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Accounting and Brannigan

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3. Invest in organic growth from internally developed new products Anna Chong, Chief Innovation Officer, shows an alternative by investing in R&D and advertising and promoting new product entries. She outlines that it is important to “milk the cash-¬‐cows” and subsidize the investment of the “star products”. She proposes very original ideas, like new flavors that are appealing to the growing demands of the public, new innovative packages and new usages of the soups.
Pros: Original ideas, and no need to invest heavily on acquiring a small company, which avoids the risk of miscues in the production lines. The new innovations target different segments for the soup division, specially the growing categories for healthy meals and active lifestyles. One important innovation is to add new products for the Ready to Eat category, which is the most profitable of the company.
Cons: Only one out of ten innovative products actually succeeds in the market and becomes an established product in the company´s portfolio; the remaining nine do not last longer than two years. It is very difficult to assign exact costs to the products that were created from inside the company. Moreover, adding new products with the diminishing shelf space in the retailer stores represented another challenge for this plan since new products would need a reduction of the shelf space from the Ready to Eat soups.

With this alternative we can see that once again Brannigan’s net earnings wouldn’t be increased but instead decreased a 2% on average per year. (Exhibit 3 shows the calculations done in order to do this

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