K. Ratna prashanth
Counterdrop Appliances division is formed six month earlier by Central foods after acquiring a successful company named Kitchen Help’s; in the kitchen appliances range, it had established a good market in this category. Kitchen Help had good quality but financial constraints in order to expand whereas Food Corporation wanted to diversify. After acquisition the company poured in a lot of resources in Kitchen Help including the plant facilities and the employees. As a result the sales of the company grew to a large extent initially. After that there was a sudden fall in the revenue and profits. This lead to the replacement of General Manager(John Pero to Georgia Dixton). She has decided to tackle this issue by the reduction in overhead expenses by 20 % in order to revive future profits. To attain this she has delegated this responsibility to Controller Larry Williams. Larry William has studied the financial implications and the people in the organisation and come to a decision of reduction in the 20% departmental payrolls.
The Kitchen Help is undergoing a severe decline in profits and revenue. Human resources have been recruited (Good numbers) by the earlier General manager Pero to solve this. Although the company has taken action that these resources do not hinder the progress, it has nearly constant sales revenue and same sales level it maintained for past three years. There is no growth in the revenue.
There is a problem of decline in profits in the most promising product lines of the Kitchen Help. The Coffee maker which gave a 30% of total revenue and 35% profits has a decline in demand due to competitor’s better product. Their price is less than $35 and it makes a coffee of same taste. Also there is steep decline in the demand of the microwave product range which used to give a profit of 18%.
With decline in the Profits and...