1) Will Natalia lose money if she accepts the Brazilian offer? Explain.
A) According to Natalia accounting if they sell 20,000 Pippi bags to Brazilian buyer at 8$ per unit, Natalia lose money as it cost 10$ for production of each unit. There are many other factors can be considered to reduce the loss of money in this deal like by changing the variable cost of the product and also labour charge. The fixed price like material cannot be reduced and the quality should not be compromised. But the organization can reduce other variable costs like labour charges by increasing the unit production per hour, or asking employee extra time by increasing the productivity to 90% which is 70% now helps to reduce the loss of money in this deal.
2) What factors other than costs and revenue should be considered in this case?
A) As Natalia wants to enter international market as soon as possible is the main factor to accept the Brazilian offer to enter into Latin America and Asia. As Brazilian are selling the product for 35$ to 45$, Natalia can demand more price from Brazilian buyer once the customers got about the product. Selling the products at low cost initially to build a platform in the market is one strategy to make customers and increase the price later.
The other reasons can be once the product is released in the market, other buyers may come forward to buy for more price.
If the product is successful in the market they can open their own retailers too.
3) What would you recommend to Natalia?
A) I would recommend Natalia to confirm the order because of the quality of the product maintained by them and the customers are mostly teenagers and young women and their style can make their product successful in the market easily. Once they build up a customers in the market they can negotiate the price with the buyers and can gain profit later.