Cardon Carpet Case Analysis

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I. Problem Definition/Issue facing the company

Cardon Carpet Mills, Inc. is a privately held manufacturer of a full line of medium-to high-priced carpet primarily for the residential segment. Given recent developments within the floor covering industry Robert Meadows, the president of Cardon Carpet Mills, Inc is considering the possibility of establishing distribution centers or wholesale operations for the company.

II. Situation Analysis

Industry Background

Wholesale and retail distribution in the U.S. carpet and rug industry has gone through a lot of instabilities since the 1980’s. There have been three major competitive trends that occurred within the industry. The first trend to occur happened in the mid 1980’s when the
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By 1999, 10 companies in the industry produced 91% of carpet and rug sales in the United States. Shaw Industries, Mohawk Industries and Beaulieu of America account for about 85% of U.S. residential carpet and rug sales.

Qualitative Analysis Quantitative Analysis
Table 1
Cardon Carpet Mills, Inc. Financial Statement (Fiscal Year Ending June 30, 2000)
Income Statement Balance Sheet
Net Sales $75,000,000 Current Assets $26,937,500
Less cost of goods sold - $56,250,000 Fixed Assets + $24,000,000
Gross Margin = $18,750,000 Total Assets = $50,937,500
Distribution Expenses - $ 2,250,000 Current Liabilities $10,312,500
Selling & Admin Expenses - $11,250,000 Long Term Debt & Net Worth + $40,625,000
Other Expenses - $ 2,250,000 Total Liabilities & Net Worth = $50,937,500
Net income before tax - $ 3,000,000

Table 2
Net Sales (given above) $75,000,000
Contract Sales (given) 28% of company sales
Residential retail sales $75,000,000 – ($75,000,000 x 28%) = $54,000,000

Table 3
Current Assets (given above) $26,937,500
Current Liabilities (given above) $10,312,500
Working Capital (Current Assets – Current Liabilities) = $16,625,000

Table 4
Sales Force
Average salesperson time on non-selling activities (given) 25%
Average salesperson time on selling activities 1 - .25 = .75 or 75%
Time spent on selling activities (8 hrs)(5 days/wk)(50 wks w/ 2 weeks vacation)(1-.25 non-selling activities)) = 1,500

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