Characterize These Companies' Positions In The Marketplace

Characterize These Companies Positions In The Marketplace From You

Identify the market positions of the specified companies based on customer perceptions, determine their placement within the positioning matrix, assess whether the two chains view each other as competitive threats, and suggest strategies each could implement to strengthen profitability.

Use the AFN (Additional Funds Needed) equation to forecast financial requirements for Broussard Skateboard, given projected sales increases, current asset levels, and operating assumptions. Consider how changes in the asset base, dividend policies, and operational capacity affect the AFN estimates. Similarly, apply the AFN equation to Upton Computers, analyzing projected sales growth, external capital needs, and the firm’s self-supporting growth rate, based on the provided financial data. Forecast balance sheets accordingly and examine how different assumptions influence funding requirements.

Discuss agency conflicts between inside owner/managers and outside shareholders, and between borrowers and lenders. Provide real-life examples (excluding Enron), illustrating how agency problems have arisen and how current measures may prevent future occurrences. Offer recommendations to improve corporate governance and reduce agency conflicts, supported by credible sources.

Sample Paper For Above instruction

Understanding the market positioning of companies from customer perception is critical for evaluating their competitive stance and potential strategic moves. Market positioning involves how consumers perceive a brand relative to competitors, which directly influences loyalty, sales, and profitability. Companies can be mapped on a positioning matrix based on factors such as quality, price, and service. For instance, a premium brand positioned high on quality and price may face different competitive threats than a budget brand competing primarily on price.

Assessing whether companies view each other as threats involves examining their strategic positioning and market overlaps. Two chains in similar segments may perceive each other as direct competitors, leading to aggressive marketing, price wars, or innovation battles. Conversely, if they target different customer bases, they might coexist with minimal rivalry, focusing instead on differentiation. For example, a luxury retailer and a discount store typically operate in different segments, reducing competitive threats.

To strengthen profitability, companies could focus on enhancing operational efficiencies, diversifying product offerings, expanding into new markets, or leveraging technology for better customer engagement. For example, a retailer might implement data analytics to personalize marketing, thereby increasing sales and profit margins. Cost reduction strategies, such as supply chain optimization, can also improve bottom-line results.

Applying the AFN equation to Broussard Skateboard reveals the additional funding required to support projected sales growth. Given sales are expected to rise by 15% from $8 million to $9.2 million, and assets are currently $5 million at full capacity, the firm must increase assets proportionally, considering spontaneous liabilities. The forecasted profit margin of 6% and payout ratio of 40% are key inputs. Calculations show an approximate need for $260,000 in external financing.

If the company’s assets were $7 million at year-end, the AFN would increase because a larger asset base would be needed to support the higher sales level. The change reflects the altered capital intensity ratio, which measures the assets required per dollar of sales. A higher asset base increases the AFN, illustrating the importance of efficiency and capacity management.

In the case of no dividends paid, retained earnings increase, reducing the external funding requirement. This results in a lower AFN since the company funds part of growth internally, highlighting how dividend policies influence external capital needs. The differences across scenarios underscore the importance of financial strategy alignment with operational capacity and shareholder expectations.

Similarly, Upton Computers' growth plan using the AFN method indicates a need for external capital to finance sales expansion. With projected sales of $420 million (an increase of $70 million or 20%), calculations based on the existing ratio of assets to sales, liabilities, and profit margin suggest a certain amount of external funding is necessary. The self-supporting growth rate is the maximum growth compatible with internal financing, found by setting AFN to zero, which indicates when external funding becomes unnecessary.

Forecasting the 2017 balance sheet involves projecting assets, liabilities, and retained earnings based on sales growth, profit margins, payout ratios, and assumptions about spontaneous liabilities. The resulting line of credit needed reflects the external capital required at year-end to sustain growth without exceeding internal funding capacity.

Agency conflicts play a significant role in corporate governance, affecting firm performance and stakeholder trust. The principal-agent problem arises when managers (agents), who run the company, do not align their interests with shareholders (principals). An example is when managers pursue personal goals at the expense of shareholder value, such as empire-building or excessive executive compensation. Implementing incentives like stock options and performance-based compensation can mitigate these conflicts.

Between borrowers and lenders, agency issues occur when borrowers may undertake risky projects or underreport financial difficulties to maximize benefits at the expense of lenders' security. Covenants, monitoring, and contractual agreements are tools used to align interests and reduce such conflicts. Historical instances, such as the financial crisis of 2007-2008, illustrate how lax oversight allowed risk-taking that ultimately destabilized markets.

Examining real-life agency problems beyond Enron, the case of WorldCom highlights the consequences of earnings manipulation and lack of oversight. Current regulatory measures, including the Sarbanes-Oxley Act, aim to enhance transparency and accountability. However, continuous vigilance, stronger enforcement, and cultural shifts toward ethical conduct remain essential. Encouraging transparency, aligning executive compensation with long-term performance, and reinforcing board independence are additional strategies to prevent future agency issues.

References

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