Case Study Drivers of Industry Financial Structure

Case Study Drivers of Industry Financial Structure Executive Summary KR+H is a manufactory company in cabinet industry and it had devised a unique operating strategy of producing high quality custom cabinets at a low cost. Because the investments will reduce costs and increase the working efficiency in manufacturing process. And the analysis will show that adding investment is valuable and profitable. Based on KR+H’s past financial performance and the cost of investment, KR+H would need additional financing to fund the proposed capital investment.The internal financing could be very difficult for KR+H based on it had a deficit in 1992. And internal financing may also slow down the investments because KR+H has to retain its profit. Also rising the price is not a very good option in a long-term perspective. Because it could retard their growth and therefore did not represent a viable path to a long-term profitability. So we suggest that KR+H should finance the proposed capital b y relying on external financing from a bank or an outside investor. ContextKR+H is a manufactory company that designs,fabricates and installs high quality, uniquely designed cabinetry. Now it had devised a unique operating strategy of producing high quality custom cabinets at a low cost. KR+H believes that the use of computer-controlled equipment allowed the firm to significantly reduce their labor cost and other production cost while increasing the efficiency of the manufacturing process. In order to support the development if their innovative operating system, KR+H need to clearly define the scope and speed of growth for their business.However, the partners do not have internal funds to finance the investment and their access to external capital markets is limited. Therefore KR+H needs a better operating and financial strategy to managing rapidly growth and its capital. I think the article â€Å"Seize advantage in a downturn† is very helpful. Many companies fail to see the opportunities hidden in economic downturns. In order to take advantage of opportunities, KR+H first need to do a thorough but rapid assessment of its own vulnerabilities and then move decisively to minimize them. David and Daniel, 2009) KR+H could approach their problem by using some of those steps introduced in this article such as Monitor and maximize its cash position 1. Evaluating the capital position: In the cash flow statement Exhibit 6, the net decrease in cash by $15,298 in 1991 and $46,955 in 1992. In order to meet cash requirement during 1992,KR+H gets a personal loan about $35,000 and the bank overdraft to cover its deficit about $14,000,which shows us that KR+H are short of cash during the past years and it gets worse. The total enhancement of the new investment will be: Category |Cost | |Require in Capital |$300,000 | | |$100,000(developing in 2 years) | |Software | | | |$25,000 – $30,000 (maintain & update per year) | |Marketing |$40,000 |Based on KR+Hâ€⠄¢s past financial performance and the cost of investment, KR+H would need additional financing to fund the proposed capital investment for sure. 2. Adding investment is valuable and profitable: I think the proposed projects are profitable investments and it will add values. Because the investments will reduce costs and increase the working efficiency in manufacturing process: |Category |Number | |Increase production capacity |50% | |Labor cost saving per year |$170,000 |Another fact is that on a pro forma basis, KR+H’s cost of goods sold in 1990, the year before merged is approximately 60% of sales. In 1991,the percentage is increased to 67% and in 1992 the year after the merger the percentage rose to almost 75%. It shows us that some unanticipated cost increasing rapidly while the revenue is rising. If KR+H could adopting the new investment it would make its production more efficiently and the technique may also save some cost of goods. In addition, the cabinet industry exp erienced a decline in efficiency in 1992. Firm size |Sales per work |Compare to 1991 | |Large |$120,000 |gain 9% | |Medium |$84,000 |decline 11% | |Small |$80,000 |off 2% | |KR+H could gain a long-term rapid growth in sales by first adopting the new technique and the improvements in production efficiencies will give KR+H more advantages in sales. There is no doubt that the investment will increase the operating leverage and also increase risk. In Exhibit 9, with investments KR+H will yearly saving $207,900. Therefore, adding the investment is very profitable. And also rising the price is not a very good option in a long-term perspective. Because it could retard their growth and therefore did not represent a viable path to a long-term profitability. I think KR+H finance the proposed capital by relying on external financing.Because the internal financing could be very difficult for KR+H based on it had a deficit that was covered with a personal loan to company about $35,000 by a partn er and a bank overdraft $14,000 in 1992. And internal financing may also slow down the investments because KR+H has to retain its profit. The investors wouldn’t want a low return just because the firm wants to invest. Thus, external funding will be a better choice. Ratios In 1992 and 1993, exhibit 4 Year |Return on Sales |Return on Equity | |1992 |2. 1% |21% | |1993 |8. 3% |98% | | Besides this, KR+H also is profitable in 1992 and assume that it will have 10% growth rate. Meanwhile, with the investments could save KR+H about $209,900 each year.Those profitable data in its financial performance will help KR+H to get a loan from a bank or other outside investors. Conclusion: KR+H has its new investments developed and they focus on reduction by continuing to increase the level of automation in the process. And this investment is valuable and profitable. Based on KR+H had performed not very well in their cash flow in the past 3 years. The company also troubled with limited access to the capital market. Therefore, it is necessary for KR+H to get external financing in order to maintain its revenue and get a rapid growth. References: Robert C. Higgins(2012), Analysis for financial management David Rhodes and Daniel Stelter(2009), Seize advantage in a downturn

