Truck Company Need Scenario 4 Answered Scenario 3 is to help Scenario 3: A major

Question

Truck Company

Need Scenario 4 Answered Scenario 3 is to help

Scenario 3: A major operation has moved into your market area and the competitive pressure has caused you to reduce prices on one product line to the point that you are barely making a profit. This scenario is different, here you are asked to think and communicate what options are worth trying before "harvesting" that product line. Second, what steps are needed to harvest the struggling product line if your strategies don't work.

Scenario 4:You have lost your financial backing from the institute you have been using for the past three years. As in scenario 3, what refinancing options are worth trying, how long do you give yourself to evaluate and investigate these options, and, finally, if nothing works, what is your exit strategy.

Explanation / Answer

4. There are some basic amenities that each and every business organization requires to run the business smoothly and without any major hassle. Sponsor or funding is the most important factor when a business is already having a presence in the industry because without funding no business can run for long and it is observed that the current business organizations instead of relying or banking on other organizations prefer to arrange funds themselves or by taking a loan from the banks. The organization mentioned here is availing financial support from a well established organization and there is a documented contract which defines the rules and regulations of the deal. The funding organization is a beverage manufacturing organization and is has incurred a huge loss in the last few financial quarters and the objective is cost cutting and hence they decide not to renew the contract with the truck company and stop funding.

The truck company has to look for other options because without proper funding the business will not run resulting in close down and to decide on the matter the company has 4 to 5 months which they can sustain with the profit they made in the last two quarters. The company can either look for private sponsors like the previous one or they can apply for a loan to run their business. The concept of loan may seem a costly affair but in the long run it is actually secure because the organization will not be experiencing such situation in the future, independent because the bank is only considered about the amount it needs to collect from the organization irrespective of the profit the company makes, hence the organization will not have to pay a share of the profit it makes instead it will just have to pay the monthly installments. Refinancing loans provided by banks also have a low rate of interest and if the risk of the loan is low then the interest is even lower. The organization has to go through a series of document verification and the bank may monitor the situation of the business and also past records but just to ensure that if the organization fails to repay the amount then the bank can get it back through the assets possessed by the organization.

If the refinancing options does not work out, then the organization can stop its business but instead of closing down the owners can plan and strategize to sell the ownership and depending on the brand value of the organization it may be bought by various interested parties. The owners may also look for change of powers where the ownership changes but the employees and share holders remains the same which may seem a better option because if the workforce is sustained the company may continue doing the good work for the new owners too which will prevent the organization from shutting down.

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