Analysis of Eastern Electronics Essay
Order ID 53563633773 Type Essay Writer Level Masters Style APA Sources/References 4 Perfect Number of Pages to Order 5-10 Pages
Analysis of Eastern Electronics Essay
Eastern Electronics headquartered out of Berlin Germany was a cottage industry that prospered after the unification of Germany and the growth of the electronics era. Boris Schmidt, owner of the company, has enjoyed good growth over the last several years. With sales concentrated primarily in Germany, Austria, Poland, and the Czeck Republic.
Boris saw that he had a limited market in the eastern European countries and that his company was facing stiff competition from other electronic firms in Europe as well as from companies in the United States, Korea and Japan. In order to grow in size and stature and remain competitive in this industry, Boris knew he had to expand his market into other countries.
In 20×3, Boris had a vision to aggressively market and sell electronic components in the recently liberated Russian republics. He hired Vlad Demeshkin, a computer and marketing expert, to introduce sales to the Ukraine, Georgia, and the western area of Russia.
Boris felt that he could compete effectively in these new countries, even though they were relatively unfamiliar with a capitalist system. Eastern Electronics had the advantage of location, with relatively easy distribution to the former Soviet countries. He also produced high quality products indicative of precise German engineering standards.
Boris believed that the customers in the former Soviet countries would appreciate and pay for quality, especially as they were transitioning to a capitalistic form of economics. Businesses could not afford to have less than satisfactory electronic systems that might not perform appropriately as new business practices and procedures were being implemented.
Vlad had numerous connections in the former Soviet countries and also had instant credibility because of his technical expertise. He was able to represent the Eastern Electronics products very well and illustrate how the potential customers would greatly benefit from the services of Eastern.
While financial results started slowly in 20×4, it was evident by 20×6 that the majority of the growth in sales for Eastern Electronics was coming from the work that Vlad was doing in the former Soviet countries. Also, the budget projections for 20×7 and 20×8 also showed continued good growth in the former Soviet countries with only limited growth in the European market. Indeed, the expansion into the former Soviet countries was critical to the immediate success of Eastern Electronics.
Vlad was being paid a flat salary of Euro $40,000 plus a commission of 9.0% of the annual sales increase in the former Soviet countries. In 20×6, his salary would be Euro $149,800 or Euro $40,000 plus (3,780,000 – 2,560,000)0.09 = Euro $149,800. He had implemented some very creative processes to stimulate sales to the former Soviet countries during this time of economic conversion and opportunity.
Since it was very difficult for new startup companies in the former Soviet countries to obtain necessary capital for asset acquisition, Vlad provided short-term capital in the form of inventory and accounts receivable policy.
The general terms for payment on account with customers in the European countries was 2/10 net 40. Those customers often paid within the ten-day discount period to take advantage of the favorable discount terms.
However, customers in the former Soviet countries did not have a favorable cash flow situation and rarely were able to pay in the short ten-day discount period. In fact, customers had great difficulty paying in the 40-day time period. Therefore, Vlad offered credit terms of 2/10 net 80 and often unofficially extended the terms to 90 days.
These new startup companies really appreciated the generosity of Vlad which allowed them to purchase the electronic components from Vlad and then sell them to other customers within the country and collect on the sales before having to pay Eastern Electronics.
That way these companies did not have to seek short-term financing from the banking institutions and be forced to pay unfavorable interest rates. Also, it allowed the customers in the former Soviet countries more favorable opportunities in the currency exchange process. Since they had more time before payment was due, and they could essentially use customer’s money versus their own.
These companies could minimize the number of currency exchange transactions they needed to make in their payments to Eastern. Given that companies generally lose at the minimum an exchange rate fee, every time a currency exchange is made, the customers in the former Soviet countries were very supportive of Vlad’s arrangements.
Vlad felt that Eastern Electronics had a strong enough cash flow situation, and certainly stronger than these companies, to provide these sales terms. Furthermore, this was only a one time hit to Eastern Electronics of extending the payment terms by about 50 days.
