this is the end of this project ! ?

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• 1 The sums are too small to sustain anything resembling a decent business.

• 2 It is not likely that calculations for the other markets will yield better results

• At this point in the story, the author wonders what to do with the example, and decides to make some further assumptions about the project to save him from doing the slides over again

LMKmethod

• 1 The productX is physically very small so it can easily be sent by air-mail world over

• 2 The produxtX is international in nature, not requiring any written material inside or outside the box (except in english)

• 3 The productX is immediately appealing to individuals browsing on the Internet

• Thus we will sell on the Internet ! And add a line with Internet Sales without further deliberations

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• How can we estimate the number beeing sold by a WEB-site ?

• 1 We must get traffic, i.e.exposure for the product

• 2 This is obtained at a cost

• by editorial writings, and

• by word-of-mouth among certain internet communities

LMKmethod

• We try the following market scaling argument: We estimated a market in year 2000 for Norway of 2000 people, which is .05% of population. Internet-enabled world population is roughly Europe 100, America 100, Asia 100 mill, Sum 300 mill people, so our market ww is 300 000, to which we can apply our reach and buy percentages

LMKmethod

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• End user price 500

• Cost of sales 100

• Market 300 000, incr.10%

• Reach ultimately 20%

• Realistic ???

• Worthwhile???

LMKmethod