AllSmile’s mission is to provide quality toothpaste globally at a fair and honest price, providing customer service with a smile. Motto “Perfect Smile Just a Brush Away”
To Our Shareholders
Last year was a big year — we delivered strong results, launched fantastic new products and services, and positioned AllSmile for an incredible future. For fiscal year, we also maintained strong cost discipline resulting in cash flow from operations of $104. 7 million, an increase in manufacturer sales by 23 percent from the prior year. At the beginning of our first year we built a million dollar plant in Brazil. We look forward to all the opportunities this plant will provide for our company such as much lower cost of goods manufactured.
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We delivered these results by providing new products that help the families in the communities. We look forward to all the great opportunities in the future that our products will bring to Latin American individuals.
Potential Future Decisions
AllSmile has made an impact in the industry over the past three periods due to our ability to compete in terms of pricing, advertising, production, and distribution. We plan on increasing our competitiveness in the Latin American market by expanding our brand’s products to better serve our product demand and also by looking into new markets to enter.
When deciding what new products to implement (if any), we will extensively research demographics, both social and economic, and potential demand for these products. It is very important for us to choose products that produce high margins. We will accomplish this by analyzing our costs associated with producing the products and determining the demand for the product. As far as pricing, AllSmile was able to compete with the large brands during the first three periods. We intend on continuing this, as well as focusing on competing better against local and regional brands in order to increase our total market share in Brazil.
As the market matures in Brazil, we may need to enter a new market in order to increase revenues and maintain our strong growth. Some important characteristics we will analyze are: Population, GDP and GDP per capita, inflation, poverty, labor costs, shipping costs, tariffs, as well as other political, social, and economic factors. Since completion of our production plant after period one, our costs of goods manufactured has declined each year. This cost reduction will allow us to allocate more funds to areas that grow our revenue such as: advertising, promotion, and a larger sales force.
Challenges and Decisions in Year Three
Our group chose Brazil as the market to enter. We considered the national population, GPD, per capita income and other factors. Toothpaste is an ordinary and special commodity. It is ordinary, because you can easily find toothpaste everywhere, every household can afford it. It is special, because no matter a men, women, old people or children; both the workers and peasants, or drivers, or white-collar workers, and even national leaders; no matter the richest, the poor, all of them need to use it, it is a necessity product. Brazil's population is the largest in the choice of six countries, and their GDP is the highest, GDP / Capita is low.
However, due to the universality of the toothpaste, toothpaste has low prices. It will not be a burden on the economy of the Brazilian family. Therefore, we have chosen Brazil as enter the market. Before the first sales year, we established in Brazil a native plant, which has a capacity of 100 million units. According to Brazil basic social characteristics, and several other major competitors’ product, we decided our product types covered by the child toothpaste for the kids, healthy toothpaste for the elder, white toothpaste for young people, economic toothpaste for family.
Our team pricing standards are to ensure that company earnings, guaranteed price competitive enough in the market, and guaranteed consumers can afford the price. The end of the first year, we had 30% of the products left, in view of the traditional market accounted for 40. 5% of the overall toothpaste market, we decided to increase three sales people into traditional sales channels in the next year. Due to the selling of whole market Economy toothpaste are great, we add advertising investment. At the same time, the poor sell of children's toothpaste prompted us to reduce 5 million budgets on its advertising fee.
According to the results of marketing, and sales of other companies, appropriate to improve the economy, white, healthy toothpaste price and their allowance, try to stimulate the sales. The end of the second year, we left 16% of the products, the market response is good, so we only slightly increased the economy toothpaste prices, reduce the allowance of white, healthy toothpaste. Given the improved performance, the other company has a large number of sales people, we added two sales people to Traditional channel, ten to the hypermarket channel, five to the wholesale channel, trying to expand the market.
On the other hand, due to the increase of 17 sales people, the input is too high, so we decided to reduce the overall investment in advertising in the next year.
Sales and Earnings Trends
AllSmile has started off strong in period one and has maintained that momentum throughout the third period, with expectations of continuing the sales growth. At the end of period one AllSmile unit sales totaled 71. 8 million with a 6. 5% share. Our manufacturer sales totaled 72. 4 million with a 6. 2% share. Gross margins for the first period were 9. 5 million with a -24. 4 million net contribution.
Even with negative contributions AllSmile momentum was able to carry us to a positive net contribution by the end of the third period. In the second period, AllSmile gained 12. 1 million in unit sales totaling 83. 9 million with a 7. 5 share. Manufacturer sales gained 17. 8 million totaling 90. 2 million with a 7. 3 share. Gross margins also gained 26. 4 million ending with 35. 9 million, which was a growth of 279. 5%. Net contribution also improved with only -3. 0 million compared to first periods -24. 4 million. Sales growth continued in the third period as well with even higher numbers.
The third period, AllSmile unit sales had a 13. 0% growth totaling 94. 7 million. Manufacturer sales had a 16. 1% growth totaling at 104. 7 million. Gross margins growth was 28. 9% ending at 46. 3 million. Finally net contribution finally ended positive with 10. 0 million. Unit Sales Manufacturer Sales Gross Margins Net Contributions By the end of period three, AllSmile earning trends showed that the Hypermarket channel we entered totaled 85. 2% of sales compared to the Traditional and Wholesale channels. Traditional channels totaled 8. % and Wholesales totaled 6. 0%.
AllSmile has six main competitors in Brazil: Britesmile, Clean+White, Dentacare, Eversmile, Local 1 and Regional 1. At the end of period one AllSmile ranked higher than Clean+White and Eversmile in market shares sales in Brazil. By the third period, AllSmile was competing head to head with Regionals, and Local competitors in market shares. Period 3 Period 3 Throughout the industry overall, AllSmile is competing with Regional completion in all countries. AllSmile has gross margins of 44. 2%, compared to Regional completion that had 46. 6%.
Even though Regional gross margins are slightly greater than ours, it is a great accomplishment for our company to surpass the other completion in our industry. AllSmile is well on our way to being the most competitive industry in the near future.
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