Q1: What were the key issues with Red Star, Ashmark and their relationship that led to this situation?
Red Star Key Issues:
Inferior Company Leadership - President Barry Louden failed to manage the business at a high level, recognize the warning signs, and proactively deploy a strategy for improvement. He fired his accountant and allowed the company to flounder, displaying no sense of urgency, taking on increasing amounts of debt, and failing to reach out to Ashmark for help until it was too late.
Lack of Transparency - Because RS was a private company and did not volunteer information about its profitability and health, it was difficult for Ashmark to anticipate problems.
Ashmark Key Issues:
Failure to Properly Nurture…show more content… Had both of these courses of action been properly discussed and challenged before an ultimate decision, Ashmark could have saved itself much heartache.
Absence of Risk Assessment & Early Detection Measures - No mechanisms were in place to adequately gauge the risks of doing business with RS or detect financial issues - even though Ashmark had employees on-site at RS. Had Ashmark assessed and weighed risks properly, it’s unlikely that it would have placed all emphasis on price and put 75% of its spend with a single company. Additionally, the fact that RS’s other customers bailed 6 months prior to the company’s bankruptcy announcement (likely to due price increases resulting from Ashmark’s demands for lower prices) should have raised alarm. As a result of failure to assess risk and late detection, Ashmark’s actions in the end were too little too late.
Poor Communication & Coordination - Overall, it’s fair to characterize the relationship between Ashmark and RS as “dysfunctional interdependence.” The companies failed to develop the close communication and coordination necessary to ensure two-way success. Ashmark was careless in its relationship management of what should have been a mutually beneficial strategic partnership with RS, and RS chose not to express the adverse impact of Ashmark’s decisions or the severity of its issues so