Managing the Marketing Function

21/6/2013

Managing the Marketing Function

In the following paper, we will discuss and better understand the reasoning behind placing a bid in Managing the market function case. In order to better understand why Nathan did not finally placed a bid; we must first understand the basic calculations:

To begin with, making of the bid is time consuming, and therefore costs money which comes to an additional investment of $200,000 out of the budget of the Vancouver Office. The second thing Nathan was looking at was the expected revenue from the given project.

The given hourly rate of 120$/h with 6000 h/y for 3yr produces:

120 X 6000 X 3=$2,160,000

The above total will be disturbed over 3 years following the beginning of the project.

Now we must consider how the profit will be disturbed among the offices of the firm.

As was given, 20% of the profit will be given to the local office who won the bid, 50% will be given to the headquarters offices in Toronto and Montreal, and finally 30% will be going to the rest of the company's offices.

With that said, the following are the calculations to show the exact figures.

Local office:

20% X 2,160,000 = $432,000

Headquarters:

50% X 2,160,000 = $1,080,000

Other Offices:

30% X 2,160,000 =$648,000

Now, we should consider the revenue following the deduction of the money originally have invested by the local office in order to pay for the bidding process.

432,000-200,000 = $232,000

Looking at the results above, it is clear why Nathan had decided not to invest and bid for the project. Although by simply looking at the numbers above, one should clearly understand who not to bid, we do have to consider other business factors why a company of this magnitude should bid. At times where a company is at a place where they have a large over head expenses and the business is not generating enough cash, it is a common practice to still bid or go for projects which are not profitable or has a very low amounts of income. Although initially it might seem like the wrong thing to do, if it is done correctly with the correct financial safety measurements, it is a good way to generate income to "keep the wheels turning".