Rsm 432

[pic 1][pic 2][pic 3][pic 4]

[pic 5]

Question 1:

The Sunbeam’s new Financial Strategy introduced by the new CEO Mr. Dunlap was designed to increase corporation’s financial performance from extensively cost reduction, major increase in revenue generation and operating margin improvement.

Cost reduction strategies include redefying core business and marking non-core business as divestitures; Consolidating divisional and regional headquarters to one worldwide corporate headquarter and reduce the corporate personnel; Reduction of production facilities from 26 to 8.The growth strategies include reducing capital spending and working capital requirement to pay off existing debt during the year of 1997; Creating substantial cash flows after non-core business divestitures and reducing working capital requirements; Growing revenues through the development of new innovative products and globalizing operations.

There are two noticeable inconsistency in the corporation’s proposed strategies. First, reducing capital spending and employees while developing new innovative products are contradictory. It is extremely difficult to develop new products with limited capital investment and less employees. Moreover, as the company closes down its divisional headquarters it damages its ability to form strong network with international distributors. However, the corporation is aimed to increase international sales by adding distributors and jointer venture internationally.

Question 2.

Convincing features:

Redefying the company’s core business and non-core businesses divestitures to reduce cost is one convincing feature. Selling off its non-core business lines including bedding product line, furniture business and the time & temperature product line can certainly help the company to generate sustainable cash flows that improves the company’s financial position. In addition, consolidating company’s division headquarters and reducing its employee numbers is another cost reduction feature that I am convinced about. Consolidating the divisional headquarters into one global headquarters will reduce the overlapped functionality between different divisional headquarters hence to reduce the overall cost. At the same time, company can greatly reduce its headquarters personnel and administrative personnel from its consolidation of divisional headquarters.

Problematic features:

The first problematic feature is the company’s forecast to double the revenue in the near future while eliminating 75% of its production facilities. The huge elimination of the company’s production facilities will likely to weaken the company’s ability to produce its products that may not be sufficient to support its sales. The second problematic feature is the company’s plan to introduce 30 new products and form multiple joint ventures and licensing agreements after the close down of its divisional headquarters and reduction of capital spending as well as its employees. With the reduction of its headquarters personnel and the close down of divisional office, maintaining a strong relationship with local distributors will become unprecedentedly difficult. It is hard to imagine that the company can develop stronger relationship with regional distributor and form more licensing agreements to improve its presence internationally. Furthermore, the decrease in capital spending and headquarters personnel certainly do now help potential new product development. As a result, these two features are problematic and their successful implementations are highly difficult.