In 2007, CUTCO had profits of $197 million and has estimated revenues of $260 million in 2011. This provides CUTCO with a five-year average growth rate of 8%. At this rate, CUTCO's yearly revenue will be a mere $380 million by 2016 and by 2021, $560 million. This is quite distant from reaching CUTCO's profit objective of $500 million to $1 billion per year. Therefore, CUTCO must consider strategic options that will lead to substantial growth. .
Limitation of Retail Expansion.
CUTCO's current annual revenue is $260 million, which means it needs to generate an additional $740 million in annual revenues to reach its long-term goal. Each store, based on estimates from the pilot stores, is capable of achieving revenues up to $300,000. As CUTCO increases its prices by 5% every two years, its revenue would grow to $380,000. In order for CUTCO to make up the difference of $740 million in missing revenue, it would need to open 2,000 stores in the U.S. With an initial expenditure of $150,000 per store, this venture would cost the company $300 million. Therefore, it is not reasonable for CUTCO to rely solely on U.S. and Canadian retail stores to reach its goal.
Maximizing Sales Representatives.
In 2011, CUTCO enjoyed $220 million in revenues generated by sales representatives, with total revenues of $260 million. In order for an increase in recruiting to achieve $740 million in additional revenues, CUTCO would likely need to hire almost four times as many sales representatives. Due to the high turnover rate, it would need to hire and train a large portion of this sales pool year after year. Since CUTCO is currently hiring "tens of thousands of college students a year," it is not reasonable to expect a steady supply of skilled sales representatives to be available and interested in selling CUTCO products. Therefore, CUTCO must look beyond recruiting expansion to reach its goal.
International Expansion.
