The News Express Case Study

The News Express a leading News paper brand in the UK owned by The News
Express Publishing Ltd. in 1992 got Herbert Wessling as its newly appointed
president and general manager. Though Mr Herbert was having experience in the
executive level in news paper publishing in leading such a prominent brand under
stiff competations from other local competetors yet Paul hanson was confident that
the tide will definitely turn and The news express will continue ir=ts profitable
journey in midest of stiff competations from other rivals.The News express was not a
loss making brand rather it was performing good in the londen market until Paul
Hanson made some wrong decisions related to the three stand alone real estate
products the Pauls father launched to capture the real estate market, as Londen
was developing rapidly expecially the real estate secter thus he was confident that
the consumer will get benefited from the real estate classifieds al well as to retain
its popularity and marketshare among other prominent news paper brands.
Advertising and classified are the major source of revenue for a news paper and
with a diversified market news paper should have all types of classifieds and
current trend of advertisments with it. Thus the major challenge relater=d t News
Express was not its expected profitability rather the major issue was the pricing of
its classifieds such as the To let 3 which was making losses in the process and thus
Hanson wanted to discontinue the To-Let 3 from the news paper thus expecting a
overall turn-around in profits.
In the situation of reduced prices for the classifieds by The Telegraph further put
pressure on the news papers profitability.The To-Let 3 was decided to be dropped as
it was impossible to reduce its quoted market price as well as it is impossible to
reduce its cost of production by 43 pence per centimiter.Thus the company can
remain focused on the cost reduction for other two classified products expesially the
To-Let 2 .The first half of 1992 was a successful one for the news publishing
company, as despite of Hansons thoughts about discountinue the To-Let 3 Wessling
keep the product and relied on the standard cost data from the accounting
department of the company which actually shows that the first alf of 1992 was
profitable. Had The company dropped its To-Let -3 classified product its Profitability
would have improved yet its general and administrative overhead and Depreciation
will be completely allocated between other two products thus reduced their
profitability and it may lead to huge variance from the standards set by the
company for analysis of the costs.Detail implication of the above decision refer
Exhibit 1 and corresponding notes.
Q2. Reduction of price of a product which is already prevailing on the breakeven is a
tough decision. The price of an product is depends not only on the variable cost but
also on Fixed cost structure of the whole organisation. Hence in case of News
Express , it it decide to reduce the price of the product from 4.90 to 4.50 it either
needs to increase its volume of sales in order to meet existing breakeven point or it
need to reduce its fixed cost which is not possible in the short run as it requires
carefully choosen costing techniques for overhead allocation and cost reduction
techniques. For existing Breakeven refer Exhibit 2.
It is not advisable to reduce the product costs as the company is already running
through a tough situations with negative bottom-lines.

Q3 In order to find out which of the three real estate products are most profitable
for the company we need to compare them on the basis of their contribution
margins because Non-Variable type of costs appearing in the cost sheet of the
company are to be allocated on overall basis thus they are irrelevant to our decision
making process Let out 1 is more profitable and the most promising product for the
Newspaper publishing company, Let out 2 needs attention and Letout 3 requires to
be optimized so that its variable cost to sale s ratio will decrese and in tern
Contribution will increase.. Refer Exhibit 3