Marketing is a philosophy that puts the customer at the centre no Essay

Marketing is a philosophy that puts the customer at the centre no customer, no sales - Essay Example It highlights three important aspects that marketing accomplishes. First, it recognizes the purpose of business organizations to design products which satisfy customer requirements. Marketing does not just involve offering any goods and services but business organizations should strive to offer those which offer customer value. Second, it stresses the aim of business organizations to generate profit from its operations. Thus, the definition of CIM involves assessing the marketing strategy which will be mutually beneficial for customers and companies. Business organizations as this definition implies are profit maximizing entities. Lastly, this definition highlight that marketing is not just about providing the current needs by â€Å"anticipating† the future requirements of the markets. In summary, the CIM’s definition of marketing balances the satisfaction of customer and profit maximizing goal of business organizations. This definition creates an image for marketing as something which merely reflects the needs of customers and marketers are tasked merely to identify and respond to these various needs. It recognizes that marketers have a great part in shaping customer’s needs by offering innovative solutions to their problems. Nonetheless, it is still the customers that determine which among the various products they are bombarded with represent their real need through their demand backed by purchasing power. It is irrefutable that business organizations are now operating on what Kotler (2002) termed as a hypercompetitive environment. This arena is characterized by more intense rivalry between players and higher buyer leverage. Thus, it becomes a great challenge for companies to create and deliver product offerings which will satisfy the need of individuals as well as establish efficient strategies in order to capture

Tourism Policy and Planning Essay Example | Topics and Well Written Essays - 2000 words

Tourism Policy and Planning - Essay Example On exploiting these opportunities, the Tourism industries can indeed open doors for more variety in the offerings like the food chain, entertainment, shopping and heritage sites (The Tourist Offices Of Spain, 2013; City Of York Council, 2003). This gives immense scope to incline the differentiating factors like the culture, history, heritage, language, lifestyle and natural resources. Â  While bringing these differences to a compromise seems challenging, the lack of effort in the same might make the tourist bored very quickly. Eventually, the most serious threat these two destinations might face would be the loss of revenue worth billions and the depreciation of regional output figure / GVA that has seen a commendable growth of about 20% in the last decade (The Tourist Offices Of Spain, 2013; York Tourism Partnership, 2007). Â   2. ... Â  York and Seville are blessed with environmental assets which are indeed the strength for businesses. Exploring these unruffled regions creates new options for tourists and allows them to explore the best of them, rather than just the popular and most visited places. On the other side, the weakness of the two destinations is the lack of speedy communication option, together with the challenge of balancing standardization against customization and matching tourist’s luxury with value for money (Leeds City Council, 2012). 3. Having a competitive transport infrastructure increases the mobility of tourists and gives equal opportunities for all places to be explored in the same visit. One may easily reach York by car, bus, coach tour, train, ferry and boats (Visit York, 2013). For international tourists, the entries to UK is via major airports at Leeds, London, and Manchester with world class amenities which are well connected with other famous and frequently visited destination s of the world (City of York Council, 2003). However the local conveyance needs further detailing. To overcome the disadvantages like lack of geographical knowledge of the new place, emphasis on putting up detailed maps, precise sign boards, directions and distance for visitor’s reference should be made (Seville City Council, 2008). The key proposal of investment would be towards making the best travel experience, in terms of destination development and visitor management, which demands increase in public transportation facilities and roads to help tourists navigate throughout the city quickly and with ease. A smart investment plan would include joint

