To – Mr X, CEO
From – Mr A, Middle Manager
Date – October 23, 2021
Subject – Choosing the suitable option that would provide the company maximum financial
benefit
Comparison of financial benefits of Option A and Option B
The automobile business has decided to incorporate internet of things (IoT) technology into
its vehicles. Before finalizing the innovative option, it is necessary to conduct a critical
comparison of the available innovative options. In the memo, the financial benefits associated
with both the options has been examined and the option that would be of higher financial
benefit for the company has been identified.
Sales Forecast
The sales forecast has been conducted to identify whether Option A or Option B would
produce better sales figure for the company. By choosing the innovative option, the company
is expected to showcase a solid sales turnover of connected cars at the end of the forecasted
period. The company would be able to grow connected cars at 10.2 % per year for 2 years,
and then the growth of the connected cars segment would take place at 25 % per year. It
could boost its overall sales turnover figure.
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12345678910 11
Sales Connected 3.8 4.18765.23455.76847.21059.013211.26614.08317.60422.00527.506
Sales Traditional 183.3 188.71194.27199.96 205.8 211.78217.91224.18230.59237.16244.09
Salesm forecastm datam -m Optionm Am m
Sales Traditional Sales Connected
In case the company would opt for Option B, the sales forecast of connected car segment
would be lower as compared to that of Option A. The company would be able to grow
connected cars at 10.2 % per year for the entire forecasted period.
Gross Profit Margin Forecast
A comparison of the gross profit margin forecast has been carried out to identify the option
that would be more feasible and financially beneficial for the business entity. This analytical
metric has been evaluated as it sheds light on the efficiency of the automobile business to
manage its business operations while incorporating the Internet of Things technology in its
connected vehicles.
The table that has been presented below shows that Option A would be a more profitable
alternative for the company. It would enable the business to efficiently and productively
carry out the business operations by maintaining a higher gross profit margin during the
forecasted period.
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300
1 2 3 4 5 6 7 8 9 10 11
Sales Connected 3.8 4.1876 4.614745.085445.604156.175786.805717.499898.264889.10789 10.11
Sales Traditional 183.3 188.713194.265 199.96 205.798211.779217.906224.178230.595237.157 244.09
Salesm forecastm datam -m Optionm B
Sales Traditional Sales Connected
Gross Margin less RD and capital costs
The line chart that has been presented below sheds light on the net gross margin of the
business after adjusting the research and development and capital costs. Option A seems to
be a better option for the automobile business as it would help it to generate a higher gross
margin after deducting the costs relating to the research and development aspects and capital
costs. In the long run, the company would be able to derive financial benefit which could
improve its financial position and portability in the competitive market environment. m m
Conclusion from data visualizations
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100
0 1 2 3 4 5 6 7 8 9 10
Option B 28.293 29.1863 30.1089 31.0619 32.0465 33.0638 34.1151 35.2017 36.3249 37.4861 38.7366
Option A 28.293 29.1863 30.239 31.2053 32.3838 33.6597 35.0519 36.5841 38.286 40.1945 42.3898
Grossm Profitm Marginm Forecastm -m Optionm Am andm B
Option A Option B
12345678910 11
Option A 24.193 25.0533 29.072 30.003331.145832.384533.738435.231336.892638.759240.9114
Option B 27.193 28.053328.941929.859930.808431.788632.801633.848834.931436.050937.2583
0
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45 Grossm Marginm lessm RDm andm capitalm costsm
Option A
Option B
The detailed evaluation of both the available innovative options have been carried out so that
the automobile company would be able to choose the option that would be more beneficial
financially. After comparing the sales forecast, gross profit margin forecast and gross margin
less RD and capital costs for Option A as well as Option B it has been identified that the
company must choose Option A while choosing an innovative option to integrate the IoT
technology in its connected vehicles. For example, if the company chooses Option A it is
expected that its sales forecast would increase at 10.2 % per year for the initial two years
and then the growth rate would be 25 % per year. In the competitive and dynamic business
landscape, the first option (Option A) would give rise to a host of new opportunities in the
connected car segment which would reflect on its solid sales performance in the future.
Thanking You
