Essay about Investment and Cost Savings

807 Words4 Pages
To: The Board of Directors of Coast4Life

From: Pat Brown

Re: Strategic issues and Recommendation

Date: January 18, 2013

Please find the attached report addressing the key strategic issues, analysis and recommendation.


Pat Brown

The purpose of this report is to address the key strategic issues facing Coast4Life with the expected downturn ahead. Included is a financial analysis, identification of major issues, analysis of alternatives and a recommendation.

Financial Analysis for the Year Ended 2012 (Appendix 1) * Current ratio of 1.6 indicates that the company can meet its short term obligations. There is a 46% improvement versus last year’s current ratio of 1.1. Quick ratio
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It maximizes profitability and provides opportunities to expand business ( in line with the company’s mission).

Alternative 2 – Implement a web-based booking system
* Incremental savings of $24K in 2013; $226K for the 3-yrs ahead combined (Appendix 4) * Opportunity for additional costs reduction (i.e. advertising, promotion) * Provides information about passengers * Opportunity to target more customers * Meets demand for Internet-booking * Accounting module improves financial reporting
* Loss of customer service * Technology must be up to date and well maintained * Security (i.e. financial data, customers)

This option meets the cost savings requirement. It also addresses the immediate need of the company for market/customer information and addresses constraints in alternative 1 (customer mix). This is in line with the company’s mission to provide unique services.

Alternative 3 – Hire Crew and Hospitality Workers from Underdeveloped Countries
* Incremental cost savings of $883K; $2.1M for the 3 years ahead combined (Appendix 5) * Cheaper wages
* May damage reputation (poor service quality) * May dampen employees’ morale

This alternative meets the requirement for cost savings. To ensure quality service, the company must invest in training. The company should also keep key employees (pros: assists in training, promotion

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