The current dilemma facing the enterprise is affecting the company’s performance. The company is unable to access loans from lenders and likely to be charged higher interests for bonds while facing investor apathy due to their lower ratings and low return on equity. The introduction of new reporting standards for financial institutions in reporting bad loans has forced lending institutions to tighten their lending and hedge risks against risky businesses. The enterprise has limited options to source for capital to invest in new investment ventures, but must make important decisions to ensure the business continues to be a going concern and profitable in the long-run.
Sales Generation and Price Increments
The enterprise needs to increase sales or increase the price of their goods to earn higher revenues. High-profit margins will allow the enterprise to invest in the new profitable ventures. The firm currently faces depressed earnings resulting to the meager returns on equity. The enterprise needs to re-evaluate its current value chain, encourage volume sales, partner with distributors to expand to new locations and establish discount options for their clients. The approach is cost-effective and is expected to increase sales by 10% in the medium-term. The approach is likely to overwork workers in the short-term. Alternatively, the firm can enforce cost-cutting measures such as workforce rationalization, mechanization of their processes and outsourcing of non-critical functions. The approach is likely to lead to cost savings of 6% in the short-term. Some workers may lose their jobs in the process. Similarly, the firm can increase the price of their products and differentiate their goods, offering different value propositions to their clients. The approach is likely to increase in profits by 14% in the short-term, which will provide cash flows for investment in the new investment ventures. Higher prices will affect...
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