Mr. Ricardo Baltazar established Royal Printing and Packaging Company in 1962 starting with just P2000. Previously accepting all kinds of job orders large and small, he currently caters only to multinational drug companies. Now after 27 years, he turned over the management of his business, to his son Jose, a fresh graduate from a business school in Metro Manila. Upon starting his new job, Jose reviewed the financial statements of the company and saw that in the company’s 27 years of existence, never has its Net Income reached P1 million. Furthermore, after computing the net margin which was 10%, he realized that he could earn more by selling the company’s assets and investing the cash in Treasury bills, which has an interest rate of 16%. However, upon discussing the investment in Treasury bills to his father, the older man’s response was not favorable and even stated that selling the assets is not an option.
Given the positive and profitable forecasts in the printing and packaging markets in the next ten years, the Royal Printing & Packaging Company is faced with the maximization of its assets and opportunities.
Areas for Consideration and Alternative Courses of Action
Factors to Consider:
External : Limited Clientele
Although the company has been operating for 27 years, it has limited its business operations to drug companies. It has refused to accept small job orders and lost its long-time client, Commercial Bank. However, this limited market could be expanded due to the bright forecast in the printing industry. There are projected uptrends in the value of production in the manufacturing sector representing majority of the market being serviced by commercial printers such as the markets for school textbooks, campaign and advertising materials.