Electro Industries
Case Introduction
Electro Industries are a large diversified manufacturer of computer systems, industrial electronics, electronic components and consumer electronics and a supplier of a broad range of services.
Problems confronting Electro
• Electro has incurred its first loss for the company in 15 years, despite sales growth of 20%. The net loss in 1974 was $5.7 million on sales of $875 million
• Operational expenses and administrative expenses soared.
• Stock price is low from 1968 till 1973. Interest expenses increased because majority of the debt was short term and there was an increase in interest rate. Interest expense rose from 0.54 % to 3.7% of total sales
• Decentralized structure of operations provides lesser control on the operational efficiency at the divisions.
Corporate cash flow situation
Overall, from the balance sheet, we can see that the cash available in 1974 is 2.89% of the total sales, which is lower than that of 1973.
• Only K, N, Q, T, W & X have increase in their positive cash flows, and U & V have an improvement in their cash flows but it is still negative. All other products have had a decrease in their cash flows in 1974 as compared to 1973.
• All these have managed to increase their market share, except Q.
• K, Q, V & W have high market growth rate. N, T & U have medium growth and X has low market growth rate.
In 1974, the highest cash flow was seen in products A,B, D, L,N, P, S. All others had a decrease in their cash flow as compared to 1973’s cash flows.
Product Group Quadrant Changes Market Share Change from 1973 to 74’ Long term Market Growth Cash
Flow
A Cash Cow Increased by 4.8% Low (7.5%) 6.3
B Dog Increased by 26% Low (7.3%) 1.2
D Cash cow, moving into Dog Quadrant Decreased by 1.9% Very Low (2.8%) 1
L Cash Cow Increased by 13.5% Very Low (2.8%) 3.7
N Star Increased by 7.7% Medium 9(12%) 1.3
P Cash Cow (borderline with star quadrant) Increased by 3.8% Medium (9.5%), 1.9
S Question Mark Increased by
Electro Industries are a large diversified manufacturer of computer systems, industrial electronics, electronic components and consumer electronics and a supplier of a broad range of services.
Problems confronting Electro
• Electro has incurred its first loss for the company in 15 years, despite sales growth of 20%. The net loss in 1974 was $5.7 million on sales of $875 million
• Operational expenses and administrative expenses soared.
• Stock price is low from 1968 till 1973. Interest expenses increased because majority of the debt was short term and there was an increase in interest rate. Interest expense rose from 0.54 % to 3.7% of total sales
• Decentralized structure of operations provides lesser control on the operational efficiency at the divisions.
Corporate cash flow situation
Overall, from the balance sheet, we can see that the cash available in 1974 is 2.89% of the total sales, which is lower than that of 1973.
• Only K, N, Q, T, W & X have increase in their positive cash flows, and U & V have an improvement in their cash flows but it is still negative. All other products have had a decrease in their cash flows in 1974 as compared to 1973.
• All these have managed to increase their market share, except Q.
• K, Q, V & W have high market growth rate. N, T & U have medium growth and X has low market growth rate.
In 1974, the highest cash flow was seen in products A,B, D, L,N, P, S. All others had a decrease in their cash flow as compared to 1973’s cash flows.
Product Group Quadrant Changes Market Share Change from 1973 to 74’ Long term Market Growth Cash
Flow
A Cash Cow Increased by 4.8% Low (7.5%) 6.3
B Dog Increased by 26% Low (7.3%) 1.2
D Cash cow, moving into Dog Quadrant Decreased by 1.9% Very Low (2.8%) 1
L Cash Cow Increased by 13.5% Very Low (2.8%) 3.7
N Star Increased by 7.7% Medium 9(12%) 1.3
P Cash Cow (borderline with star quadrant) Increased by 3.8% Medium (9.5%), 1.9
S Question Mark Increased by