Bayjo Ltd
-- Individual assignment #2

Student Number: 32995145
Name: Diao ZIqi
Section Number: COMM 101 104
Date: 2014-10-20

Recommendations for Bayjo to Increase Profit
They are three different kinds of products are produced in Bayjo: skateboards, bicycles and scooters. The sales for bicycles and scooters are continually increase from first launched to
2012, but the sales of skateboards are decrease sharply in recent years. Base on the Annual
Unit Sales table, financial and marketing analysis I have three recommendations for Bayjo to improve their profit

Recommendation #1: Bayjo should close down the skateboard division
*Key Factors: Reduce Loss, Improve Strength
From the table, we can find that the sales of skateboard decrease quickly from 2005. There are several reasons could explain this problem. The most obvious one is the service to consumers. In the Business Model Canvas the consumer relationship section contains the service to consumers and those are really important, but skateboard division does not have warranty return policy and delivery service. Besides the materials used for skateboards are very generic and basic, this means their skateboard are always 'same'. The skateboard division is managed by Blakay and dedicates 60% of his time. If shut down this division, he will have more time and more capital to develop other two division. For example to transfer marketing energy from skateboards to scooters and bicycles and therefore can increase sales and profit.

Recommendation #2: Develop new design, purchase machineries and Training workers *Keys Factors: Innovation, increase capacity, cut cost in long run
Scooter division performs pretty good from 2008. This could be mainly due to not only the market was growth with a high rate but also the good services to consumers. For example, the delivery time have been perfect. However, in report, I find that the design for scooter was never changed from 2008 till now. As same as skateboarder division, sales could decline after several years, because the products are saturated in the market. Innovation is necessary if they want to keep increasing the sale. Moreover in 2012 the sale is 27000 which is just 1000 below the maximum production capacity. Manager should consider to buy machineries for scooters division to prevent sales exceed the maximum production level.
Also because making scooters is labor-intensive, to increase capacity they need to training workers to make them more professional.

Recommendation #3: Adopt a part of factory into warehouse
*Key Factor: Inventory
Bayjo receive a email from Giantco that want to have a three-year-contact. But for this contract, Bayjo need to hold at least 800 finished bikes. However, they don't carry finished goods inventory now. I suggest they accept this contract and adopt a part of factory into warehouse enable company to hold stocks.
In my first suggestion, I recommend Bayjo to give up skateboard division, so they should then have 22% of factory is empty which can be transformed to warehouse.

Recommendation 1: Shut down the skateboard division
*Calculation:
Break even analysis (2012) for three different products.

Skateboards

S elling P rice

Direct Labo ur
V ariable Co st(P er unit)
Direct Material
B atch co st per unit
M aintenance

$

Capital
105.00

$
$
$

Calculati o n

45.00
5.00
44.00
(22000/500)

F i x e d C（P o s te r y e a r )

$
6 0 , 0 0 0 . 0( 60 0 % * 1 0 0 0 0 0 )
S a l a（B ry lakay)
Factory
$ 2 2 0 , 0 0 0 . (0202 % * 1 0 0 0 0 0 0 )
T o tal Fixed Co st (Per year)
$ 280,000.00
*Breakeven point for Skateboard : (Fixed cost)/(contribution)=280000/(105-45-5-44)=25454 units
Note: I am underestimate the actual cost of the inspection and maintenance.
Capital
Claculation
Scooters
Selling Price
$
120.00

Variable Cost
(Per Unit)

Labour+Materials+Variable Overhead
Bonus for Manager

$
$

83.60
2.00

Rent of Machines
Factory
Salary

$ 200,000.00 (4*50000)
Fixed Cost
$ 100,000.00 (1000000*10%)
$ 72,000.00
Total Foxed