Product_Launch_Plan

`Running head: ONGKO FURNITURE STORE – FINANCE CONCEPTS Ongko Furniture Store – Finance Concepts Srinivas V. Sudhirkashyap University of Phoenix Abstract While Jaya Ongko’s Furniture Store thrived in his industry in the eighty’s in Bali, Indonesia the economic globalization of the 90’s quickly changed his industry and caught him unprepared and facing severe reduction in his company’s revenues. He now had to compete with global companies, franchises and distributors that offered the same product at a much lower cost. Through his research he discovered that these companies where able to achieve reductions through high tech equipments, reduced overhead, faster production cycle and through global exports and distributions (Correa, 2010) The purpose of this paper is to explain the finance concepts related to the context of the Ongko Furniture Store scenario. Some important finance terms discussed in Ongko Furniture case have been explained below in the context of this case scenario. These include income, revenue, costs (includes manufacturing, capital and expenses), taxes, margins, overheads, total assets, total equity and total current liabilities. Also included are variance analyses, budgets and financial statements of the company (Ongko Furniture Budget - University of Phoenix, 2010) Some other important concepts that are part of the company’s financial blueprint are labor, premium, exports, business competition, prices, profit margins, merger, acquisitions, joint venture, suppliers, variance analysis, budgets and financial statements. Ongko Furniture Store – Finance Concepts Manufacturing is one of the key components in businesses and involves conversion of raw materials to finished goods. Jaya Ongko’s company in Bali, Indonesia manufactures furniture by buying raw material from the open market and converting it into tables and chairs as finished goods. According to the scenario, the labor available to the Ongko was comparatively cheaper than other parts of the country Ongko Furniture Store - University of Phoenix, 2010) Labor (man-power) is one of the direct elements of cost which assists in converting raw material into finished goods. The labor is inexpensive and skilled for Ongko when compared with other companies. Premium is used to describe the additional value than the market value or fair can be fetched due to better quality than other products available in the market. As the company’s labor is manufacturing high quality hand-crafted furniture, it could sell the product for more than the market price of other products (Emery, Finnerty and Stowe, 2007). Prices include both total cost and profit. There are different ways of setting selling price, such as total cost plus net profit margin, cost of goods sold plus gross profit and variable cost plus contribution margin. As the competitor of Ongko is using modern technology which reduced the product cost. This makes it difficult for Ongko in selling the goods. The profit margin (gross or net) is the difference between cost and the selling price. If a company has to reduce the selling price without cutting the cost, the profit margin will go down and the same thing applies to Ongko. Here the cost has been used to describe the total expenses incurred in making the furniture. Normally, there are three element of cost such as direct material, labor and factory overheads. The cost of Ongko is going up and the selling price is going down due to tough competition (Emery, Finnerty and Stowe, 2007). Other financial concepts that Ongko’s furniture business considers are material costs, labor- rate and broker costs, real-estate costs including property taxes, insurance, buildings and supply expenses. Additionally, it also considers net income, net margins, overhead, and net income before taxes (Ongko Furniture Budget - University of Phoenix, 2010) Typically, when two companies create a partnership to share profit or losses and the partnership is limited to a particular project, it means that there is a goal to limit the liabilities of both the partners up to that particular project, and not the other business of the partners. Mr. Ongko owner is not interested in joint venture as he is afraid that he will not be able to enjoy his life and will not be able to spent life with the family, as he is doing now. Conclusions The paper identified and analyzed some important financial concepts related to the Ongko Furniture Store scenario. These concepts could be used in the future to solve any issues pertaining to the company’s ventures including acquisitions, mergers and achieve a global footprint. References Emery, D.R., Finnerty, J.D., & Stowe, J.D. (2007). Corporate financial management (3rd ed.). New Jersey: Pearson-Prentice Hall. University of Phoenix Eun, C.S., & Resnick, B.G. (2007). International financial management (4th ed.).New York: McGraw-Hill. University of Phoenix University of Phoenix (2010). Ongko Furniture Scenario. Retrieved on March 21, 2010, from https://ecampus.phoenix.edu/classroom/ic/classroom.aspx University of Phoenix (2010). Ongko Furniture Budget. Retrieved on March 21, 2010, from https://ecampus.phoenix.edu/classroom/ic/classroom.aspx Juan Correa (2010). Furniture Store Analysis synopsis. University of Maryland. Retrieved on March 22, 2010, from www.jlcorrea.net/app/download/3883383863