Thomson Greenhouse - Essay Example

Thomson Greenhouse Because of the small yet competitive market that the Thomsons find themselves in, there would not be much room for growth. In order to compete with its rivals, Thomson Greenhouse would have to focus on which target market to focus on, either upper class customers who are willing to pay for better quality products, or lower middle class customers who do not appreciate quality so much and want cheaper prices.2. Thomson Greenhouse may need to restructure the organization to cope with a new greenhouse.

To evaluate how a new greenhouse would impact the company as a whole, the Thomsons could use the following methods to do so: Rate of Return method: Cost -- $12,000 Expected Usage -- 10 years Expected Profit -- $9,050 profit before taxes -$6,400 interest ($640/ year for 10 years) -$240 depreciation = $2,410/ $6,000 = 40.1% Payback method: Cost -- $12,000 Income -- $2,360 Depreciation -- $240 Cost/ (Income + Depreciation) = 4.

6 years Break-even Analysis: Cost -- $12,000 Profit Margin -- 29% Cost/ Profit Margin = Sales Revenue of $41,379 These figures show that a the potential new greenhouse would offer a good return on investment and could be paid back relatively fast; however, profitability would have to be increased slightly in order to break even.3. Thomson Greenhouse has very healthy current and debt ratios, so this means that the firm is able to borrow money easily. Also, productivity is healthy because inventory is replaced only every three months or so.

The profitability of Thomson Greenhouse is also very strong, so the long-term outlook is positive. The business is now at the point where it could potentially expand and not be affected too much because of the strong financial position that it is in.4. If the business was passed to one of the sons then specific organizational roles would have to be given to ensure the future success of the business. Any son that took on business would have to have the desire and commitment to Thomson Greenhouse.

On the other hand, if the business is sold to an outsider, what kind of profit will Earl and Lisa make from the sale. The deal would also need to be attractive to the potential buyer.