DURANGO MANUFACTURING COMPANY

Introduction

The Durango Manufacturing Company is a new company that is involved in the production of glass products. However, the company is a public manufacturing firm that is said to be doing great in the last two years since it started last year September. For the Company to do well a lot has to be done regarding planning and coming up great ideas of creating a competitive scenario. The competitive scenario will help Durango to take advantage of different opportunities available in the market.  As a consultant, it is advisable to come up with a business plan that will make the Durango Manufacturing one of the best firms in the glass product industry. The growth of any company is highly depended on this like marketing and profit generalization. However, any firm that is found to be in a position to maximize both sales and profits are found to grow and dominate any given industry. All firms are willing to have a lion share in the market arena, and this will only be achieved through a good planning process. Besides, this paper is aimed at coming up with the best steps the company will embrace in a period of five years so as to be able to compete with other firms in the industry both locally and internationally. The strategies embraced by the firm should enhance a 10% revenue growth and create an organizational structure that will be found to comply with the SOX for a stable corporate leadership.

Executive Summary Of Durango Manufacturing Company

The Durango Company is a medium sized Glass manufacturing company that is said to be doing well in the industry in the last one year. The company has been operational for the last one year. The Company is known to be producing over 30 glass products, and this is one of the reasons why the firms have been said to be among the fast growing firms in Durango City. After one year in the market, it has been realized that most of the Durango customers have been found to be satisfied by several products produced by the company. Satisfying customer demands have been found to be the main aim of every organization and this is one reason for a short period Durango Manufacturing Company has become a force to reckon in the industry. Besides, last year the company won the best young company in the industry and this was after their products were praised by most of its customers. The Durango products are easily recognized because they are found to be unique when compared to goods produced by other glass companies. The company has specified its products in designing and coloring making their products easily recognizable, from substitutes. Some of the strategies that have been used by Durango will continue to be used include; positioning, market mix strategy and implementation plan. However, accounting and financial ratios will be of great importance especially when the farm wants to attract more shareholders and investors.

1.    Financial Management Skills

 Excellent financial skills have been found to be of great influence to the success of any given business. This is more important for medium enterprises which comprises of firms like Durango, where the risk of insolvency is small compared to big sized companies. One of the key concerns of small sized business organizations like Durango is the cash flow management or the cash conversion cycle. However, this can be defined as company’s ability to generate income from its customers through sales. The CEO of Durango should make sure the company embraces great financial management skills if success has to be realized by the Company in the next five years. The time taken by the firm to collect accounts receivable will be of great help to the company. The fast the company will be able to collect its debts the more health financially the company will become. Capita cycle is the other skill of accounting that will be of great use to the company. This is the movement of both cash and liquid assets through business operations. The ability of any business organization to manage its working capital and the speed of its cash conversion cycle will affect the company’s profit realization in a positive way.

The CEO should understand that anyone who is willing to invest in the firm will only use financial reports of the company so as to decide on whether the company is healthy financially is on the verge of shutting down. There are different ratios used by lenders, investors and stakeholders to determine whether to give money to any growing company. Durango is in the need of more money so as to open several branches in various parts of the country and maximize profit. Before any bank gives loans to a company it is good they learn more about the financial efficiency of such firm so as to avoid bad debts scenario. Some of the ratios used by investors and lenders include: Earning per Share this is the ratio that explains the amount of profit a company has made in the last one financial year divided by the number of shares in the market. Investors, lenders and shareholders will be willing to give more cash to any company that is found to have good levels of earnings per share. This is because such company is found to be able to service their loans and pay good dividends at the end of each financial year.

Price to Earnings Ratio: Price-earnings ratio (P/E) has been established as the best ratio that can be examined by investors when deciding on the best firm to invest. High levels of P/E     is an indication that investors are giving more cash to the company as they anticipate great returns in the future. However, the other ratio used by investors is the Price to Sales ratio; this is among the best stock valuation indicator that is commonly used by investors. The P/S ratio is used to determine the price of the firm’s stock against the numbers sales made in every financial year. This ratio explains more on the times investors are paying for every dollar of the business sales. The debt-equity ratio is the type of ratio that is used in comparing the firm’s total liabilities to its total shareholders’ equity. The ration is used to put on check the number of suppliers, lenders, creditors and obligors have given money to the business enterprise in comparison to what the shareholders have provided. Low levels of the ratio mean the firm is making good use of a leverage, and the company have a strong equity position (Bull, 2008).

The Stock’s Dividend realized is presented as a percentage of the revenue realized in the financial year, and calculated to show the dividends per share generated by the company for the last one year, and the results are divided by the current stock price. The price to Book Ratio is the other ratio used in determining the financial position of any business organization. This type of financial Ratio is used to compare a stock’s per-share price (market value) and it’s book value as provided in the balance sheet (shareholders’ equity). However this type of  ratio,  is presented  as a multiple, and it is used to explain more on a number of cash shareholders are giving in return for the net assets.  “price-to-book”, is said to help investors with information which they use to compare market value with the amount of money they are giving for each share. Payout Ratio is another ratio used in determining on whether to invest in a firm or not (Bull, 2008).

