MBA FPX 5010 Assessments 4 Expansion Recommendation
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MBA FPX 5010 Assessments 4 Expansion Recommendation
Student Name
Capella University
MBA FPX 5010 Accounting Methods for Leaders
Prof. Name
Date
Expansion Evaluation of Organization
This report examines the viability of XYZ Company, operating in the food industry, which is currently planning to expand its services and products by establishing a second production facility. The company, specializing in staple food products with a stable demand, intends to invest $7,000,000 in new equipment with a ten-year lifespan. In the event of asset sales, potential proceeds are estimated at approximately $1,000,000. With a requirement for a 12% return on investment, our organization’s role is to provide a recommendation on whether the company should proceed with the investment. As an accounting manager, my responsibility is crucial in evaluating the facts and statistics to propose an expansion strategy (Soti, 2018).
Financial Information Analysis
To facilitate effective expansion planning, comprehensive financial analysis of the organization is imperative. For instance, the income statement for the year 2022 reveals that the company experienced a significant boost in profits only after introducing the additional product, Product B. Over the ten-year period, the total forecasted revenue for both Product A and Product B amounted to $52,140,000. Further financial details include a cost of goods sold (COGS) of $19,675,883, resulting in a gross profit of $30,064,004. Depreciation and taxation expenses, categorized separately from COGS, were $3,250,000 and $7,000,255, respectively.
Analysis of Risks Associated with the Expansion
Expansion strategies, while potentially beneficial, are not immune to legal, political, and human resource risks. Currency fluctuations pose a risk to planned returns, and challenges such as long queues and employee behavior can impact customer service. Additionally, unforeseen events, like the COVID-19 pandemic, may disrupt sales tasks and affect goods procurement. Compliance with regulations, depreciation method choices, and supply chain risks further contribute to the complexity of the expansion decision (Onyusheva, 2018; Harb et al., 2019).
Explanation of Recommending
The analysis suggests that XYZ Staples Company has growth potential in various regions of the United States, with opportunities to introduce new products in areas with high demand for affordable food items. Prioritizing customer service improvements, hiring marketing professionals, and focusing on nutritional value can enhance the company’s competitive position. However, before expansion, a robust risk management plan is essential. Once all conditions for revenue and profit improvement are met, expansion can be considered (Björklund et al., 2020; Stephens, 2018; Vasconcelos, 2021).
References
Björklund, T. A., Mikkonen, M., Mattila, P., & van der Marel, F. (2020). Expanding entrepreneurial solution spaces in times of crisis: Business model experimentation amongst packaged food and beverage ventures. Journal of Business Venturing Insights, 14, e00197.
Harb, M., Hagenlocher, M., Cotti, D., Kretzschmar, E., Baccouche, H., Khaled, K. B., … & Gearchange, M. (2019). Simulating future urban expansion in Monastir, Tunisia, as an input for the development of future risk scenarios. GI Forum, (1), 3-9.
Onyusheva, I., & Santhanakrishnan, R. (2018). RISK ASSESSMENT AND MITIGATION STRATEGIES FOR AFRICAN MARKETS EXPANSION: THE CASE OF PHENIX CONSTRUCTION TECHNOLOGIES. The EUrASEANs: journal on global socio-economic dynamics, (5 (12)) , 29-38.
MBA FPX 5010 Assessments 4 Expansion Recommendation
Soti, K. (2018). International Business Strategy for Overseas Expansion of Local Small and Medium-sized Enterprises. GI Forum, 91(2), 129-144.
Stephens, J., Miller, H., & Militello, L. (2020). Food delivery apps and the negative health impacts for Americans. Frontiers in Nutrition, 7, 14.
Vasconcelos, J. M. K. V. P. (2021). SME internationalization strategy: poor sabers expansion to Switzerland (Doctoral dissertation).