The Case Of The Shrinking Margins

Decent Essays

DigiMaxCon (A): The Case of the Shrinking Margins

Patrick Wiseman

Boise State University

GenBus 450-001

DMC needs to identify their main business problems and develop a new strategy along with procedures to address it. Although DMC had grown into a multi-billion dollar company and regularly ranks in the top of the industry, gross margins have decreased steadily between 2010 and 2012. Depicted the Table 1 below, margins ranged from a net income loss of $2.6 billion in 2010, $1.7 billion in 2011, down to just $940 million.

Table 1: Simplified Income Statement Summary

2012 2011 2010 2009 2008

(in millions)
Net sales $ 8,050 $ 8,500 $ 8,200 $ 4,500 $ 5,200
Gross margin 940 …show more content…

They know that growth is lacking and that in order to survive, DMC must alter course now. Senior leadership needs to determine which market segment to pursue, and how this strategy may or may not affect other areas of the company including, but not limited to: Human Resources, Manufacturing and Distribution. Senior leadership must also be aware that any change in strategy will influence I.T. also. While IT is a broad-minded team willing to offer up technical solutions to advance product development and sales, their budget, as well as other departments has been inhibited over the course of current recession and the inconsistency of returns to the company.
Finance and accounting continue to be apprehensive about cash flow demands and financial activity for major company endeavors. HR understands that any change can have substantial impact, especially on morale. DMC is also dealing with the ever-changing nature in the electronics industry. Responding to market forces has always been difficult due to the nature of the product and large investments required for advancement in technologies. Rising development costs and decreasing margins become immediate priorities. Innovation is not an option, rather it is a requirement for preserving a competitive advantage. Growing market share is a slow process that happens to companies who adapt quickly.
DMC needs new or revised strategies in order to obtain positive results while

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