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Posted on April 21st, 2014, by

The introduction of the new CNC mill machine opens larger opportunities for the company to enhance its position in the market. On the other hand, the company needs to invest substantial funds into the introduction of the new mill machine and its marketing. In such a situation, the company confronts the problem of the shortage of cash and the lack of the fast return on investments since within three years, the project is unlikely to bring considerable return on investments and cover investments of the project. Therefore, the company should conduct the in-depth analysis of the project to take a decision on whether to launch the new mill machine or not. In this regard, it is possible to recommend launching the production of the new mill machine because the company can take an advantageous position in the industry with its new mill machine, while benefits of the new machine may outweigh costs of the introduction and production of the new mill machine. Consequently, the company can count on substantial return on investments on the condition that the company conducts the in-depth marketing and financial analysis before introducing the new product and develops an effective marketing strategy. In this regard, it is possible to recommend introducing the new product and focusing on the aggressive promotional campaign to attract customers and to accelerate the return on investments within the three-year period.

The information concerning the costs of the production, the budget of advertising campaign and the expected sales along with the labour costs are the most relevant information concerning the project. In this regard, the company should pay a particular attention to the costs of the production. At the moment, the costs of the production of the new mill machine are low, while expected revenues are high. Hence, the company can count on the high profitability of the new mill machine that makes the new machine worth implementing. The high profitability of the new machine can cover costs of its introduction and marketing.

Furthermore, the company should take into consideration the budget of advertising campaign, which, at the moment, comprises €40 000 of additional funds being spent on advertising of the new product. However, taking into Consideration €18 000 benefit that may be generated by the new mill machine, the company should introduce the new machine in the market. At any rate, the company should conduct the aggressive advertising campaign during the first year after the introduction of the new product and within three years the return on investments will cover additional funds being spent on advertising campaign at the moment since the benefit generated in three years will be no less than €54 000, if the benefit remains unchanged. However, the benefit is likely to grow respectively to the growth of sale rates of the new machine in the course of time and on the second year the company can gain €20 000 benefits, while on the third year, the level of benefits can reach €22 0000. As a result, the total benefit generated in three years will comprise €60 000. Therefore, the company will be able to cover costs of investments into the additional advertising and gain considerable benefits in a long-run perspective.

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