Recommendation on Look and Like Ltd’s Proposal

Recommendation:
Customer Focused Ltd should reject the contract proposal from Look and Like Ltd based on the following reasons:

1. Financial Impact
   • While the proposal offers potential increases in sales and profit, the financial returns are marginal and not commensurate with the risks involved. The incremental profit after tax for 6 months is only GH¢41,800, with an annual profit increase of GH¢83,600. This level of return does not justify the significant commitment and operational demands posed by the contract, particularly over a three-year period.
2. High Risk of Wastage
   • The contract assumes a wastage rate of 20%, which is typical for well-managed businesses. However, Customer Focused Ltd’s known inventory management issues may result in higher wastage, potentially eliminating any profit. If wastage increases to 26%, profitability could be wiped out, turning the contract into a loss-making venture. This poses a substantial risk, especially given the company’s current weaknesses in managing inventory.
3. Operational and Management Challenges
   • Managing the fresh produce supply chain requires more intensive operational involvement, including quality control, proper handling, and regulatory compliance. The company currently lacks the systems and expertise to manage these challenges effectively, which increases the likelihood of operational failures and financial losses.
4. Ethical Concerns
   • There are ethical concerns regarding Look and Like Ltd’s labor practices and relationships with suppliers, such as paying low wages and charging farmers fixed fees. These practices may not align with the long-term values or reputation of Customer Focused Ltd. Accepting this contract could expose the company to reputational risks, which may outweigh the short-term financial gains.

Conclusion:
The contract proposal from Look and Like Ltd introduces too many risks, both operational and ethical, and does not provide sufficient financial return to justify these risks. Customer Focused Ltd should reject the contract and focus on improving its internal processes and exploring alternative growth opportunities that align with its strategic objectives and ethical standards.