• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Science Technology Company - 1985

Extracts from this document...

Introduction

Science Technology Company - 1985 Advanced Financial Management Professor Clayton June 9, 2005 Chirayu Patel Dave Chen Ian Hoffman Tim Boyd Bill Watson of Science Technology Company (STC) should not discuss the current 5-year financing plan prepared by Harry Finson, the chief financial officer, at the forthcoming board meeting. The industry that STC is in has short product life cycle, rapid technology obsolescence and fast growth with increasing competition. In fact, STC's strategy to survive the competition is to maintain leadership in ATE segment and to further compete in the large scale integrated (VLSI) circuits segment by chasing market share and spreading high R&D cost over large sales. However, the large sales growth seems to be more difficult to obtain with the newly added competition. Based on historical trend, level of competition, and other related industry figures; It is suggested that a more reasonable 12.8% annual growth projection be used. ...read more.

Middle

The industry that STC is in has short product life cycle, rapid technology obsolescence, and fast growth. STC's strategy will beat the competition by maintaining leadership in ATE segment and competing in the large scale integrated (VLSI) circuits segment by chasing market share and spreading high R&D cost over large sales volume. The growth of ATE segment is largely fueled by the growth of electronic products, but this success can be segment dependent. Although the ATE segment with 28% annual growth is exceptional, the success in the ATE segment cannot infer the same success in the VLSI segment. Despite the aid of ATE segment growth, the historical sales growth would still be approximately 12.8% from 1980 to 1984. This implies that STC, with a history of averaging around 12% sales growth, is unable to outpace the competition, and the 30% sales growth seems far out of reach. Historical cost of goods sold for STC and three other primary competitors over the years is around 45% to 46% of sales; this shows that STC has not been able to position itself well enough to obtain the unrealistic growth projection of 41%. ...read more.

Conclusion

The $66 MM in equity from common stock sales in 1982 and 1983 allowed STC to continue its operation without having to drastically reorganize its operations. Based on the conservative estimates STC's debt is increasing faster then sales, the additional debt would have to be financed by increasing debt service or increasing equity. It is strongly recommended that Mr. Watson continue to look toward ensuring the future of STC products by investing capital into R&D and technology. Technology advances so quickly that in order for STC to keep their share of the market, they need to keep up with technology and innovation in order to increase sales and profits. In short, STC is in need of a major overall to its operations, STC must increase cash to concentrate on R&D and sales growth, increase company efficiency and quality, and reduce receivables and inventory. Additionally, STC could benefit by outsourcing its manufacturing operations to reduce costs and improve its financial position. 3 1 Science Technology Company - 1985 6/9/05 ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our AS and A Level Structures, Objectives & External Influences section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related AS and A Level Structures, Objectives & External Influences essays

  1. Marked by a teacher

    Marketing Management - Swisher Mower and Machine Company.

    5 star(s)

    Although the chain's outlets were located in metropolitan areas, there would be some overlap in trade areas with SMC's current dealers. SMC, a small concern, relies heavily on its regional dealers to promote its products to consumers. Such a bold move might lead to certain percentage of independent dealers to drop the SMC line.

  2. For my portfolio, I was asked to do an assignment on two businesses. I ...

    Comparison of Influences of the stakeholders The interest vary of stake holders according to the ownership and business activity The stakeholder's interest may vary according to their ownerships and business activity. For example Tesco is a public limited company where shareholders are the owners but the interest is different

  1. Tesco financial review

    They will need to ensure that they don't spend to much on stock as new stock will be arriving every few days. I recommend that Tesco uses the Hire purchase method wherever possible, as they will be paying for the item in monthly instalments and as they are making profit

  2. Businesses choose the location for their business for many different reasons. Depending on the ...

    To provide a charitable service: Charities don't have an aim to make a profit because they don't earn from the charity. To be environmentally friendly: Companies who deal with harmful substances tand to make an aim to help the environment.

  1. Economic growth

    in sales which could result in some job lay-off's in order to cut costs. However, by cutting costs they would be losing those employers that are helping them to meet the demands of the economy. This is a vicious cycle in which businesses could find it very hard to break out of.

  2. Interpretation of Financial Statements.

    The major value of ratios lies in their ability to highlight difficulties and signpost financially deteriorating data or wave financial danger-flags to the users. Ratios can also be used in a more positive sense. If ratios are used in a discriminate sense they can assist for example, in identifying companies

  1. Sustainability in the Automotive Industry

    Such pressures can force industries to change the industry norms simply for competitive advantage, Joseph Fiksel (2001) said "it is quite plausible that those companies who fail to understand the sustainability drivers may find themselves displaced by the entry of new, more agile competitors" he then went on to say

  2. Applied Business. Investigating a business Preston Manor High School

    Promotion ? this is how the customers are informed, promotion is done by advertising which is non personal form of communication and it includes television, newspapers, magazines, billboard posters, radio, cinema, etc. Advertising is intended to persuade and to inform.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work