Breakdown of Pukah Revenues
The business is going from strength to strength but where do they go from here? Should they continue to grow their product range or should they seek new markets for their existing products? The large majority of Pukah’s revenues come from the UK market although they do export some of their ranges through, in the main, web sales to Europe.
Breakdown of Pukah Revenues for 2015 by Country:
Country Revenue £m’s % Revenue
UK 10.5 82%
Ireland 0.9 7%
Germany 0.7 5%
France 0.2 2%
Other European 0.5 4%
Two potential strategic directions have been identified as follows:
1. Maintain sales in the UK & Ireland with their current product range, whilst expanding sales in the European markets where they already have a presence. As an extension to this, they are considering entering the North American market (US & Canada) plus Japan. Pukah believes that it could leverage its ‘Britishness’ as other specialist food companies have done. The recent falls in the value of the pound post-Brexit, could aid this strategy.
2. Focus solely on the UK market and further increase their product range. In reality, Pukah have been struggling to make much headway in Europe in recent years due to the relative strength of the pound, differing tastes and habits, plus ongoing sluggish demand on the continent.
Pukah have therefore employed economics consultants to aid tactical and strategic decision making at the business. You are currently on placement at the consultancy. Whilst the more experienced members of the consultancy team will be advising Pukah on areas such as Brexit effects, competition levels, barriers to entry, trade support and finance, you have been tasked with providing both an overview of both macro conditions and analysis at the company/product level.
Specifically you have been asked to produce a report, of maximum 2,000 words, outlining your analysis and insight into the following areas:
1. Providing a summary of the UK Macro-Economic environment in which Pukah have traded in the last 15 years.
2. Summarising Pukah UK Sales Revenue performance over the last 15 years in the context of the prevailing macroeconomic environment, both in actual and ‘real’ terms.
3. Summarising prospects for the UK Economy in both the short and medium term (no insight is expected on potential Brexit effects). Comment on the stability of forecasts produced over the course of 2015 for both the short and medium term.
4. Modelling overall UK sales for Pukah, using an appropriate macro-economic variable as an explanatory variable.
5. Utilising the model of UK sales to forecast overall sales for 2016 and 2017.
6. Producing sales forecasts for Pukah’s three key product lines for the final two quarters of 2016 and the first two quarters of 2017.
7. Analysing UK sales by regions and stores (excluding internet sales) in 2015.
8. Identifying the demand curve for Pukah Green Tea (20 bags). You have been provided with sales and pricing data from Holland & Barrett, a key retailer of Pukah products.
9. Modelling the total cost curve for the production of boxes of 40 Pukah ‘Matcha Green’ Teabags at their production facility in Swindon. The production manager can then be advised as to what level of weekly production will minimise average costs.
10. Describing Sterling exchange rates with currencies relevant to their current and potential export markets over the last 10 years, in conjunction with a summary of the overall sterling index.
11. Summarise forecasts for the sterling index in both the short and medium term.