Once a sales pattern and resulting payments was established, the differentiation offset itself. Besides, this collection policy gave Eastern a competitive advantage in securing sales in these former Soviet countries. The obvious increase in sales volume easily offset any concerns regarding repayment.
Vlad also helped the new companies in carrying inventory. He arranged to ship a majority of the inventory to the companies generally after these companies had made their sales to other customers. Sometimes Vlad could even have Eastern Electronics ship directly to the customers of the new companies if the orders were of a sufficient quantity. This often eliminated one shipment, and saved Vlad’s customers time and money.
With the big problem of theft in the former Soviet countries, the customers of Vlad were very concerned about carrying a large inventory of highly desirable Eastern Electronic products at a storefront location. The capital cost for these new companies to provide secure inventory storage for a large amount of product was often prohibitive for the new companies.
Since Vlad was able to cut down the requirements of inventory, he is in a sense providing no cost start up inventory capital to the companies in the former Soviet countries.
The inventory policy offered by Vlad also gave Eastern Electronics a competitive advantage especially over companies from countries like Japan, Korea and the United States. The new companies in the former Soviet countries especially liked the way Vlad was watching out for their best interest.
They felt Vlad was a comrade who was really looking out for them as they started their companies. They rewarded Vlad with increasing levels of sales orders, and the sales projections for the next two years look particularly promising.
With the continual increase in sales levels, Eastern electronics is looking to make some capital expansion of their own. Eastern is nearing capacity limitations on production and storage facilities. Given the anticipated growth in the former Soviet market, it is possible that Eastern will consider building a major storage facility in the Ukraine.
Such an action will also help to show their commitment to their expansion program with the former Soviet countries and could allow them further expansion into countries like Kazakhstan and Uzbekistan even beyond to the east. Boris sees these areas as untapped markets and with the modernization of some of the more Arab nations, he wants to get a foothold in these markets as soon as the opportunities are available.
Boris is very pleased with the work Vlad has done to open the markets in the former Soviet countries and is considering a significant raise in both the base salary and commission rate for him beginning in 20×7. He is also excited about the growth opportunities and wants to pursue a capital expansion program so Eastern electronics can meet the anticipated demand increases for the next five years.
He feels he can get some very favorable financing rates with the German National Bank of 11.5% for secured capital loans, and there is always the use of internally generated funds and maybe new external funds to support a growth opportunity.
Financial statements for the years of operation from 20×3 to 20×6 along with the projected budgets for 20×7 and 20×8 are presented as follows.
For the years Ending December 31, 20×3 – 20×8
Years 20×7 and 20×8 are Budget Projections
All amounts in Euro $100,000
Account 20×3 20×4 20×5 20×6 20×7 20×8 Sales – Europe 156.4 158.0 162.0 167.0 172.0 177.2 Sales – Russia – 6.2 25.6 37.8 54.8 71.2 Net Sales 156.4 164.2 187.6 204.8 226.8 248.4 Operating Expenses Production 81.4 86.8 100.4 112.6 130.8 142.6 Admin & Selling 31.4 32.0 37.4 40.4 42.0 48.0 Depreciation 9.2 10.8 14.8 15.4 15.4 17.0 Excise Duties 23.0 22.4 23.4 23.8 24.4 25.2 Total Operating Exp 145.0 152.0 176.0 192.2 212.6 232.8 Operating Margin 11.4 12.2 11.6 12.6 14.2 15.6 Other Expenses Interest Expense 1.6 1.6 4.6 4.2 4.8 5.4 Earnings before Tax 9.8 10.6 7.0 8.4 9.4 10.2 Income Tax 3.4 3.6 2.8 3.2 3.2 3.6 Net Earnings 6.4 7.0 4.2 5.2 6.2 6.6 Dividends 4.8 5.2 3.0 4.2 4.8 4.8 Retention of Earnings 1.6 1.8 1.2 1.0 1.4 1.8
As of December 31, 20×3 – 20×8
Years 20×7 and 20×8 are Budget Projections
All amounts in Euro $100,000
