feoci - final and edited

7/28/2019 FEOCI - Final and Edited

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CASE ANALYSIS GROUP WORK

I. Title: FEOCI on Financial Downturn

II. View Point: Mr. K. Fourex, Chairman of the Board

III. Time Context: April 2005

IV. Problem Statement:

The need to revive the detrimental financial condition of the company

V. Statement of Objectives:

1. To decrease liabilities, capital deficiencies and losses.

2. To minimize cost

VI. Areas of Consideration:

Strengths:1. High-tech, state of the art equipment from Germany

2. High standards of a modern fiber cable plant

3. Engineers were well-trained

4. Attractive compensation and benefits induce employee loyalty

5. Plant operation was practically automated

6. High quality and competitive products

Weakness:1. Funds and manpower mismanagement

2. Company had suffered from leadership issues3. High operating expenses

Opportunities:1. Threat of new entrants in the industry is minimal due to capital

intensive nature.

2. Harmonious business relationship with big cable TV companies in

Metro Manila and to a slew of smaller companies in the Visayas

and the Mindanao.

3. Lucrative exports to numerous countries

4. Business Expansion

Threats:1. The growing trend of joint ventures has caused increased

consolidation among firms.

2. Decreased market share3. Competition from China and others4. Bankruptcy

VII: Assumptions: Mr. Opradicho decides with Mr. K. Fourexs influence.

VIII: Alternative Courses of Action:

ACA 1: Downsizing employees and devote on cross training

ACA 2: Manage the companys cash flows and utilization of existing resources

(materials and manpower)

ACA 3: Re-Organization of management and consolidation of departments.

ACA 4: Sell or lease the unused 3 hectare acquired land


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IX: Analysis:

ACA 1: Downsizing employees and devote on cross training

Advantages Disadvantages

1. Ensure you have staff members who can step

into other roles. This can have added benefit if

your operation is subject to fluctuating

workloads.

2. Reduces the cost. Biggest asset was its

people, but they were also its biggest liability.

1. Involves training costs

2.Increase stress and job burnout

3. Encourage labor movement

ACA 2: Manage the companys cash flows. Maximum utilization of existing

resources (materials and manpower) of the Company to reduce cost


1. Efficient management of cash flow results

to sufficient money on hand to pay expenses.

2. Cash flow, when efficiently managed,results

to growth of the business, an advantage that

your cash-strapped competitors dont have. It

helps FEOCI to grow its business in the

economic marketplace.

3. FEOCI can use steady cash flows topurchase higher q uality business inputs for

its operations and to retain cash to work

through periods of low sales.

4. Reduced marketing and transportation cost

1. The lack of tracking makes it impossible to

connect specific payments thus, can be a major

disadvantage if accounting errors occur.

2. Cash flow accounting lacks dedicated

departments for accounts receivable and

accounts payable, making it difficult to keep track

of money owed to the business as well as money

that the business owes.

3. Because cash flow accounting doesn't track the

flow of money within a business, accounting

errors can go unnoticed until they cause cash

flow problems.

ACA 3: Re-Organization of management and consolidation of departments -

FEOCI may re-organize management and combine two or more of its departments to

save money or to streamline activities.


1. It saves money and streamlines activities. It

cuts costs without sacrificing the quality of

products or the integrity of the company

2. It opens lines of communication and gives

the company the ability to put the business on

a path toward long-term sustainability.

3. Greater financial strength.

4. Increased productivity.

5. Remove or minimize management issues

6. Putting the right people in the right job

1. When reorganization is not done correctly,

material, parts, tools, cutting tools, papers,

documents, and office supplies build up,

resulting to unnecessary surpluses which

create waste and loss.

2. It will significantly hurt its relations with

employees. Employees fear change and whenthey are scared of being downsized, it can

affect morale.

3. It could affect loyalty of employees and

decrease productivity and it could hurt the

profitability of the company in the long run.


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ACA 4: Sell or lease the unused 3 hectare acquired land


1. Increases available cash

2. Help reduce liabilities

3. Proceeds can be used for other investment

1. Sale may take that little bit longer

2. If you are in a hurry to sell, there is no

guarantee the home will sell or that you will

receive the price you desire.

X: Conclusion:

Variables:

Cost Effectiveness means economical in terms of tangible benefits producedby money spent

Sustainability of objectives - Capacity to bear and support the fulfillment of theset objectives.

Timelinessoccurring at a suitable time; well timed Easy implementationthe leniency of the action to be carried out, executed, or

practiced

Rating System:

1 being the lowest 4 being the highest

Decision Matrix:

ACA Cost

Effectiveness

Sustainability

of objectives

Timeliness Easy

implementation

Total

ACA 1 1 2 2 1 6

ACA 2 4 4 3 4 15

ACA 3 3 3 4 2 12

ACA 4 2 1 1 3 7

Conclusion:


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We therefore conclude that ACA 2, which is the management of cash flow and

maximum utilization of existing resources (materials and manpower) will help the

company reduce its cost and recover from its liabilities, capital deficiencies and losses.

XI: Plan of Action:

Activity Person

Responsible

Period Covered Budget

Board meeting Chairman of

Board

Twice a month

P5-10K

Update policies and procedures Chairman of

Board

2 months

P5k

Review opportunities for improving cash

flow

Top Management

BOD

2 weeks -

Monitor performance with statistical

reports

Top Management

BOD

daily, weekly

and monthly

P5-10k

Assess outgoings. It may be a useful

exercise to review any remaining

expenses such as entertainment,

bonuses and travel.

Accounting &

Finance

Department

1 week -

Improve receivables and manage

payables

Accounting &

Finance

Department

daily

-

Shorten your credit terms. Credit check

your customers before you do business

with them.

Credit and

Collection

Department

daily

-

Use aged debtor analysis. Maintain a list

of accounts receivable due and past due.

Accounting &

Finance

Department

daily

-

Offer Prompt Payment Incentives Top Management

BOD

1 year -

Increase cash by increasing sales. Attract

new customers or sell additional goods

or services to your existing customer.

Marketing efforts.

Marketing

Department daily

P5-10 M

Promote virtual support Technical support 1 year P5-10 M

Debt Consolidation Accounting &

Finance

Department

2 months

-

Secure loans to take out existing loans

from other financial institutions.

Top Management

BOD

Accounting &

Finance

Department

2 to 4 years

-

Increase equity by issuing stock. Offer

stocks to employees. Since the employee

has profit attached to the success of the

company, the employee is expected to

be more hardworking and efficient at

work.

Top Management

BOD

HRD

As long as

available

-

Communicate with your suppliers so

they know your financial situation. If you

ever need to delay a payment, you'll

need their trust and understanding

Purchasing,

Accounting &

Finance

Department

In case -

Look at funding sources outside your

business.

Top Management

BOD

Accounting &

monthly -


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Finance

Department

Ask clients to refer business to you also.

More clients should help improve cash-

flow.

All always -

Prepare regular cash-flow forecasts Top Management

BOD

Accounting &

Finance

Department

daily, weekly

and monthly P5-10k

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feoci - final and edited

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