Identify three products of services of the firm

Management Consultant Group PLC (MCG) is a consulting company that provides other companies or individuals with professional services to improve their businesses and look at ways to expand their profitability. MCG provides a range of services such as:

• Consulting

Where they offer a strategic plan that achieves sustainable results.

• Professional Services

Where they offer a wide range of “hands on” services from supply chain planning support through to expert project management

• Systems

Where they implement and support best-of-breed supply chain solutions, as well as provide other expert technical services

• Training and Education

In partnership with education facilities they deliver short courses, tailored corporate training, mentoring and executive symposiums.

• Benchmarking

Where they measure your business performance against best-in-class companies and industries to identify improvement opportunities.

It was difficult to choose what services I wanted to run with for my 3 products / services, so I decided to go on the 3 that I felt the most familiar with which are; Consulting, Training & Education and Benchmarking.

It was very difficult to find the prices for these services or how to even get in contact with the consultants for these services on the website. To my knowledge, prices were not disclosed so these figures are a rough estimate for the Sales Price, Variable Costs and Contribution Margin. I did take a look at the revenue on the profit and loss sheet for the year 2018 to get a rough estimate on what figures could be expected from these services.

In 2018 Management Consultant Group (PLC) made roughly 28 million pound in Revenue. I calculated that the cost of sales would be about 49.4% of the revenue.

The allocated variable rate percentage is as shown:

1. Consulting – 48%
2. Training & Education – 55%
3. Benchmarking – 46%

Given that the consultants would be charging clients at a charge out rate, I cannot really estimate what their charge out rate would be without knowing their qualifications. So, I am going to use the figure that I estimate they would have made from the services individually for the entire year.

Given that they made a revenue of 28 million pound I estimate that:

1. Consulting – made 12 million (SP)
2. Training & Education – made 4.2 million (SP)
3. Benchmarking – made 6.3 million (SP)

The Variable cost for each product:

1. 0.48 x $12,000,000 (SP) = $5,760,000 (VC)
2. 0.55 x $4,200,000 (SP) = $2,310,000 (VC)
3. 0.46 x $6,300,000 (SP) = $2,898,000 (VC)

Contribution Margin (CM) = Sales Price (SP) – Variable Cost (VC)

1. Consulting = $12,000,000 (SP) – $5,760,000 (VC) = $6,240,000 (CM)
2. Training & Education = $4,200,000 (SP) – $2,310,000 (VC) = $1,890,000 (CM)
3. Benchmarking = $6,300,000 (SP) – $2,898,000 (VC) = $3,402,000 (CM)

	Product	Selling Price	Variable Cost %	Variable Cost	Contribution Margin
1	Consulting	$12,000,000	48%	$5,760,000	$6,240,000
2	Training & Education	$4,200,000	55%	$2,310,000	$1,890,000
3	Bench Marking	$6,300,000	46%	$2,898,000	$3,402,000

Contribution Margins on Management Consulting Group (PLC)

The contribution margin is the sale price of the service minus the variable cost. For MCG their variable costs vary for several reasons. I believe Training & Education would have a higher variable cost because this service would cost the company more to provide. For example: supplies, learning facilities, resources, teacher/mentors’ wages, etc. Because of the expenses being so high to provide this service, the contribution margin decreases and becomes significantly less than the other services that perhaps only provide the consultant and office expenses. Therefore, I estimated the variable cost percentage to be about 55% because it is just a little bit higher than the cost of sales being 49.4% of revenue.

I used 48% on the Consulting service because I assume that that is their biggest and most popular service and would therefore have a high percentage. Likewise, I used a 46% variable cost percentage on Benchmarking for similar reasons to consulting however, since Benchmarking is usually the next step people take after consulting. However, not everyone who seeks a management consultant goes onto benchmarking. Although I imagine it would still be a popular and useful service that people would use. Therefore, the variable cost percentage for Benchmarking is 46%

Possible Constraints

A constraint is anything that interferes with the profitability of the business.

The goal of Management Consultant Group is to provide affordable, professional and sustainable advice and expertise to companies on how to improve their profitability and take their business in the right direction. A constraint that could interfere with MCG and the profitability of their business is the employees. This is because some employees may not be competent enough to provide the services sufficiently to satisfy the customers, therefore they put the company at risk of losing clients and creating a bad reputation. The second constraint is economics. This is a constraint because if there were to be a down-turn in the market, companies may feel it is out of budget to seek advice from a management consultant company and instead try and do their best by themselves.

Discussion

I found the contribution margins easy once I figured out what my 3 products were going to be. I will not lie though I nearly had a nervous breakdown just trying to find them. My company’s website is really hard to navigate and is not very straight forward with what their aim is, their company goal or objective in any way shape or form. I ended up having to google other consultant companies to see what kind of services they provide as I found it really hard to find anything on my company’s website, but after a little bit of digging I finally found some answers. Although once I found some answers I was hit with another complication, I could not see how much the services cost and it made this part of the assignment really complicated. I kept trying to remind myself not to spend too much time on it as this part of the assignment is only worth 4 points, but I just could not let it go. I ended up having do an estimate of what I thought the company would make from that service for the whole year by looking at the revenue for the 2018 year (most relevant and recent year) and then take the percentage of cost of sales out of the revenue and base it around that. Although the figures may not be exact, I think I am still on the right track and I still demonstrated how to calculate contribution margin regardless. Once I finally got some figures to work with, the rest was easy to do as I remember reading about this in one of the chapters and I believe I may have discussed it in one of my KCQs. Although, it was relatively simple now that I have completed it and am looking back on it, I was still asking some class mates and people who have done the unit before how to complete this step and if I was on the right track because I was unsure and not very confident with the figures I came up with in the beginning. I also struggled choosing my three products/services because I did not know much about management consulting to begin with, but I also did not know what all these services were for. Fortunately for me, my dad owns a business of his own so he was a lot of help and told me all about what the services can do for a company which helped me pick my 3 services because I seemed to have more information on them after speaking to my dad. My biggest constraint with this step was making sure that I was on the right track. I was dreading doing this step but now that I have completed it, I realise it was not as bad as what I assumed it would be. I had to read the instructions for this step a lot of times and even got my dad to have a look at it to see if he had the same thoughts as me on what to do for this step.