Name of the business: Haefren Baum GmgH
Nature of the business:
Haefren Baum is a retailer of high quality home furniture located in Cologne, Germany. They have also added three outlet stores in Rhineland, a nearby suburban area.
Haefren retails high quality furniture manufactured by Wiegandt has advertised aggressively in order to build and maintain a strong brand image. Haefren benefited tremendously from the successful marketing provided by Wiegandt. Wiegandt has However, because the nature of the product is high-end and durable, sales are subject to fluctuations of the business cycle. During the economic boom leading up to 1993 Haefren, as well as the industry in general, enjoyed strong sales. However, the economic bust in 1993 has slowed sales growth. Decreased consumer confidence caused industry sales growth to decrease from 42.9% in 1992 to 9% in 1993. Haefren experienced negative sales growth during this period. Haefren has a strong competitive position; however, it is quickly deteriorating. The addition of 3 outlets give Haefren an opportunity to capture a wider market than it currently has. However, new competitors entering the market are all competing for stagnant demand. European retailers are also entering the German furniture market which makes it even harder for Haefren to maintain its competitive advantage.
Haefren obtains its merchandise directly from the manufacturer, Weigandt. Weigandt has provided “fairly liberal” credit terms which include a discount for early payment (2% 10, net 30). However, they have jeopardized their lose credit terms because of inefficiencies with their receivables, inventories, and fixed assets.
A major issue that Haefren needs to address is the delinquency of their customers accounts. From 1993 to 1995, days sales outstanding have increased to 77 days, which is dramatically higher than the 30-day monthly installment terms. This delay in collection is...
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