However, this type of ratio expounds more on the amount of profit that is used to pay out dividends. Besides, the ratio gives more information on the percentage of net income in comparison with the common share that is used to pay out cash dividends. This ratio is the one used by the company to prove that they support payment of dividends. Current Ratio is another ratio that Durango firm should use when in need of influencing investors and lenders. This type of the ratio is among the most used financial ratio. The ratio is used to examine the firm’s liquidity. At times, it is referred as the current working capital of an organization. The ratio is realized by getting the portion of current assets and dividing by the available current liabilities.  The main aim of this ratio is to determine whether the firm can pay its short-term accounts payable with its available liquid assets. In theory, high levels of the current ratio are said to be a positive (Bull, 2008).

The Npv Ratio

However, now that the firm is in need of increasing its revenue generation by 10% using the NPV ratio will be of great influence in the growth of the company. Net Present Value can be defined as the difference existing between the present value of the firm’s cash inflows and the cash outflow present value. This type of ratio is used in capital budgeting to give more light on the amount of profit that will be realized from a projected project. A positive NPV will be passing a message that the projected earnings realized from a given investment are more that the anticipated cost of the project. However, a positive NPV shows that such a project will be profitable while a negative NPV will be an indication that the firm will incur a loss if the undertake the projected investment program. Durango will be able to avoid projects that can be destructive to the financial position of the company. This means through NPV Durango will be able to grow in revenue generation in the next five years because they will only be able to get involved in projects that will encourage profit generation (Sexty, 2011).

Job Order And Costing

 For Durango to be able to experience improvement in its operational efficiency, some changes will be done in various departments. The use of process, job order and job costing will be used in the department of production. The three methods should be used strictly in all the department of producing the finished product. Job order is a set of written rules on how one is expected to perform as specified in the requirements of the job and cost estimates. However, will help individuals working in these departments to produce more goods. Increased production to any firm is said to help in both profit and sales maximization. Activity-based costing is said to be a costing procedure that identifies the activities within the firm’s production department and assigns the cost to be incurred by every activity of producing a product. This helps in coming up with actual figures the company will incur during production. However, this process will avoid cases of overspending something that affects profit generation (Sexty, 2011).

Outsourcing Labor

The CEO should go ahead and outsource cheap labor from abroad. However, the aim of every firm is to reduce its operational and running cost for this will enhance growth and profit maximization. The outsourcing will benefit the firm in many ways. The operating cost will be reduced as the company enjoys better innovation from recruits from foreign countries. Innovation will increase production and this will boost sales maximization. Better revenues will be realized after cutting the operating cost. Outsourcing labor from abroad will make it easy for the firm to venture into different parts of the world because they will use the foreign workers as ambassadors of their company abroad. This will enable Durango to open other branches in other parts of the world especially in emerging markets and developing countries. However, one of the challenges that may be faced through outsourcing is a situation where it will take time before such individuals become conversant with the company’s long-term and short-term goals. However, through such employees it will be possible to find new markets for Durango products, and this will be enhancing globalization. On the other side through outsourcing more ideas will be brought to the firm and this will help in perfecting what the firm has been doing since it started operating (Lehu, 2007).

Business Environment

Every business organization is highly depended on the business environment they are operating. If the company is to grow its revenue by 10% in the next five years, then a conducive business environment should be available. The business environment has both external and internal factors. The external business environment comprises of things like government, the industry and competitors. Government policies and the political activities will highly affect the profit generation of Durango. Favorable government policies will enable the realization of the company’s dream in the next five years. Some of the favorable policies include imposing high import duty, besides this will help in avoiding cases of dumping in the economy.

Durango is a small company, and it deserves to be protected from foreign companies. The government should come up with policies of giving financial aid to small business organizations, and this will boost the operations of the Durango firm. Political stability has been found to enhance business growth and this will help Durango in achieving its five years plan.  The glass industry is known to have several big companies in the United States of the America, however. Competition is healthy for business organizations, but cases of wasteful competition can be destructive to a small firm like Durango. It should be hoped that in the next five years the industry will enjoy constructive competition where the big companies will not come out to smash the upcoming companies. The internal environment of any business is very important. Teamwork in any business will boost production and this in return will enhance both profit and sales maximization. Teamwork is known to be the mother of specialization and specialization leads to increased output that in return will increase profit generation. Conflict solving should be done in the best way to avoid cases of prolonged conflicts.  Employees should be well-paid if there is need for them to feel motivated. Discouraged employees will go on strike and plan for go-slows in the working place exposing the company to the danger of experiencing reduced production of not eliminated. However eliminating such things is by making sure good package regarding wages is offered to employees (Kerin, 2006).

