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Management Practices

With the present status of your business, it is deemed fit that you will not status quo.  Instead, have a new supplier and a better product.  It is more practical and desirable for the success of your business that you will tie-up with the Brazilian company, which offers a better-than-the-competition engine.  Although the cost is higher by $75, and the delivery is 1 week later than your former supplier, but the projected sale is undeniably higher than $50.

That is a better course of action than to stick with the former Korean supplier, as reflected by your dwindled sales the past six months.  Be it noted also that the  cause of  your decreased sales is the reluctance of the consumers to buy your product since the competition had been bold in moving in with a new engine that produces more horsepower with less gasoline usage.  Thus, to keep up with the competition do not status quo, change your supplier.  Besides, when sales flows in faster, the higher-acquisition-cost of the Brazilian engine will be off-set by the higher profits. Hence, bigger profits may be eventually realized.

Moreover, be always aware of the economic situation of the country.  Along with that is your awareness

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with your consumers.  Know your consumers, know their purchasing capacities, and know their wants and needs.  Do not just offer a product without studying carefully your market, that is,  who needs your product, who can afford it, and what do they want.  Likewise, be abreast with the political condition of the country and that of the supplier’s.

  That also is a factor in having a good and smooth flow of your business.  Take for example the strained relationship between the country and Korea, it raised concerns that will affect the delivery of the engines and their prices.  A “favored trading agreement” with the country and Brazil is more advantageous to your business, especially when the Brazilian company is willing to have a strategic alliance with you to promote the engine [in the country].

Aside from the aforementioned recommendations, you have to consider and implement downsizing of employees.  Doing so would mean lesser cost for employees’ salaries and wages, and in effect, would let you afford the Brazilian engine. Retrenching is a usual business practice to save a failing business, therefore, do not be reluctant to do so.

The remaining five employees can carry on the office/warehouse tasks, as the tasks of the two retrenched ones may be absorbed by anyone of the remaining five, or may be distributed to them proportionately, depending upon the nature of the tasks.  In addition, donwsizing would easen-up your tight cash flow.  The lesser the employees, the lesser salary expense, thus, the bigger cash on hand.

As you are still financially tight to settle your loan, pay the interest first.  If the interest is still too high for you to settle, make an arrangement with your creditor. Perhaps, you and your creditor could come up with a better amortization plan, that is not too restraining on you.

Another concern is, it is not unethical to break an existing relationship with your current supplier.  Sometimes, ties should be broken in order to make a more profitable one.  Have in mind that an old connection which does not make your business progress, pulling it to failure instead, should really be severed.  You are in business in order to realize satisfactory return on investment, and not merely to stay connected with your supplier – current or prospective alike.

Furthermore, the financial constraints that you are experiencing right now were by-product of your old management practices.  Endeavor to devise and implement new management styles, new marketing strategies, new production and cost management, and the like. A winning management style is a balance between the efficiency and effectiveness of the employees and the employer(s).  A smart marketing strategy is not only attractive and enticing to the consumers but as well should increase your sales rates.  A brilliant production and cost management is one that is not only disbursing an amount of capital but as well facilitating the receipts of funds.

Better yet, conduct a feasibility study to inquire into the marketability of the Brazilian engine, and to have a projected cash flow for the next five years.  Such feasibility study will serve as your guide in conducting your business and in controlling your finances.

Lastly Mr. and Mrs. Doe, the success of a business lies on the resilience of the businessmen.  They have to see the contraints as surmountable, and as challenges that will make them press on more, rather than see them as reasons for closing shop.

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