E-commerce as a Business-to-Consumer International Market Entry Essay

E-commerce as a Business-to-Consumer International Market Entry Strategy - Essay Example In the following paper I will be examining e-commerce in terms of marketing entry strategy and business-to-consumer operations. Marketing mix and strategies for effective product distribution through the channel of e-commerce is reviewed to cover the topic. Ultimately, conclusions and recommendations end up the paper. As illustrated in Figure 1, business to consumer (B2C) refers to the selling of goods and/or services directly to consumers by businesses. The classic example is Amazon (www.amazon.com) which offers in excess of 1.5 million book titles online and has extended its sales into other products, including music CDs, videos and games. Business to business (B2B) refers to the selling of goods and/or services by one company to another as part of their supply chain, and is likely to contribute to at least 80 per cent of the growth of e-Commerce in the next five years. An example is Marshalls (www.marshalls.com). There are significant overlaps between Internet strategy and Internet marketing, particularly if a company adopts a broad perspective of marketing by engendering customer focus throughout the business, as described above. Indeed, the two terms can be regarded as synonymous. Chaffey (2002) regards Internet marketing as a subset of Internet strategy that he calls 'sell-side e-commerce', meaning that it focuses on building relationships with customers, in parallel with 'buy-side e-commerce' that focuses on supply chain management. Chen (2001) regards Internet marketing as dealing with operational rather than strategic issues, but includes customer relationship management in the 'operational' category. In this book, we use the term 'Internet marketing' in a broad sense, while still distinguishing strategic aspects and operational aspects. Usually, when speaking of B2C operations, the business of e-retail is implied in the term. The business of e-retail has been defined as the sale of goods and services via Internet or other electronic channels, for personal or household use by consumers (Harris and Dennis, 2002). This definition includes all e-commerce activities that result in transactions with end consumers (rather than business customers), i.e. B2C rather than B2B. Some e-marketing activities that do not directly involve transactions, such as providing (free) information or promoting brands and image, are considered to be part of B2C but are not normally considered as being within the scope of e-retail. Despite the dot.com crash of 2000, e-retailing has been growing, particularly for the 'top eight' categories that account for three-quarters of all European sales. These major growth areas comprise: books, music and DVD movies, groceries, sex products, games and software, electronic and computer equipment, travel, and clothes. Disadvantages of E-Commerce as an international marketing entry strategy Over perceived benefits of E-Commerce as an international market entry strategy that will be discussed later in this paper, this kind of product or service distribution has its disadvantages. Retailers, for example, may lack the technical know-how, the substantial investment required or

Essay due in Asian Collection at the Metropolitan Museum of Art

Due in Asian Collection at the Metropolitan Museum of Art - Essay Example The Asian collection of Art works at the Metropolitan Museum of Art contains a large number of Art works from Asian countries. It is renowned for its collection of Chinese and Indian Art works displayed. Thesis statement: From the perspective of a viewer, discussion on the basic differences between Chinese and Indian art and analysis of a piece of art to unearth its history, the artist’s motives and expression. The Asian collection at the Metropolitan Museum of Art includes a wide range of Art works from different cultures from Asia. The collection includes gifts from philanthropists who collected different types of Art works from different cultures in Asia. Besides, the collection covers the 4000 year history of Asian Art. Some important differences between the Chinese and Indian art objects which represent the Asian Art are mentioned below. The Chinese collection includes Calligraphy and painting which represent its rich tradition of Art. Carol Michaelson and Jane Portal opine that: â€Å"Chinese painting is quite different from brightly coloured Western oil painting† (Michaelson and Portal 8) the tradition of painting in China is entirely different from Western form of oil painting. Besides, the Art works represent the history of different dynasties that ruled over China for centuries. For instance, the work ‘Model of a watchtower’ represents the Eastern Han dynasty in ancient China. But the Indian collection is different from Chinese works. The difference from Chinese Art can be seen in the usage of colors, medium and theme. The favorite medium of Indian Artists includes paper and cloth. For instance, the work ‘Mahavira Sitting at the Top of the Universe: Folio from a Kalpasutra Manuscript, 15th century’ is in paper. The favorite theme of Indian artists includes stories from sacred te xts. In addition, red is a dominant color in Indian Art works. But the favorite colors

