CASE ANALYSIS GROUP WORK I. II. III. IV.

. Title: View Point: Time Context: FEOCI on Financial Downturn Mr. K. Fourex, Chairman of the Board April 2005

Problem Statement: The need to revive the detrimental financial condition of the company Statement of Objectives: 1. To decrease liabilities, capital deficiencies and losses. 2. To minimize cost Areas of Consideration: Strengths: 1. 2. 3. 4. 5. 6. Weakness: 1. 2. 3.

V.

VI.

High-tech, state of the art equipment from Germany High standards of a modern fiber cable plant Engineers were well-trained Attractive compensation and benefits induce employee loyalty Plant operation was practically automated High quality and competitive products

Funds and manpower mismanagement Company had suffered from leadership issues High operating expenses

Opportunities: 1. Threat of new entrants in the industry is minimal due to capital intensive nature. 2. Harmonious business relationship with big cable TV companies in Metro Manila and to a slew of smaller companies in the Visayas and the Mindanao. 3. Lucrative exports to numerous countries 4. Business Expansion Threats: 1. The growing trend of joint ventures has caused increased consolidation among firms. 2. Decreased market share 3. Competition from China and others 4. Bankruptcy Mr. Opradicho decides with Mr. K. Fourexs influence.

VII: VIII:

Assumptions:

Alternative Courses of Action: ACA 1: Downsizing employees and devote on cross training ACA 2: Manage the companys cash flows and utilization of existing resources (materials and manpower) ACA 3: Re-Organization of management and consolidation of departments. ACA 4: Sell or lease the unused 3 hectare acquired land

IX:

Analysis: ACA 1: Downsizing employees and devote on cross training

Advantages Disadvantages 1. Ensure you have staff members who can step 1. Involves training costs into other roles. This can have added benefit if your operation is subject to fluctuating 2.Increase stress and job burnout workloads. 3. Encourage labor movement 2. Reduces the cost. Biggest asset was its people, but they were also its biggest liability.

ACA 2: Manage the companys cash flows. Maximum utilization of existing resources (materials and manpower) of the Company to reduce cost Advantages Disadvantages 1. Efficient management of cash flow results 1. The lack of tracking makes it impossible to to sufficient money on hand to pay expenses. connect specific payments thus, can be a major disadvantage if accounting errors occur. 2. Cash flow, when efficiently managed,results to growth of the business, an advantage that 2. Cash flow accounting lacks dedicated your cash-strapped competitors dont have. It departments for accounts receivable and helps FEOCI to grow its business in the accounts payable, making it difficult to keep track economic marketplace. of money owed to the business as well as money that the business owes. 3. FEOCI can use steady cash flows to purchase higher q uality business inputs for 3. Because cash flow accounting doesn't track the its operations and to retain cash to work flow of money within a business, accounting through periods of low sales. errors can go unnoticed until they cause cash flow problems. 4. Reduced marketing and transportation cost

ACA 3: Re-Organization of management and consolidation of departments FEOCI may re-organize management and combine two or more of its departments to save money or to streamline activities. Advantages Disadvantages 1. It saves money and streamlines activities. It 1. When reorganization is not done correctly, cuts costs without sacrificing the quality of material, parts, tools, cutting tools, papers, products or the integrity of the company documents, and office supplies build up, resulting to unnecessary surpluses which 2. It opens lines of communication and gives create waste and loss. the company the ability to put the business on a path toward long-term sustainability. 2. It will significantly hurt its relations with employees. Employees fear change and when 3. Greater financial strength. they are scared of being downsized, it can affect morale. 4. Increased productivity. 3. It could affect loyalty of employees and 5. Remove or minimize management issues decrease productivity and it could hurt the profitability of the company in the long run. 6. Putting the right people in the right job

ACA 4: Sell or lease the unused 3 hectare acquired land Advantages 1. Increases available cash 2. Help reduce liabilities 3. Proceeds can be used for other investment Disadvantages 1. Sale may take that little bit longer 2. If you are in a hurry to sell, there is no guarantee the home will sell or that you will receive the price you desire.

X:

Conclusion: Variables: Cost Effectiveness means economical in terms of tangible benefits produced by money spent Sustainability of objectives - Capacity to bear and support the fulfillment of the set objectives. Timeliness occurring at a suitable time; well timed Easy implementation the leniency of the action to be carried out, executed, or practiced

Rating System: 1 being the lowest 4 being the highest

Decision Matrix:

ACA

Cost Effectiveness

Sustainability of objectives

Timeliness

Easy implementation

Total

ACA 1

ACA 2

15

ACA 3

12

ACA 4

Conclusion:

We therefore conclude that ACA 2, which is the management of cash flow and maximum utilization of existing resources (materials and manpower) will help the company reduce its cost and recover from its liabilities, capital deficiencies and losses. XI: Plan of Action:

Activity

Person Responsible Chairman of Board Chairman of Board Top Management BOD Top Management BOD Accounting & Finance Department Accounting & Finance Department Credit and Collection Department Accounting & Finance Department Top Management BOD Marketing Department

Period Covered

Budget

Board meeting Update policies and procedures Review opportunities for improving cash flow Monitor performance with statistical reports Assess outgoings. It may be a useful exercise to review any remaining expenses such as entertainment, bonuses and travel. Improve receivables and manage payables Shorten your credit terms. Credit check your customers before you do business with them. Use aged debtor analysis. Maintain a list of accounts receivable due and past due. Offer Prompt Payment Incentives Increase cash by increasing sales. Attract new customers or sell additional goods or services to your existing customer. Marketing efforts. Promote virtual support Debt Consolidation

Twice a month P5-10K 2 months 2 weeks daily, weekly and monthly 1 week P5k P5-10k -

daily daily daily 1 year P5-10 M daily

Secure loans to take out existing loans from other financial institutions.

Increase equity by issuing stock. Offer stocks to employees. Since the employee has profit attached to the success of the company, the employee is expected to be more hardworking and efficient at work. Communicate with your suppliers so they know your financial situation. If you ever need to delay a payment, you'll need their trust and understanding Look at funding sources outside your business.

Technical support Accounting & Finance Department Top Management BOD Accounting & Finance Department Top Management BOD HRD

1 year 2 months

P5-10 M -

2 to 4 years

As long as available

Purchasing, Accounting & Finance Department Top Management BOD Accounting &

In case

monthly

Finance Department Ask clients to refer business to you also. More clients should help improve cashflow. Prepare regular cash-flow forecasts All Top Management BOD Accounting & Finance Department always daily, weekly and monthly -

P5-10k

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