Musicalia is a high volume producer of CDs and other associated products. It has been in business for 15 years and was formed after the liquidation of a company producing records. Its production is highly automated and takes place in a completely dust-free environment. Their turnover last year was £175 million.
| General information |
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| Product: | A range of CD ROMs, DVD discs and other data recording equipment. |
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| Market: | A rapidly changing and evolving market. Technological developments come thick and fast. All products are sold to UK firms, but there is intense worldwide competition for the business. |
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| Ownership: | A Plc. The shares were floated 15 years ago and apart from 2 big institutional investors they are mainly owned by small shareholders. |
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| Financial Information |
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| Turnover: | £175 million |
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| Profit: | £14 million |
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| Ratios: |
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Profit margin : | 8% |
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| Gearing (level of debt): | 45% |
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| Acid Test Ratio: | 0.7 |
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| Return on Capital Employed (ROCE): | 21% |
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| Cost structure: | There is a high level of indirect costs. Production is highly capital-intensive and maintaining a dust-free environment is very expensive. There are also big R & D costs. The labour required is relatively unskilled for production and direct costs are a small proportion of overall costs. |
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| Marketing |
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| Marketing strategy: | Most of the products are sold on to big music companies to be recorded. Marketing is therefore based on meeting regularly to develop these strategic relationships. |
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| Average market growth over last 5 years: | The market has grown on average at 10% over the last five years. |
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| Market prospects: | The CD-ROM market could be considered a mature market and while still an excellent earner it has grown slowly in recent years. Most of the market growth is coming from new technologies. |
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| Types of marketing used mainly: | No advertising. Most marketing focuses around the 'product' and is done by developing strategic relationships. |
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| Product |
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| Characteristics: | A hi-tech range of products that are highly dependent on growth in other markets (the music and personal computer market). |
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| Price elasticity of demand: | Relatively price-elastic. Keeping the cost and the price down is vital to maintain business growth. |
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| Income elasticity of demand: | Relatively income-elastic. The demand for the products depends a great deal on the demand for music and computers, and both are very sensitive to levels of economic growth. |
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