This is case study analysis of a case named "Harry's hi-fi center", in this case Harry was in dilemma for its business strategy. His firm was making losses and we need to provide solution to Harry. This case analysis is in WAC format provides recommendation to Harry.

1. Written Analysis & Communication
Report on Harry’s Hi-fi Centre

2. TABLE OF CONTENTS
1. EXECUTIVE SUMMARY……………………………………………………………………………………………………3
2. SITUATIONAL ANALYSIS………………………………………………………………………………………………….3
3. PROBLEM STATEMENT…………………………………………………………………………………………………...4
4. STATEMENT OF OPTIONS………………………………………………………………………………………………..4
5. CRITERIA FOR EVALUATION.....………………………………………………………………………………………..5
6. EVALUATION OF OPTIONS………………………………………………………………………………………………5
7. RECOMMENDATIONS………………………………………………………………………………………………………6
8. PLAN OF ACTION……………………………………………………………………………………………………………...6
9. ANNEXURE-1................................................................................................................................................................7
10. ANNEXURE-2...............................................................................................................................................................8
11. REFERENCES................................................................................................................................................................9
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3. LETTER OF TRANSMITTAL
TO: Harry
FROM: Bhargav, Dadhich
DATE: 20/7/2012
SUBJECT: Detail analysis report on existing business as well other business opportunities.
PURPOSE:
As you sought solution for your future business planning, we have analyzed different options
on certain criteria
The transmittal covers detail analysis of options available to you for business. Please
scrutinize through report and ponder over our suggestion to go ahead with loudspeaker
business.
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4. Executive Summary:
Mainly because of improper marketing strategy, a clash between partners and economic slowdown
existing business does not seem profitable. So mainly a problem for Harry is, whether he shall go
with his existing business or think about other options which may be more profitable to him, first
one of them is he will get out of his current business and start manufacturing unit of loudspeaker
and second is he will go back to his old shop and do the same business as he did earlier. As per
analysis, the sales of current business is declining from $ 36000/month to $ 18000/month during
last six months, while in case of going back to old shop and start up business there is required much
effort and maybe it is not as much profitable as older one during starting period. As per the current
market scenario in loud speaker industry, profitability of new manufacturing business is very high
means approx. profit for 1st year comes around 23% therefore, it is recommended to go with this
option by choosing proper target market & making suitable marketing strategy.
[Total Words: 183]
Situation Analysis:
By analyzing the case, we can say that currently Harry and his partners are facing problems to
sustain into competitive market because of following major factors.
1. Improper marketing strategy
2. Inappropriate target market
3. Location of new shop
4. Clashes between business partners
5. Economic slowdown (annual GDP was 1%)
After evaluating declining sales of the business, they decided to restructure the existing business
model to increase the profitability. We analyze the new business model and estimation prepared
by Cyril, one of the partners.
o Analysis of new organized business for profitability:
By the analysis of data given in case we can produce following graph for getting idea of current as
well as future sales of the company.
As we have seen that sales per month is declining from $36000/month in March to $18000/month
in September at the time of reappraisal, also economic recession is going on and annual GDP is 1%
hence people are not likely to buy luxurious item in this period therefore there is a high possibility
of decrease in sales per month in next 4-5 months of future period.
As per the estimated profit statement, one can infer that to make minimum profit, sales per month
should be kept minimum $19150/month.
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5. Sales per month of new organized business
40000
35000
Sales per Month in $
30000
25000
20000
15000
10000
5000
0
Month
If Harry wants to continue with his existing business then following expenditures / liabilities
incurred on him which he should keep in mind.
1. Payment of $10000 to each partner.
2. Total estimated asset value ($112000) is much lower than it is calculated because of economic
slowdown, so higher depreciation of asset.
3. Total monthly expenses around $3650.
4. Lease amount of shop
Problem Statement:
Should Harry continue with the same business or think about other options which might be more
profitable to him?
Statement of Options:
1. Acquire existing business:
Harry should take up his existing business and expand the same by the use of effective
marketing strategy & choosing proper target market.
2. Establish new business of loudspeaker manufacturing:
Harry should break partnership and get out of existing business by taking $20000 and invest
the same to open and establish a new business of loudspeaker manufacturing.
3. Go back to his previous shop and re establish the business:
Harry should break his partnership and start same business in his previous shop by making
necessary changes.
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6. Criteria for Evaluation:
We can assess the suggested options for this intricate problem with respect to some parameters
and constraints .We eventually weight them on the basis of following each criteria.
1. Profitability
2. Future growth
3. Customer relationship
Evaluation of Options:
We analyze options by stating pros and cons of each and by assessing that up to what extent they
can satisfy all above criteria.
1. Acquire existing business:
o Profitability: In situation analysis we infer that profitability of this business in near future
(5-6 months) is very low because of economic slowdown, poor customer relationship etc.
However if Harry revises his marketing strategy and build stronger customer relationship
then it can become profitable in long term.
o Future growth: The shop is on lease and actual value of his assets come around $52000
instead of $112000.One favorable situation for Harry is that his partners will not make any
influence on him as they will be out of the business. Harry knows how to grow business
from his past experience, but looking at the market condition rate of growth of the same
will be lower in near future.
o Customer relationship: Because improper location of new shop and poor marketing
strategy customer relationship of Harry’s existing business is at its worst. Harry has to put
lots off efforts in marketing, advertising and also by giving his personal time to establish
strong customer relationship.