Account 20×3 20×4 20×5 20×6 20×7 20×8 Assets Cash 13.6 20.0 22.4 24.6 27.0 29.8 Accounts Receivable Europe 17.4 18.0 18.2 19.0 19.4 19.8 Russia 0 0.6 6.0 9.0 13.4 17.6 Allowance -0.2 -0.2 -0.2 -0.2 -0.6 -0.8 Inventory 15.4 15.8 18.0 28.6 31.8 34.8 Total Current Assets 46.2 54.2 64.4 81.0 91.0 101.2 Property, Plant & Equi 147.4 147.4 153.0 153.0 170.8 188.0 Accum Depreciation -59.0 -69.8 -84.6 -100.0 -115.4 -132.4 PP & E Net 88.4 77.6 68.4 53.0 55.4 55.6 Long-Term Invest 7.8 7.8 7.8 7.8 6.0 6.0 Total Long-Term 96.2 85.4 76.2 60.8 61.4 61.6 Total Assets 142.4 139.6 140.6 141.8 152.4 162.8 Liabilities & Equity Accounts Payable 9.0 9.2 9.4 10.6 11.4 12.4 Short-Term Notes 7.6 14.4 15.2 15.8 25.6 34.6 Other Current Liab 18.6 18.0 20.6 22.6 25.0 27.2 Total Current Liab 35.2 41.6 45.2 49.0 62.0 74.2 Long-Term Notes 40.6 29.6 25.8 22.2 18.4 14.8 Total Liabilities 75.8 71.2 71.0 71.2 80.4 89.0 Stockholders Equity 60.0 60.0 60.0 60.0 60.0 60.0 Retained Earnings 6.6 8.4 9.6 10.6 12.0 13.8 Total Liab & Equity 142.4 139.6 140.6 141.8 152.4 162.8
There are 60,000 shares of closely held stock outstanding in the company.
- Analyze the performance of Eastern Electronics over the 20×3 through 20×6 time period. Also, determine if the budget projections in 20×7 and 20×8 indicate any changes either favorable or unfavorable in the company performance.
- Comment on the accounts receivable policy being implemented by Vlad for the companies in the former Soviet countries. Do these policies appear sound? What are some of the advantages and disadvantages of such a policy?
- Comment on the inventory policy being implemented by Vlad for the companies in the former Soviet countries. Do these policies appear sound? What are some of the advantages and disadvantages of such a policy?
- Should Boris give Vlad a raise for the work he has done over these last three years? Why or why not? How would you propose to pay Vlad for the work he does for Eastern Electronics?
- Should Eastern Electronics undergo their proposed capital expansion program, especially with their focus in the former Soviet countries? Why or why not?
Analysis of Eastern Electronics Essay
QUALITY OF RESPONSE NO RESPONSE POOR / UNSATISFACTORY SATISFACTORY GOOD EXCELLENT Content (worth a maximum of 50% of the total points) Zero points: Student failed to submit the final paper. 20 points out of 50: The essay illustrates poor understanding of the relevant material by failing to address or incorrectly addressing the relevant content; failing to identify or inaccurately explaining/defining key concepts/ideas; ignoring or incorrectly explaining key points/claims and the reasoning behind them; and/or incorrectly or inappropriately using terminology; and elements of the response are lacking. 30 points out of 50: The essay illustrates a rudimentary understanding of the relevant material by mentioning but not full explaining the relevant content; identifying some of the key concepts/ideas though failing to fully or accurately explain many of them; using terminology, though sometimes inaccurately or inappropriately; and/or incorporating some key claims/points but failing to explain the reasoning behind them or doing so inaccurately. Elements of the required response may also be lacking. 40 points out of 50: The essay illustrates solid understanding of the relevant material by correctly addressing most of the relevant content; identifying and explaining most of the key concepts/ideas; using correct terminology; explaining the reasoning behind most of the key points/claims; and/or where necessary or useful, substantiating some points with accurate examples. The answer is complete. 50 points: The essay illustrates exemplary understanding of the relevant material by thoroughly and correctly addressing the relevant content; identifying and explaining all of the key concepts/ideas; using correct terminology explaining the reasoning behind key points/claims and substantiating, as necessary/useful, points with several accurate and illuminating examples. No aspects of the required answer are missing. Use of Sources (worth a maximum of 20% of the total points). Zero points: Student failed to include citations and/or references. Or the student failed to submit a final paper. 5 out 20 points: Sources are seldom cited to support statements and/or format of citations are not recognizable as APA 6th Edition format. There are major errors in the formation of the references and citations. And/or there is a major reliance on highly questionable. The Student fails to provide an adequate synthesis of research collected for the paper. 10 out 20 points: References to scholarly sources are occasionally given; many statements seem unsubstantiated. Frequent errors in APA 6th Edition format, leaving the reader confused about the source of the information. There are significant errors of the formation in the references and citations. And/or there is a significant use of highly questionable sources. 