Allegro Case Analysis

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Recommendation:

Based on the data availability and analysis we have done, we believe that we should move forward with a price point of $275 and anticipate to spend at least $1.5M and $1.0M on advertising and S&D respectively. At this price point and advertising spend, we have the ability to maximize our profit while achieving a market share of 2.7%. Going beyond these values for advertising and S&D spend will drive sales up and we get to a greater % of market share but it happens at a slower rate and also it yields diminishing returns and will eventually eat into our margins.

Limitations:

We are constrained to only having 1 year of data and this does pose a bit of a challenge in terms of the analysis. Having historical sales over many years and in monthly buckets would have helped us understand how the product has behaved and if there are seasonal effects we need to take into account. In addition having some historical market size and share data will help us understand how we are positioned versus our competition. Knowing our competition, their price point and market share will help us to improve our model and confirm the assumptions for managerial judgmental inputs in the model.

We do not know if there is any room for improvement in our internal manufacturing processes that could decrease overhead spend. Also, any information on cost reduction associated with efficiency gains will help in changing the inputs such as price, to be made could also have affected how much we can take our variable cost down, which in turn can help drive our net margins up.