financial management - final project group presentation
TRANSCRIPT
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Financial management
Licensing, Duty-Free Shops, and Directly-Operated Stores
Done by: Sarah, Anastasia, MariaIsabel
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IntroductionLicensors (Gucci) grant licensees (external businesses) permission to use, create or sell its products under its brand name. In return, they receive royalties.
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IntroductionDuty-free shops are exempt from the payment of taxes and duties, on the requirement that the goods sold will be sold to travelers.
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IntroductionDirectly-operated stores (DOS) are owned and run by the company and allow luxury houses to maintain complete control over presentation, service, pricing, and the range of products that were sold.
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Risk VS reward
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Investment needed● Licensing: Low● Duty-free shops: Moderate● Directly-operated stores: High
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Revenue Cost of goods soldGross profitExpensesOperating profit
Effects on financial statements
Increase in sales volume + royalties
Decrease in marginal cost
Decrease in rent and fixed expenses
Licensing: income statement
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Effects on financial statementsLicensing: balance sheet
Assets
Liability
Shareholder’s equity
Decrease in fixed asset investment
Increase in return on capital invested
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Effects on financial statementsDuty-free shops: income statement
Revenue Cost of goods soldGross profitExpensesOperating profit
Decrease in taxes
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Effects on financial statementsDirectly-operated stores: income statement
Revenue Cost of goods soldGross profitExpensesOperating profit
Increase in sales volume
Increase in expenses
Overall increase in operating profit
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Effect on profit margins
Licensing: ● Brands acquire rights to design and distribute products
● The easiest way to expand a brand○ Handbag collection
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Effect on profit margins
Duty Free Shops: Duty Free Sales before 2000
1990 1992 1994 1996 1998 2000P
RO
FIT
YEAR
● In the early 90s big companies relied on sales by tourists
now their goal is to establish local relationships
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Effect on profit marginsDirectly Operated Stores:
● A risky investment● Cutting cost● Allows for complete control
○ pricing○ service○ creative○ profit!$$$
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THE END