LL Drinks is a public limited company which produces a varie…
LL Drinks is a public limited company which produces a variety of fruit drinks. The drinks are produced and sold in many different countries across the world. LL Drinks is a successful company, but the directors want to increase its share of the fruit drinks market around the world. The following two ways of increasing market share have been identified. Option 1: Increase sales of its most popular brand of drinks by starting to sell it in 10 more countries. The investment required to launch the drinks into these new markets is estimated to be $50m. This includes market research, marketing campaigns and building factories to produce the fruit drinks in these countries. Option 2: Take over a competitor which sells a different range of drinks. The cost of buying all the shares to take over this competitor is estimated to be $100m. APPENDIX 1 Summary of Financial Information LL Drinks existing business 2020 $m Capital employed 400 Sales revenue 800 Gross profit 600 Net profit 100 Option 1 forecasts $m per year Sales revenue from 10 countries 200 Cost of sales 80 Operating expenses 110 Option 2 forecasts Sales revenue from taking over the competitor 400 Cost of sales 120 Operating expenses 220