Stan's Sounds: Case Analysis

Stan's Sounds is a retail store based in Westville Texas selling standard sound equipments through its flagship store Stan's Sounds and customized sound equipments through Cen-Tex Audio Centre. The company's vision is to set up a chain of outlets across Texas.

The long-run objective of the company is to set up economically sound retail chain stores with wide array of market. The company presently has the opportunity to expand but is in the dilemma of going with it or not. The company has a liquidity crunch presently as it has a 10 year loan from bank. The company has to take a decision whether it should go for the expansion now or postpone the decision.

Situational Analysis

The company has a 10 year loan of $22,000 with interest to be paid every year. Thus the company has a long-term debt burden.

The company as a part of its expansion plan has recently opened its customized store, Cen-Tex Audio Centre and thus had to spend heavily on it. Thus there is a problem of liquidity with the company.

The profitability of the company is good but the question of sustainability is an issue here. The company's new store Cen-Tex Audio Centre in its initial months has been able to provide with good returns.

The inventory management of the company is a question mark. Merchandise buying procedures were disorganized and were purchased when needed.

The opportunity ahead for the company is that it is thinking of opening a new store in Wardlow. But availability of funds as well as managing the new store is an issue for the company.

Also the threat to company is that even if it takes decision to open the new store it might hurt the existing business because of liquidity crunch, thereby, affecting the overall business adversely.

Problem Definition

 To decide on lease option on space in a new shopping centre for a fourth company store in Wardlow.

 If opening the new store whether to open Stan's Sounds, selling standard sound equipments or specialised store Cen-Tax Audio Centre, selling customised sound equipments.

Statement of Objectives

The long-term objective of the company is to open a chain of retail stores in Texas.

The short-term objective of the company is to be financially sound and maximise returns from the newly opened store to pay off its liabilities.

Criteria

The following criteria will have to keep in mind before going for a decision:

 Liquidity problem should not be faced by the company thereby affecting the existing business.

 Break-even should be