Strategies Durango Will Use To Achieve Its Revenue Goals

There are different strategies that when put in place can enable Durango to achieve its goal of raising its revenue by 10% in the next five years. Profit maximization depends on sales and, this means the frim should look for ways of selling more. However, this means customer care and relations will be important for this dream to be realized by Durango. Business ethics must be well utilized by employees so as to make sure more customers are attracted to the company. When customers feel appreciated they develop a sense of belonging and this will result in consumer loyalty. Consumer loyalty will always enhance the realization of the dream because loyal customers will bring in more friends to consume Durango products.

Marketing will be another strategy that must be well utilized by the company. This means throughout the five years the firm should venture into new market niches for this will bring in more new customers. During marketing, it will be advisable for the CEO to tell his employees to collect information from employees on what needs to be improved so as to attract more customers. This can be used as a secret weapon because big companies may not be willing to do it. During marketing, it is important to learn more about the strategies competitors use when marketing their products. This means individuals doing the market will be expected to put a close check on the substitute goods produced by competitors and come up with ways of differentiating the company’s products from the ones offered by competitors. Differentiation will attract more customers, and this will boost revenue generation in the next five years (Bull, 2008).

The other strategy will be product promotion. This is the only more customers will get to know more about the products being offered by Durango. Now that Durango is a new firm in the market many Americans are not aware of its products and product promotion will the only way these customers will get to know more about the Durango products. There are different product promotion methods that can be used by Durango. In the modern world social media has become more common and this can be one great platform that will allow Durango to advertise its products globally. The other channel to be used for product promotion will be the media that include the Television. Through this type of method, people will get the chance of seeing different products produced by the firm. The target market should be reached through all methods is sales maximization has to be realized. The company should come up with ways of motivating their employees. The best sale person should be awarded, and this will be a tool that will boost sales because everyone will be willing to sell more so as to get the award. The company should attend some activities like a trade fair, and this will be another method of marketing and doing product promotion (Abrams, 2005).

The IT Department Of Durango

This department should be well equipped so as to take care of mail practices like corruption and fraud. Internal auditing should be done after every three months so as to make sure that no one is misusing the company’s money. The accounting officer should be able to process and issues the books of accounts to leaders of the organization who are expected to monitor them closely. The issue of handling cash should be avoided so as to make sure fraud cases are eliminated or reduced. These cases of fraud can hinder the realization of the company’s dream of increasing its revenue by 10% in the next five years. Cases of fraud will again be stopped by making harsh measures on anyone who is found guilty of such cases. Within the company’s premises, it is advisable for banners carrying information against corruption to be available so as to remind employees that they should be corrupt at any point (Brigham, 2004).

Conclusion

Durango is a new medium sized firm operating in the glass industry. The company has been doing excellent in the last one year and this is a sign that the firm will be doing great in the next five years. However, the firm has a five-year plan of increasing its revenue by 10%. This means a lot has to be done if this plan has to be realized. Financial management skills will be of great importance in making this dream a reality. The firm should make sure most of its directors are well equipped with financial skills, and this will make the five years plan a reality. Great marketing strategies must be identified and implemented within the course of the five years. Marketing is said to be among the best ways of maximizing sales. The marketing strategies identified should enable the company to conquer new market niches and be able to pool more customers. Consumer loyalty should be created for this will help in bringing in more customers. Consumer loyalty will be realized through the process of offering quality goods that meet customer demands. However, customer care services should be offered. The service should be aimed at helping the company’s customers in learning more about the products offered by the company. Reducing the cost of operating the company should be one of the main aims of the management, and this can be done through the process of outsourcing cheap labor from foreign nations. Besides, product promotion is another tool that can be used in making sure that more customers informed about the products being offered by the company. This will be realized through the use of various methods and platforms like the use of social media platform. The social media platform will enable the company to advertise its products abroad. Fraud and other cases of losing money should be dealt with accordingly if the objective of increasing revenue by 10% has to be realized in the next five years.

References

Abrams, J. (2005). How to value your business and increase its potential. New York: McGraw-Hill.

 Brigham, E., & Houston, J. (2004). Fundamentals of financial management (10th ed.). Mason, Ohio: Thomson/South-Western.

Bull, R. (2008). Financial ratios: How to use financial ratios to maximize value and success for your business. Oxford: CIMA.

Kerin, R. (2006). Marketing (8th ed.). New York: McGraw-Hill/Irwin.

Lehu, J. (2007). Branded entertainment product placement & brand strategy in the entertainment business. London: Kogan Page.

Sexty, R. (2011). Canadian business and society: Ethics & responsibilities (2nd ed.). Whitby, Ont.: McGraw-Hill Ryerson