The Best Way Forward to Saving SDI Inc - Case Study Example

Case Answer to Question There are several problems facing SDI Inc. and its management. Generally, the organization seems to be making no meaningful profits. It is not making money. This makes the cash in the organization to run out quickly thereby triggering even more serious problems, given that the initial problem is not adequately solved. The management need to maintain the good solar feeder booking that existed in order to ensure a timely delivery of products to the customers. The problems facing SDI thus seems to centered to a failure in delivery of the company’s products to customers. Delinquent orders have been accumulating while the company was not able to fulfill these increasing orders. Some of the Solar Feeder parts were even contracted to other suppliers with SDI only having the responsibility of assembling the parts. The company could, however, not maintain full and successful control on its sub-contractors (Brown and Abercrombie). Quality problem in the parts received from the suppliers was poor, which also facilitated the slow delivery. This factor is further attributed to the fact that it would always take SDI a lot of time to adjust the poor quality parts to the desired quality before the delivery is done. Consequently, the production process had to slow down significantly. Further much down time as well as production reject was experienced. Addressing the issue would require the management to look at the best ways to gain control over suppliers in order to quicken the parts quality and delivery. This will further boost production quality and quantity and hence revenue generation. Answer to Question 2 Break even volume refers to the number of a product units that SDI has to sell in order for its sales revenues to equal to its total costs. In this regard, considerations of both unit costs and start-up costs are done. As for now, SDI Inc. has not achieved a breakeven of sales. The company’s costs and sales revenues need to balance in order to achieve a breakeven volume of sales (Hofstrand). From a look at the SDI financial ratios, it can easily be noticed that the company has a long way to go before achieving a breakeven volume of sales. The company is still facing losses, but not profits. The gross profit margin of the company is 59% (Brown and Abercrombie). This is based on the difference between the sales and cost of goods sold all divided by the sales. Considering that there are still other expenses/costs, which have to be deducted in the gross profits, the total costs are fur much above the sales revenue (Hofstrand). With a net profit of about -47.5 percent, the implication in this case is that SDI is not close to achieving a breakeven volume of sales. This is mainly caused by the various fixed costs and start-up costs that can only be covered through high volumes of sales. The company thus need to increase its sales in order to boost profits, which in turn would be able to cover its operating expenses. The company’s costs are too high as compared to the generated revenue from sales (Hofstrand). Answer to Question 3 Currently, SDI has developed a marketing strategy that incorporated some market research to look for a potential market for bird feeders. The strategy did not work adequately since the research done was hardly adequate for such a potential market (Brown and Abercrombie). The company has to develop the strategy or create a better strategy that aims at gaining the largest portion of the potential market. Besides, the company experienced an ambiguous market positioning through its current strategy. In this regard, the solar feeder product was positioned mainly as a high end or upscale product. This strategy generated many competitive disadvantages from its competitors. Regarding this strategy, some basic changes are required in order to place the company in a better competitive edge. SDI thus has to position its product lower in order to compete effectively with its competitors’ products. With such adjustment, more sale volumes are likely to be generated. Another issue attributed to its marketing strategy is the problem of low product awareness. In this case, it seems that customers have had problems in understanding the way the solar feeder products work. The mode of advertising is also poor. For instance, one of its marketing videos that have been created to explain the way the products work depict some element of negativity to the product. This aspect has greatly hurt the company. The management need to create advertisement efforts that only portrays positive images about the product (Lake). A negative image will not only make shy customers off from their intention to know more about the product but also from buying the product. Answer to Question 4 The best way forward to saving SDI Inc. from perishing is to focus on its past trends especially its failure. No new strategy need to be implemented, but the existing strategy could be improved by lifting its strengths and structuring various ways of improving its failures. The company’s vision is one of the most important aspects to be considered for an effective strategic plan. The company is now operating at a loss, which means that all efforts should be based on the best ways to narrow such losses and boost its profitability (Lake). First, focusing on quality is fundamental to its future success. The issue of quality has pushed many potential customers away. In this regard, the company should work hard to gain power over suppliers who cause delays that in turn lead to slow producing processes and poor product quality. Products should also be processed with the consultancy of professionals. The company can invest more on human resources by hiring technically skilled individuals to control product quality. Regarding its financial strategies, the company’s income statement need to be analyzed in details. In this case, the books would be balanced and sales are likely to increase, specifically by decreasing the company’s expenses and expenditures. Further, a lot of cash need to circulate with the SDI’s reserves with more focus on boosting investment (Lake). For the marketing strategy, product awareness should be enhanced through heavy advertisement, which will also place the company at a better competitive edge. Works Cited Brown, Lew G. and Emily Abercrombie. "Case 2: The Solar Feeder." Cases in Strategic Management (n.d.). Print. Hofstrand, Don. Breakeven Sales Volume. Apr 2007. Web . 13 Jan 2015. Lake, Laura. How To Develop a Marketing Strategy in 5 Easy Steps. 2015. Web . 13 Jan 2015. Read More