2. Establish new business of loudspeaker manufacturing:
Here we analyze, how much capital investment is required to start and establish this new
business and what will be the profitability of the same. As per the Annexure-I, total capital
investment required is $21,156, as Harry has already $20000 in his hand by getting out of his
existing business hence Harry has to manage $1156 to start his new business.
o Profitability: As per Annexure-II, If Harry will manufacture and sell only 1800 loudspeakers in
a year then also he will get return around 31% and net profit ratio will be 23.2% which will
be considered as very good condition for newly establish business. Also as given in case
there is 40% investment allowance and higher tariff charges incurred on imported
loudspeakers which definitely motivate the buyers to buy loudspeakers from domestic
manufacturing unit hence it won’t be much challengeable to sell only 1800 loudspeakers in a
whole year.
o Future growth: As harry has vast technical knowledge as well as past contacts with
customers hence he can definitely penetrate in to this new market by putting some efforts in
advertising and building customer relationship.
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7. o Customer relationship: AS Harry had earlier experience of customer management, he can
use the same to make strong customer relationship, also because of his vast technical
knowledge and customer oriented strategy he can make good relationship with customers.
3. Go back to his previous shop and re establish the business:
o Profitability : Considering shop rent, electricity, start-up inventory and other wages cost him
another $5000, considering recession period in 1975 sales went to $100,000,gross profit
$22000 and net profit $5400. So these figures show that there is a very good scope of profit
for this option.
o Future growth: Future growth is inevitable if harry is following above discussed business
model in this option.
o Customer relationship: As harry has moved to his previous location and he is investing
another $5000 to renovate his old shop to accommodate more customers, he can very much
lure middle and upper middle class customers.
By evaluating each option we can conclude the following table.
Criteria Profitability Future Growth Customer
Options relationship
Option 1 3 2 2
Option 2 1 1 2
Option 3 2 1 2
1 – For higher priority & 3- Lower Priority
Recommendation:
As we have analyzed several options and evaluated each option on each criteria, it is suggested to
harry to go ahead with loudspeaker manufacturing business as future growth and profitability of that
is business is much higher than that of other two.
Plan of Action:
o By use of capital, Harry gain from his existing business, Harry should purchase optimum land
and hire optimum number (as per Annexure-II) of competent staff to kick off his business.
o He shall make tie up with some local dealers by giving them some attractive offers to make
position in a market.
o Harry shall use of his past contacts with customers and companies to design its marketing
strategy and feed back for value creation.
[Total Words: 1127]
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8. ANNEXURE – 1
A Fixed Capital in $ B Working Capital per month in $
(i) Land and Building (i) Staff and Labour
200
Built-up Area Sq.Mts. Sr No Designation Nos Salary Total
150
Assembly, Testing and Stores Sq.Mts. 1 Manager 1 100 100
Office 50 Sq.Mts. 2 Supervisor 1 70 70
Rent Payable (per annum) 4800 3 Clerk/Typist 1 50 50
(ii) Machinery and Testing Equipments 4 Watchman 1 30 30
(a) Machinery 5 Skilled Workers 4 40 160
1 Buffing and Grinding Machine 100 6 Semi-Skilled Workers 3 30 90
2 Drilling Machine (1/2") 80 Total 500
(b) Testing & Office Equipments 4836 (ii) Raw Material Requirement (per month)
TOTAL FIXED CAPITAL 9,816 Total 3080
TOTAL CAPITAL INVESTMENT in $ (iii) Other Contingent Expenses
FIXED CAPITAL 9,816 Total 200
WORKING
CAPITAL FOR 3 11,340
MONTHS TOTAL EXPENDITURE 3,780
TOTAL CAPITAL 21,156
INVESTMENT
Assumptions:
o The economic slowdown will obsolete in next 5-6 months.
o Price of some equipment assumed on the basis of price of some other equipments.
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9. ANNEXURE-2
A Cost of Production (per annum)
1 Total Recurring Expenditure 64800
2 Depreciation on Plant/Machinery/Equipment @ 10% 400
3 Depreciation on Office Equipment/Furniture @ 20% 200
4 Depreciation on Jigs and Fixtures @ 20% 100
Interest on Total Capital
5 Investment @ 16% 3574
Total 69074
B Sales Turnover (per annum)
Qty Rate in
Item (Nos) $ Value
Loud Speaker 1800 50 90000
C Profit per year (Before Tax)
Sales - Cost of Production 20926
D Net Profit Ratio
Profit per annum X 100
Sales per annum 23.2%
E Rate of Return
Profit (per annum) x 100
Total capital investment 31.02%
REFERENCES
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10. 1. http://www.econ.mq.edu.au/website_administration/economics_studies_macquarie_uni
versity/Econ_docs/research_papers2/2004_research_papers/Abelson_9_04.pdf
2. 1970-79 are Productivity Commission data
3. http://www.abs.gov.au/Ausstats/abs@.nsf/Previousproducts/1301.0Feature%20Article4
82001?opendocument&tabname=Summary&prodno=1301.0&issue=2001&num=&view
4. http://www.archimedesfinancial.com.au
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