Download - FEOCI - Final and Edited
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CASE ANALYSIS GROUP WORK
I. Title: FEOCI on Financial Downturn
II. View Point: Mr. K. Fourex, Chairman of the Board
III. Time Context: April 2005
IV. Problem Statement:
The need to revive the detrimental financial condition of the company
V. Statement of Objectives:
1. To decrease liabilities, capital deficiencies and losses.
2. To minimize cost
VI. Areas of Consideration:
Strengths:1. High-tech, state of the art equipment from Germany
2. High standards of a modern fiber cable plant
3. Engineers were well-trained
4. Attractive compensation and benefits induce employee loyalty
5. Plant operation was practically automated
6. High quality and competitive products
Weakness:1. Funds and manpower mismanagement
2. Company had suffered from leadership issues3. 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 share3. Competition from China and others4. Bankruptcy
VII: Assumptions: Mr. Opradicho decides with Mr. K. Fourexs influence.
VIII: 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
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IX: Analysis:
ACA 1: Downsizing employees and devote on cross training
Advantages Disadvantages
1. Ensure you have staff members who can step
into other roles. This can have added benefit if
your operation is subject to fluctuating
workloads.
2. Reduces the cost. Biggest asset was its
people, but they were also its biggest liability.
1. Involves training costs
2.Increase stress and job burnout
3. Encourage labor movement
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
to sufficient money on hand to pay expenses.
2. Cash flow, when efficiently managed,results
to growth of the business, an advantage that
your cash-strapped competitors dont have. It
helps FEOCI to grow its business in the
economic marketplace.
3. FEOCI can use steady cash flows topurchase higher q uality business inputs for
its operations and to retain cash to work
through periods of low sales.
4. Reduced marketing and transportation cost
1. The lack of tracking makes it impossible to
connect specific payments thus, can be a major
disadvantage if accounting errors occur.
2. Cash flow accounting lacks dedicated
departments for accounts receivable and
accounts payable, making it difficult to keep track
of money owed to the business as well as money
that the business owes.
3. Because cash flow accounting doesn't track the
flow of money within a business, accounting
errors can go unnoticed until they cause cash
flow problems.
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
cuts costs without sacrificing the quality of
products or the integrity of the company
2. It opens lines of communication and gives
the company the ability to put the business on
a path toward long-term sustainability.
3. Greater financial strength.
4. Increased productivity.
5. Remove or minimize management issues
6. Putting the right people in the right job
1. When reorganization is not done correctly,
material, parts, tools, cutting tools, papers,
documents, and office supplies build up,
resulting to unnecessary surpluses which
create waste and loss.
2. It will significantly hurt its relations with
employees. Employees fear change and whenthey are scared of being downsized, it can
affect morale.
3. It could affect loyalty of employees and
decrease productivity and it could hurt the
profitability of the company in the long run.
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ACA 4: Sell or lease the unused 3 hectare acquired land
Advantages Disadvantages
1. Increases available cash
2. Help reduce liabilities
3. Proceeds can be used for other investment
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 producedby money spent
Sustainability of objectives - Capacity to bear and support the fulfillment of theset objectives.
Timelinessoccurring at a suitable time; well timed Easy implementationthe 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 1 2 2 1 6
ACA 2 4 4 3 4 15
ACA 3 3 3 4 2 12
ACA 4 2 1 1 3 7
Conclusion:
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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
Period Covered Budget
Board meeting Chairman of
Board
Twice a month
P5-10K
Update policies and procedures Chairman of
Board
2 months
P5k
Review opportunities for improving cash
flow
Top Management
BOD
2 weeks -
Monitor performance with statistical
reports
Top Management
BOD
daily, weekly
and monthly
P5-10k
Assess outgoings. It may be a useful
exercise to review any remaining
expenses such as entertainment,
bonuses and travel.
Accounting &
Finance
Department
1 week -
Improve receivables and manage
payables
Accounting &
Finance
Department
daily
-
Shorten your credit terms. Credit check
your customers before you do business
with them.
Credit and
Collection
Department
daily
-
Use aged debtor analysis. Maintain a list
of accounts receivable due and past due.
Accounting &
Finance
Department
daily
-
Offer Prompt Payment Incentives Top Management
BOD
1 year -
Increase cash by increasing sales. Attract
new customers or sell additional goods
or services to your existing customer.
Marketing efforts.
Marketing
Department daily
P5-10 M
Promote virtual support Technical support 1 year P5-10 M
Debt Consolidation Accounting &
Finance
Department
2 months
-
Secure loans to take out existing loans
from other financial institutions.
Top Management
BOD
Accounting &
Finance
Department
2 to 4 years
-
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.
Top Management
BOD
HRD
As long as
available
-
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
Purchasing,
Accounting &
Finance
Department
In case -
Look at funding sources outside your
business.
Top Management
BOD
Accounting &
monthly -
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Finance
Department
Ask clients to refer business to you also.
More clients should help improve cash-
flow.
All always -
Prepare regular cash-flow forecasts Top Management
BOD
Accounting &
Finance
Department
daily, weekly
and monthly P5-10k
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