Executive Summary Ceres Company, backed by its innovative GetCeres program, has been capitalizing on a previously untouched segment of the organics market. In capturing a key demographic of consumers, those causal gardeners who demand instant gratification, rather than the extended gardening period, Ceres is eager to expand quickly to capitalize on this opportunity before its competitors. This strategy is putting extensive strain on the company’s resources and its relationship with suppliers. The exciting growth in sales have eclipsed the company’s sustainable growth rate and Ceres is hampered by cash deficits. Our team has identified three options for Ceres as it looks to …show more content…
- Increase prices to decrease sales.
- Change the discount rate from 15% to 10%.
- Do not expand in the retail segment anymore, but instead focus on the stable, slow-growing sector of the online business.
- Cut down R&D expenses by reducing product line expansions.
Our pro-forma statements project an increase in NOCF from $884 to $2184 (thousands), Cash Conversion Cycle reduced from 59 days to 25 days.
B. Pursue an aggressive growth strategy on its own - aim for a 35% increase in sales.
-AFN to pursue this policy is $2 million; still within bank limits (Exhibit 2)
- Financing options: sell new stock; stop paying dividends, increase financial leverage.
- NOCF will increase from $886 to $1752 (thousands), however, the pro forma assumes that the company will manage to keep all its expenses in the same ratios.
-The marketing strategy has to focus on increasing market share and the related costs for advertising, fending off competitors, training additional personnel and maintaining a credit-line to cover seasonal sales.
C. Ceres should merge with a cash-cow (for e.g. a nation-wide dealer such as Home Depot) The synergies created will enable Ceres to pursue its currently planned strategy of rapid retail growth through aggressive marketing efforts and position itself as leader in the industry.
- Decrease in COGS: 15% decrease from past dealer discount part of GetCeres, reducing labor and marketing