bank risk analysis
Global Statement of purpose The Global Solution Tobacco project(6ST) if success will boost the gross profit of the Global Solution by 176 percent in the nest fiscal year(2013) according to the research department of the global Solution. It will move our core business into another level in terms of profitability. Outline Global Solution core competency has always been the production of agriculture product such as corns and rice. The corporation owned approximately 46590 acre of land throughout the United States, 78 percent of those are located in North Carolina one of the biggest tobacco producer in the United States).
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In 1989 the return on investment of the production was around 17 percents, which was quite impressive compare to the industrial average 11 percent. However, in 2010 the profits margin seems to decline to 12 percents. According to the our analyst, such trend will continue for at least another decade due to the open doors policy which makes it easier for the international firms to invest in the US. Demand for the product remains unchanged while more competitors are in the market. Global have to immediately ake some action against this matter.
There must be a substantial change to our core business. Background In the past, the agricultural products that always be number one when it comes to the profits margin is the Tobacco. Very small investment, but large returns. The profit margin is more than 300 percents. So, what differentiate the tobacco with another agricultural product? Why the selling Tobacco is more profitable than other agricultural product when there are less consumers. The answer is that, first, there are no alternative to tobacco. Tobacco is tobacco.
Unlike vegetable, there are so many alternatives for them, think about broccoli, lettuce, cucumber onion and many more. Second, not every that the tobacco can be grown. It is very hard for the tobacco to grow if the climate and the soil is not right. As you can see from the world map, the green spot is where the tobacco output per land is high. Not many places in the world can do that. North Carolina is one of the few. That is one of the best comparative advantage that our company has over other company. Why wasted those land growing corns and other products.
It would be a lot more profitable to grow tobacco in those lands. Come to the part where to sell out tobacco products. If the GST project does work, the tobacco will not be used to produce cigarettes but will be used to produce chewing tobacco and imported to Asia where there are very few competitors in chewing tobacco cigarettes. In fact, not many people in Asia actually know what a chewing tobacco is, or even know that it actually exists. If we are the first company to enter the market, we will capture the demand in the market and will lso be clearly memorized to the customers.
The next part of this business plan will talk about how the Global Solution should starts with the GST project. Recommendation Currently we have 38,250 employees throughout North Carolina working on Agricultural products, they all currently worked on the 46,590 acres farm land produce approxlmately 1 tons 0T products annually. However IT we were to swltcn our core product to tobacco we have to hire the specialists. Approximately 1 tobacco specialist per 10 acre, their salary would be around 100,000 dollars per year.
However f this works, the revenue gain per 10 acre from the products will be 400,000 US dollars, triple the gain in investment. These will be the first investment that we have to make. The second investment would be to make a long term rental on the ware house throughout Asia; this would cost approximately 5,000,000 US per years. These warehouses will locate in China, Thailand, Malaysia and Korea. The necessity of renting these warehouses is because it will substantially reduce the shipping cost from North Carolina to the retailers by more than 8,000,000 dollars per year.
The last investment that we will have to make is the advertisement. Our analyst makes an estimate that of 3,500,000 dollars per year. This includes the television commercial, flyers, magazines and radio. We do not know what the rate of return on advertisement is; however after the first year we will analyze the sales volume to determine whether to decrease or decrease the advertisement budget. Call to action 1. Make a survey to the product. Introduce this product to the people because most of them would not know this product before.
Then make a sound demand. 2. If there is a positive feedback to the product, starts the production line. 3. Go ahead and commercialized it. 4. Get celebrities to commercialize the product to as many groups of people as many as possible especially young adults who will eventually become a lifetime customers. 5. Prepare the contingency plan. 6. Launch the product to the target markets. 7. See the feedback. 8. Make some changes to the product if necessary. 9. Count the cash. 10. Do the evaluation on the profitability.