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Lack of Profitability in Gulf States Metal - Case Study Example

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This research will begin with the statement that GSM stands for Gulf States Metals. It is basically a nickel refinery located in the southern part of USA. The refinery not only produces nickel but also, copper, cobalt and ammonia sulfate…
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Lack of Profitability in Gulf States Metal
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Download file to see previous pages According to the research findings, it can, therefore, be said that as IMI acquired GSM after the company and project analysis it assumed that GSM would be costly for two years and then will start generating revenues. However, something either got in the way or hindered their profitability because according to the case study, GSM has not been able to generate any profits for the parent company to date. This lack of profitability has been contributed to various factors. Over the years there has been a comparatively low demand for nickel and copper which were expected to be high in demand. The change in demand was not expected by the company and ended up in overproduction having a huge supply of something that had negligible demand in the market. This can certainly be blamed at the research and development departments of the company. This decrease in demand from this company due to the other companies at comparatively low prices. The other competitors’ low priced nickel is not a mystery. The started buying nickel at a low price and hence sold it at a price lower than that of GSM. The point to consider here is that the cost of the raw material that GSM was buying was high in relation to the market price that it would have had to provide in order to compete with its competitors1. If GSM would have set the same price as that of its competitors then GSM would have gone in a loss and if it sets a price to have a certain amount of profit covering all its operating and raw material costs then again it would not be profitable for the company. Either way, there was more supply of the nickel and copper by GSM and a low demand due to the high price in comparison to its competitors. As mentioned in the case study about the shabby condition of the plant and equipment, I quote “the physical environment of the plant can be best described as rough. The building and equipment are old and corroded. The atmosphere smells of chemicals. Leaky valves and pipes spray chemical and vapors into the air. ...Download file to see next pagesRead More
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