The Isis Company considers introducing a new lower-end olive oil brand with cheaper packaging in addition to its original brand "Isis". The objective was to increase the company's market share by penetrating the mass market (Isis's current market share in 2020 is 10%). Management wanted to position the two brands very differently. However, they anticipated that the new brand might cannibalize from Isis. The below table summarizes the prices, costs and expected volumes in both scenarios (Isis alone and Isis+ New Brand) next year (2021). 2021 Price (EGP/unit) Var. Cost (EGP/unit) Scenario 1 Isis 50 20 Scenario 2 Isis 50 20 Volume (units) Fixed Costs (EGP) 90,000 500,000 a) Conduct a cannibalization analysis to evaluate the introduction of the new brand. Next year (2021) 100,000 500,000 New Brand 35 15 50,000 1,000,000 b) What is the % increase (or decrease) in yolume and in net profits if the new brand is introduced? What is the new market share of the Isis Company (Isis+ New Brand) in this case (Isis's current market share is 10%)?
The Isis Company considers introducing a new lower-end olive oil brand with cheaper packaging in addition to its original brand "Isis". The objective was to increase the company's market share by penetrating the mass market (Isis's current market share in 2020 is 10%). Management wanted to position the two brands very differently. However, they anticipated that the new brand might cannibalize from Isis. The below table summarizes the prices, costs and expected volumes in both scenarios (Isis alone and Isis+ New Brand) next year (2021). 2021 Price (EGP/unit) Var. Cost (EGP/unit) Scenario 1 Isis 50 20 Scenario 2 Isis 50 20 Volume (units) Fixed Costs (EGP) 90,000 500,000 a) Conduct a cannibalization analysis to evaluate the introduction of the new brand. Next year (2021) 100,000 500,000 New Brand 35 15 50,000 1,000,000 b) What is the % increase (or decrease) in yolume and in net profits if the new brand is introduced? What is the new market share of the Isis Company (Isis+ New Brand) in this case (Isis's current market share is 10%)?
Essentials of Business Analytics (MindTap Course List)
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Publisher:Jeffrey D. Camm, James J. Cochran, Michael J. Fry, Jeffrey W. Ohlmann, David R. Anderson
Chapter15: Decision Analysis
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Transcribed Image Text:The Isis Company considers introducing a new lower-end olive oil brand with cheaper packaging in
addition to its original brand "Isis". The objective was to increase the company's market share by
penetrating the mass market (Isis's current market share in 2020 is 10%). Management wanted to
position the two brands very differently. However, they anticipated that the new brand might cannibalize
from Isis. The below table summarizes the prices, costs and expected volumes in both scenarios (Isis
alone and Isis + New Brand) next year (2021).
2021
Scenario 1
Isis
50
20
Volume (units)
Fixed Costs (EGP)
100,000
500,000
90,000
500,000
a) Conduct a cannibalization analysis to evaluate the introduction of the new brand. Next year (2021)
Price (EGP/unit)
Var. Cost (EGP/unit)
2022
Price (EGP/unit)
Var. Cost (EGP/unit)
b) What is the % increase (or decrease) in volume and in net profits if the new brand is introduced? What
is the new market share of the Isis Company (Isis+ New Brand) in this case (Isis's current market share
is 10%)?
Volume (units)
Fixed Costs (EGP)
Isis
50
20
c) The Company thought of extending the research beyond one year. The below table summarizes the
projected prices, costs and volumes in both scenarios (Isis alone and Isis + New Brand) in 2022.
Based on the above data, conduct a cannibalization analysis for the introduction of the new brand in 2002
Scenario 1
Isis
50
20
110,000
500,000
Scenario 2
Isis
50
20
90,000
500,000
New Brand
35
15
50,000
1,000,000
Scenario 2
New Brand
35
15
100,000
1,000,000
d) What is the % increase (or decrease) in yolume and in net profits if the new brand is introduced? What
is the new market share of the Isis Company (Isis New Brand) in this case (Isis's current market share
is 10%) ?
e) Based on the results in (a-d), what would you conclude
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