Florida Atlantic University Star River Electronics Ltd. – Case Analysis Case Summary Star River Electronics is a joint venture company that has gained respect within the industry for producing high quality CD-ROMs to major software companies. In the mid 1990s, multimedia products created a high demand for CD-ROMs, allowing manufacturing companies of all sizes to enter the market. As a result, an oversupply ensued causing prices to decline as much as 40%. Star River survived a period of consolidation, and now faced a new threat. DVDs are alternative storage devices that offered 14 times more storage capacity. Surveys showed that DVD disc drives would increase from 7% to 59% of all optical-disc-drive shipments by 2005. …show more content…
For net profit margins, ROE, and ROA, Star River experienced a declining trend of 1.22, 1.32, and 1.44 respectively from 1998 to 2001. This is due to an increase in cost of goods sold, particularly inventory, resulting in compressed margins. Star River’s inability to pay down its debt will cause EBIT and EBITDA to continue to show an increasing trend, until the company can control their Current Liabilities. |Profitability Ratios |1998 |1999 |2000 |2001 | |Gross Profit Margin |53.14% |52.08% |49.80% |49.60% | |Net Profit Margin |7.96% |8.21% |5.28%
According to Randall’s analysis, to launch “Clean Edge” as a mainstream product would require significantly more market support. Mainstream razor unit volumes were expected to capture over three times niche volumes in the first year, and reaching the masses would require an extensive advertising campaign as we can observe on Exhibit 7. In other hand, launching as a “niche” positioning, would be a lot cheaper. Also, the company could use the market penetrance of the brand to help consumers buy the product.
In 1975 Pioneer maintained relationships with approximately 3,500 franchise retail outlets, the retail outlets benefited from a 5% Pioneer investment in local advertising, and attractive gross margins and credit terms. However, that same year, Pioneer and three competitors were forced to sign consent decrees with the U.S. Federal Trade Commission promising not to engage in alleged anti-fair competition practices – namely requiring distributors to use suggested list prices and punishing those distributors who didn’t comply either through delayed shipments or revoked franchises. A market price war followed the signing of the consent decrees, lowering franchise’s profits while increasing revenue for Pioneer. Pioneer followed
Black & Decker Corporation is a corporation based in Towson, Maryland, United States, that designs and imports power tools and accessories, hardware and home improvement products, and technology based fastening systems.
But due to recent emerge of Digital Video Disks (DVDs) Star River Electronics does need to face some problems. The conditions got worsen with the recent resignation of their former CEO. The new CEO Adeline Koh needs to face these problems. Digital Video Disks (DVDs) are expected to cut into the CD-ROM market in the very near future, but with 5%
So while the company increased its net income, it has done so with diminishing profit margins.
Higher leverage is very likely to create value for a firm considering capital structure change by exerting financial discipline and more efficient corporate strategy changes.
| The ROE decreased in the last year but still in the good margin of profitability.
Also, according to its leverage ratios, the company’s debts are not only very high, but are also increasing. Its decreasing TIE ratio indicates that its capability to pay interests is decreasing. The company’s efficiency ratios indicate that despite the fact that its fixed assets are increasingly being utilized to generate sales during the years 1990-1991 as indicated by its increasing fixed asset turnover ratio, the decreasing total assets turnover indicate that overall the company’s total assets are not efficiently being put to use. Thus, as a whole its asset management is becoming less efficient. Last but not the least, based on its profitability ratios, the company’s ability to make profit is decreasing.
The ROE is actually very good in comparison to other market participants especially in 2003, but dropped significantly in 2004. Likewise the ROA dropped. Due to the fact that there was no decline in sales, the constantly rising operating expenses can be seen as a reason.
As the optical and multimedia products became more and more popular in the mid-1990s, CD-ROM manufacturing industry experienced rapid growth during this time. Due to this effect, small manufacturers overreacted, creating oversupply that
Operating profit margin figures in the table above show the return from net sales[13]. However profit margin ratios are high enough for the 3 years, there is a fall from 12.86% to 11.26% during 2011-12. Sales revenue increases with a higher rate than gross profit so there is a poor
Northern Alberta, the oil sands development area surrounding Fort McMurray, is the fastest growing economic area in Canada for several years. Obviously Bolster’s total market share in this area was the highest with one third of the total market share it held national wide. Vickers based in Edmonton, Alberta covered 50% of the local market share and 75% of servicing in that area in spite having a national distributor, National Electronics (National). Also local firms preferred to do business with Vickers than National which has their nearest warehouse in Calgary, Sothern Alberta around 750 Km from Fort McMurray. (Exhibit 1)
and let them see my side of the business. I have to cut costs, so we
Clearly, Net profit margin is decreased in 1994. In 1992 it was the highest then it is showing downward trend. It is the only cause which is lowering Return over Equity (ROE).
You will undoubtedly wish to add/subtract to this paper. I received a high grade on this but it was early in the course and so less analyses were expected. Meaning, you will want to apply those course concepts that suggest alternatives that actors in this case could choose, as relevant to where you are in the course.