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United By Blue
Can an Eco-Friendly Apparel Company Afford to Stay Mission Focused in the Face of High
Brian Linton grew up in Singapore and Japan and , even as a child, was fascinated by water,
particularly the ocean. ?I was fortunate to travel the world and go to a lot of different beaches,?
he says. ?I loved all things aquatic and had about 30 fish tanks in my room. These experiences
put me in beautiful locations as well as places that were so littered with trash that you couldn?t
see the sand. Seeing trash and polluted oceans was especially discouraging for me.? In 2006,
while still a student at Temple University, Linton started Sand Shack, a business that sells
beach-themed jewelry to stores along the East Coast (and that he still. owns). He donated a
portion of the company?s sales to nonprofit organizations dedicated to ocean conservation but
wanted to ?do something that was more concrete and tangible than giving money to nonprofits,?
In 2010, Linton launched United By Blue, an eco-friendly apparel company, with the idea
that this business would be different. The name Linton gave his company is inspired by his
belief that water unites all of humankind. ?The water of the world is what we all need to live,? he
says. ?It?s what unites everything, and it?s often the most mistreated part of the world.? In fact,
people dump an estimated 14 billion tons of trash into the earth?s oceans each year, and Linton
wanted to do something about it. Rather than merely give away money that may or may not
accomplish worthy environmental goals, United By Blue, which is based in Philadelphia, would
associate a tangible environmental action for every sale that it makes. Linton pledged to
sponsor cleanups that would remove one pound of trash (which primarily is plastic) from the
world?s oceans and waterways for every product that United By Blue sells. ?Our cleanups are
the bedrock of our company and allow us to engage with thousands of volunteers and inspire
participation in the ?blue? movement,? he says. So far, the company has hosted nearly 100
beach or waterway cleanups and has removed more than 140,000 pounds of trash.
Two years after starting United By Blue, Linton was analyzing the company?s financial
statements noticed something alarming: It?s wholesale gross profit margin had shrunk from 60
percent to just 15 percent, a pattern that was unsustainable. T-shirts are the company?s bestselling products, and customers who believe in the company?s mission are buying them through
retailers such as Urban Outfitters, Whole Foods, and other small, independent shops for a retail
price of $29.50. United By Blue sells the shirts to retailers for $14.50, but some of the
company?s larger customers receive discounts and pay less. The environmentally friendly Tshirts, which are produced in India, cost more to make and package than the standard T-shirts
because Linton used softer, more expensive slub cotton rather than the traditional jersey cotton
that most companies use to make T-shirts. He also insisted on avoiding the use of plastic in any
of the company?s packaging because of its negative impact on the environment, choosing
instead to use biodegradable packaging made from banana fiber and paper hangtags made
from recycled elephant dung that is infused with bluebell flower seeds so that customers can
actually plant the tags and grow flowers. The banana fiber wrapping alone costs 50 cents
each---- 50 times the cost of a plastic bag. In addition, each cleanup that United By Blue
sponsored costs between $2,000 and $5,000, a significant expense for a small company with
annual sales of less than $1 million.
Linton turned to his spreadsheet and calculated that he would have to raise its wholesale
price to $16.50, which in turn would mean that retailers applying the standard markup would
charge customers a final price of $34 for United By Blue T-shirts. He realized that raising the
wholesale price to $16.50 probably would cause two of the company?s largest customers, Urban
Outfitters and Whole Foods, which together account for 25 percent of United By Blue?s sales, to
drop the shirts. ?Large retailers want discounts to maintain [gross profit] margins around 60
percent,? he says. Losing major retailers also would make selling to small, independent shops
more difficult as well. ?[Having big-name retailers as customers] helped us build legitimacy,?
says Linton. If he raised prices, the company?s small retail shops might drop the line as well. If
he did not raise prices, he estimated that United By Blue would run out of cash in less than six
months. Another option is to reduce the shirts? cost by using less expensive plastic bags and
hangtags and traditional jersey cotton, which also has a negative impact on the environment.
United By Blue has 50 cleanup events planned for the upcoming year, and eliminating would
save between $100,000 and $250,000. However, all of these changes would go against the
company?s mission and the reason that Linton started United By Blue in the first place. ?Our
cleanups are the bedrock of our company,? he says. ?My grand vision is to use the power of
business to leave a positive impact on this world.?
This assignment will assess the competency 5. Apply concepts related to pricing
and credit strategies within the context of small business operations. (Ch. 11)
Directions: Read Case 8 ? United by Blue on page 842 of the textbook. Answer the
? What risks does United By Blue face if Linton raises the prices of its t-shirts?
What risks does the company face if it fails to raise its t-shirt prices?
? Should Linton abandon United By Blue?s mission as an active, eco-friendly
apparel company to lower the cost of the company?s t-shirts? What are risks
of taking this approach?
? Should United By Blue raise the wholesale price of its t-shirts from $14.50 to
? If Linton decides to raise the price of United By Blue?s t-shirts, what steps
should he take to communicate the price increases to the company?s retailers
and its final customers?
Write a 1-2 page paper detailing the above questions, and be sure to cite your
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