Two business proposals from the Production division of the New Heritage Doll Company are being considered for submission to the capital budgeting committee. Only one proposal will be submitted. The proposals are: Match My Doll Clothing Line Expansion and Design Your Own Doll.
A systematic process will be used to determine which proposal to recommend. Criteria Include:
1. Comparison of the business cases
2. NPV analysis
3. IRR and payback period analysis
4. Analysis of additional information
Comparison of the Business Cases
Most Compelling Business Case Match My Doll Clothing Line Expansion
Match My Doll Clothing Line Expansion is the the most compelling opportunity. This initial recommendation is based solely on a qualitative comparison of the cases and the financial exhibits provided by the brand managers. A SWOT (Strength, Weakness, Opportunity, & Threat) analysis was used to aid the decision process. See Tables 1 & 2 for SWOT analysis.
Benefits of the Match My Doll Clothing Line Expansion:
* Success of the original line of business
* Utilization of the businesses existing strengths
* Long term ability for the product to stay up to date and drive business
Concerns for the Design Your Own Doll:
* High risk associated with developing a proprietary software system
* Complexity of manufacturing
* High break-even sales volume
Overview Business Case 1 – Match My Doll Clothing Line Expansion
The proposal for the Match My Doll Clothing Line Expansion is to expand the line, based on the success and popularity of the existing product line, to include products for all four seasons. The current product includes a doll and two sets of matching warm weather clothing for child and doll. See Table 1 for SWOT…...