15 out 20 points: Credible Scholarly sources are used effectively support claims and are, for the most part, clear and fairly represented. APA 6th Edition is used with only a few minor errors. There are minor errors in reference and/or citations. And/or there is some use of questionable sources. 20 points: Credible scholarly sources are used to give compelling evidence to support claims and are clearly and fairly represented. APA 6th Edition format is used accurately and consistently. The student uses above the maximum required references in the development of the assignment. Grammar (worth maximum of 20% of total points) Zero points: Student failed to submit the final paper. 5 points out of 20: The paper does not communicate ideas/points clearly due to inappropriate use of terminology and vague language; thoughts and sentences are disjointed or incomprehensible; organization lacking; and/or numerous grammatical, spelling/punctuation errors 10 points out 20: The paper is often unclear and difficult to follow due to some inappropriate terminology and/or vague language; ideas may be fragmented, wandering and/or repetitive; poor organization; and/or some grammatical, spelling, punctuation errors 15 points out of 20: The paper is mostly clear as a result of appropriate use of terminology and minimal vagueness; no tangents and no repetition; fairly good organization; almost perfect grammar, spelling, punctuation, and word usage. 20 points: The paper is clear, concise, and a pleasure to read as a result of appropriate and precise use of terminology; total coherence of thoughts and presentation and logical organization; and the essay is error free. Structure of the Paper (worth 10% of total points) Zero points: Student failed to submit the final paper. 3 points out of 10: Student needs to develop better formatting skills. The paper omits significant structural elements required for and APA 6th edition paper. Formatting of the paper has major flaws. The paper does not conform to APA 6th edition requirements whatsoever. 5 points out of 10: Appearance of final paper demonstrates the student’s limited ability to format the paper. There are significant errors in formatting and/or the total omission of major components of an APA 6th edition paper. They can include the omission of the cover page, abstract, and page numbers. Additionally the page has major formatting issues with spacing or paragraph formation. Font size might not conform to size requirements. The student also significantly writes too large or too short of and paper 7 points out of 10: Research paper presents an above-average use of formatting skills. The paper has slight errors within the paper. This can include small errors or omissions with the cover page, abstract, page number, and headers. There could be also slight formatting issues with the document spacing or the font Additionally the paper might slightly exceed or undershoot the specific number of required written pages for the assignment. 10 points: Student provides a high-caliber, formatted paper. This includes an APA 6th edition cover page, abstract, page number, headers and is double spaced in 12’ Times Roman Font. Additionally, the paper conforms to the specific number of required written pages and neither goes over or under the specified length of the paper.
GET THIS PROJECT NOW BY CLICKING ON THIS LINK TO PLACE THE ORDER
Do You Have Any Other Essay/Assignment/Class Project/Homework Related to this? Click Here Now [CLICK ME] and Have It Done by Our PhD Qualified Writers!!
Tired of getting an average grade in all your school assignments, projects, essays, and homework? Try us today for all your academic schoolwork needs. We are among the most trusted and recognized professional writing services in the market.
We provide unique, original and plagiarism-free high quality academic, homework, assignments and essay submissions for all our clients. At our company, we capitalize on producing A+ Grades for all our clients and also ensure that you have smooth academic progress in all your school term and semesters.
High-quality academic submissions, A 100% plagiarism-free submission, Meet even the most urgent deadlines, Provide our services to you at the most competitive rates in the market, Give you free revisions until you meet your desired grades and Provide you with 24/7 customer support service via calls or live chats.