ABC Enterprise Solutions, is the provider of hosted solutions for Small to Medium Enterprises
(SMEs). The headquarters is in Mississauga, ON, and has clients across the globe. Currently, they
are charging a $400 monthly fee for their CRM services they offer to 300 of their clients. They have
recently been contacted by their software vendor, and been told that with a $150,000 upgrade on their
hardware and CRM software platform, they can substantially improve their direct marketing
offerings. The new system will cost them nothing beyond the initial cost, but they will have to
increase the number of their maintenance and support staff from 10 to 13 to be able to comply with
their service level agreements. The maintenance staff is paid $1200 weekly.
Using the What-If Analysis feature of MS Excel, answer the following questions:
1. If the management thinks the upgrade will cause the demand (# of clients) to grow uniformly
(same percentage every month) until it doubles at the end of the third year (144 weeks), what
will be the average weekly demand growth (percentage) for their service?
(Note: assume 1 month is 4 weeks).
2. Assuming the demand growth from question 1 is achievable, should they invest in this
upgrade if they want to break even (reach the statuesque profit level) within 1 year? Why?
3. What minimum level of a weekly demand increase (percentage) would justify the investment
if ABC wants to break even (reach the statuesque profit level) after 2 years?
4. If the demand will stay the way it is, however there is an opportunity for ABC to charge more
for this new service, to maintain current profitability, what should the new monthly fee for
this service be
DATE
Question answered on Jul 22, 2018
PRICE: $14.99
Solution~000495051.zip (18.37 KB)