Company Law Essay Example | Topics and Well Written Essays - 750 words

Company Law - Essay Example The factual scenario raises various issues in company law relating to the legality of proposed transactions. With regard to the proposed transactions and dissatisfaction of Ergan,Arif and Moshe as minority shareholders in the actions of Pedro and Morgan;this initially raises issues of breach of directors’ duties under the Companies Act 2006. Section 171 of the Companies Act 2006 (CA) provides that â€Å"a director of a company must- a) act in accordance with the company’s constitution, and b) only exercise powers for the purposes for which they are conferred† (CA). Section 175 of the CA further imposes a positive obligation on directors to â€Å"avoid a situation in which he has, or can have, a direct or indirect interest that conflicts, or possibly may conflict, with the interests of the company† (Section 175 of the CA). If we apply this by analogy to the current scenario, it is evident that Pedro and Morgan have awarded themselves pay increases despite t he fact the company is making marginal profits. As such, this would suggest a conflict of interest with the interest of the company. Moreover, the common law and equity impose duties on directors and section 179 of the CA expressly states that â€Å"the consequences of any breach†¦ of sections 171 to 177 are the same as would apply if the corresponding common law rule or equitable principle applied†.... k v Deeks ([1916] 1 AC 554) asserted that directors cannot take advantage of an opportunity or information that belongs to the company without prior approval of the company. The common law fiduciary duty is further bolstered by the provisions of the Company Directors Disqualification Act 1986, where the courts can disqualify directors whose companies have failed as a direct result of their misconduct for periods up to 15 years. Moreover, under section 172 of the CA, there is a new duty deriving from the equitable fiduciary duty principle expressed as a duty to promote the success of the company. To this end, Section 172(1) sets out a non-exhaustive list of guidelines that directors should refer to including (without limitation) the relationship with suppliers and customers, impact of decision on environment and members of the company. It is important to ensure compliance with this and failure to comply cannot only result in exposing the company to potential claims, but can also lead to piercing of the corporate veil for potential actions against the director (Wild, 2009). Furthermore, section 173 of the CA 2006 imposes a positive duty on a director of a company to exercise independent judgment. Section 174(1) sets out the common law duty of care and skill and section 174(2) sets out an objective test similar to the dual obligations test extrapolated under section 214 of the Insolvency Act 1986 in relation to the wrongful trading provisions. In context of the current scenario, this will have a bearing in relation to the concerns regarding the sale of the company’s property at undervalue. Firstly, it is evident that the proposed sale of the company property must be in the best interests of the company under Section 172 of the CA 2006. If the sale at undervalue is not

Discuss why space exploration is not a waste of money Essay

Discuss why space exploration is not a waste of money - Essay Example As the world continues to struggle with the economic recession, the question on whether expenses on space exploration mission can be justified continues to be debated. This paper discusses" why space exploration is not a waste of money" There are hundreds of missions, which has been launched with a view to explore the extra-terrestrial bodies from the Mars to the moon and to other periphery of the solar system. From each of these bodies, mankind has been able to learn something about the universe, what constitutes it and what lies beyond the planet earth. Hereunder are prime factors underlying the justifying the important need for heavy spending on space exploration? Through space exploration of planets including Venus, Mars, Mercury, Saturn, Jupiter and others mass, man has gathered important information that has been used by scientists to unravel the question of why there only emerged life on earth. Scientists have also unravelled the mystery of solar system formation. With the recent space exploration on Planet mass, imaginative ideas of living on Mars have been put to rest, while at the same time confirming the existence of water on the mass. According to Kranz (2011) the knowledge of the nature of planets alongside their gravitational dynamics, and the structure of the solar system is a template that can help scientists to identify extra solar planets that revolve around stars that may harbour life. The underlying motive behind exploring the planets including Moon and Mars is that they can be future potential habitable places. It is, therefore, important to develop technologies that can make it possible for mankind to settle in these hostile worlds. This requires resources are dedication towards technologies that enable mankind to understand the material resources, composition, surface conditions and atmosphere of these worlds. Space exploration is one of the greatest challenge to mankind. The