Question

Use Microsoft Excel to solve the problems and answer the question. Show step by step solution

Q1) RANIS Enterprise Solutions is the provider of hosted customer relationship management (CRM) solutions for Small to Medium Enterprises (SMEs). The headquarters are in Toronto, ON, and they have clients across the globe. Currently, they are charging a $500 monthly fee for their CRM services that they offer to 300 of their clients. They have recently been contacted by their software vendor and been told that with a $180,000 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 $800 weekly. Using the what-if analysis feature of MS Excel, answer the following questions:

A. 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.

B. Assuming this demand growth (from question 1) is achievable, should they invest in this upgrade if they want to break even (reach the status quo profit levels) within 1 year? Why? Hint: Consider the average client size for the 144 weeks while dealing with the proposed change.

C. What level of weekly demand increase (percentage) would justify the investment if RANIS wants to break even (reach the status quo profit levels) after 2 years?

D. If the demand will stay the way it is, however, there is an opportunity for RANIS to charge more for this new service, to maintain current profitability, what should the new monthly fee for this service be?

Answer 1

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