Calculating the gross margins and reflections so far

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. • 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. 01. 08. 00 LMKmethod

Reflections on the result of gross margin in 5 -year plan so far • With these market estimates, and no export organization, we get after 5 years a yearly gross margin of 01. 08. 00 LMKmethod

5 -year plan for Sales and. Gross margin • So this is the end of this project ! ? 01. 08. 00 LMKmethod

Why should this project be killed? • 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 01. 08. 00 LMKmethod

Further assumptions to save the case from the wastebasket • 1 The product. X is physically very small so it can easily be sent by air-mail world over • 2 The produxt. X is international in nature, not requiring any written material inside or outside the box (except in english) • 3 The product. X 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 01. 08. 00 LMKmethod

Internet Sales • 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 advertizing, – by editorial writings, and – by word-of-mouth among certain internet communities 01. 08. 00 LMKmethod

Internet sales 2 • 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 01. 08. 00 LMKmethod

Internet Sales 3, new spreadsheet 01. 08. 00 LMKmethod

Summing up so far, gross margin from e-sales • End user price 500 • Cost of sales 100 • Market 300 000, incr. 10% • Reach ultimately 20% • Buying 20% • Realistic ? ? ? • Worthwhile? ? ? 01. 08. 00 LMKmethod