August Scientific Instruments, Inc. (ASI, Inc.) is a small private company which specializes in the manufacturing of miniature electromechanical components. It is located on a small but progressive town wherein a Technical Education Institute is also based. At first, the company underwent several problems and setbacks and was able to grow steadily and expand its operations until in 1958; it was able to acquire additional investments, substantial monthly sales and workers, and started to have backlog of orders. As time pass by, the backlog had grown at an alarming rate which is brought by the inability of the company’s production to meet the demands of the customers. The company decided to have a major expansion by loaning from banks and allocating the 80% of the account receivables as payment. However, this was not enough to sustain and match the increasing orders from the customers. To address the new stage of growth it is facing, the company is opting to get financial help from outside or freeze the size of the company at an artificially low level since the stockholders had already exhausted their cash resources. To cope up with its situation, the company needs a new plant at an estimated cost of $350,000; and capital of about $200,000 for the procurement of additional equipment and machinery, and for the financing of the training for additional personnel. The company also considered locating in other city that offered inducements of a new building and tax-free advantages, but it did not want to leave the community where it enjoyed a cooperative arrangement with the scientific educational institution and other advantages. On the other hand, the business community doesn’t want to lose the company since it was the major source of the earnings of the students there. The local bank was willing to help but the proposed project was too much and over its capacity. Other lending sources with greater capacity had been approached but without tangible results. The Small Business Administration was also persuaded to take an interest in the project. II. Viewpoint
Several recommendations are anticipated to be formulated after analysis of the situation of the company is conducted. To have a detailed view on the state of the company, person coming from the company, such as the resident planners and the managers, shall first make the preliminary assessments on what options are the best and will give optimum results for the benefit of the company. It is also primarily the responsibility of the management to have a detailed evaluation on the company’s capacity to expand for the use of external analysts that may also carry out an investigation, such as the person coming from the various banks and the Small Business Administration. These recommendations and suggestions are expected to be used by the management of the company and to be applied to address the crisis the company is facing. III. Time Context
It is assumed that the analysis of the situation of the company is done on any date after 1958, the year the company started to have a steady growth rate and an increase in the backlog of orders. IV. Statement of the Problem
The current size and production rate of the company is not able to meet the increasing demand from the customers and the backlog of orders is increasing on an alarming rate. It is facing a new stage of growth but further expansion is not possible since the stockholders had exhausted their cash resources hence, they need to find a new source of financial capital to cover for the expenses needed in acquiring a new plant, additional equipments and machineries, and more working capital to finance training of additional personnel.
V. Objectives (General and Specific)
The company aims to undergo an expansion relative to its size and its production rate to meet the increasing demands and orders from the customers. Specific Objectives:
a. To acquire a...