John Atherley is the owner of Atherley Furniture Company located near Orillia, Ontario. In recent years the progression of his chair division has had mediocre results and profits have been declining steadily each year. From the years 1995 to 1998 Atherley Furniture’s total profits have suffered a 24% loss within that time span. In the company’s chair division there are three models of chairs that have quite the reputation the “Caledonia”, “Atherley”, and lastly the “Parkdale”. Growing concern for the company’s performance led the executive team to analyze income statements for each model to determine the attributed expenses and revenues. With a decline in profits for the Atherley Company, it is crucial that they …show more content…
Artherley's “Parkdale” model is outdated and not in demand as before causing loss in sales and higher inventory levels. If this situation continues then the Parkdale model must be eliminated because manufacturing it means putting resources to waste and losing potential profit from more successful models.
Management cannot invest in equipment and expansion because of the heavy debt load and diminishing profits. Inability to advance in technology will lower Atherley’s competitiveness and market share in the industry.
Overall sales income and net profits in the chair department decreased during the past three years and may continue to do so in future years. The main objective of a business is to make money but apparently the chair division is becoming unprofitable and posing a threat to the overall success of the company, a major change must happen to reverse the current situation.
Inability to match customer demand for the “Caledonia” model may cause customers to purchase from competitors. Most customers can not wait for the “Caledonia” model to be delivered and are not willing to wait if they can buy a similar product immediately from other companies, this will severely affect sales of not only the “Caledonia” model but of other models and products since customers often buy matching furniture.
Modify the “Parkdale” model to meet