How Good Was G-IIIs Management - Case Study Example

It should be noted that the selection of the family members for their respective positions is due to their being the relative of the founder and cannot be credited to their skills or experience in the industry. The current poor financial performance of G-III might be attributed to this setup. Even though some of the important executives of G-III are not family members, the Goldfarbs are still in the highest ranks which places them in the position of making the final decisions even though some lower-level executives disagree or might recommend otherwise.

The efficiency of the management team is indicated by the financial position of G-III in comparison to other industry players. The case stated that in general, G-III has expanded market share from 2% to 10% with a compounded increase in revenue of 68% from 1986-1989. The market has grown faster at a rate of compounded 75% making G-III quite slow to respond to market expansion. Financially speaking, most of the company’s resources are financed by riskier short-term debt instead of long-term ones. As G-III is cash-strapped, the company is illiquid and cannot pay its current obligations if they become due immediately. It also becomes apparent that the remedy for this will be from the capital which will be raised from the IPO. This is quite risky noting that investors who are informed about this financial position will be hesitant in shouldering the risk of buying stocks. In addition, also have problems with its creditors which indicate its very weak management strategy.

The facts discussed above indicate some loopholes in the business organization’s management team. It can be concluded that even though the Goldfarbs should be noted for their capital contribution, it is not adequate for them to run a company. G-III needs a management team that earns its credibility through its experience and exposure in managing high-profile businesses in the leather and apparel industries. Having no separation between control and ownership can lead to some anomalies and manipulation of the financial information presented to the public. Also, the presence of the company’s auditor in its executive committee is also very controversial. The most probable skeletons in the closet for these situations are the high probability and event of distortion of financial information in order to bid up the price of G-III’s stocks. Read More