Furniture Bank Case Solution

2. New Opportunities

i. Acquisition of Trucks

There are numerous options available for the organization to use its present financial standing in order to gain long-term advantage. First of all, it is proposed to improve the organization’s trucking capability by acquiring new trucks. This option is quite viable keeping in mind the fact that it relates to organization’s core competency. This will also allow the organization’s trucking operation to become self-sustaining. Currently, organization’s trucking operation is suffering from certain inherent deficiencies. This can be substantiated from the negative cash flow associated with this operation. Addition of trucks in the service fleet will allow the organization to increase the magnitude of its service. The benefits will manifest in the shape of efficient delivery and pick up of the items. As a result, the organization will be able to provide satisfactory results to the customers. The end-result will be a positive flow for organization’s trucking operation. Addition of the new trucks will offset the negative effects of depreciation and replacement of the old trucks. However, it is imperative for the organization to get the best possible deal for this option. This implies that the acquisition of the new trucks must be done in most cost-effective manner. For this purpose, organization’s relationship with GM motors could come quite handy as it can buy new trucks at discounted price. However, acquisition of the new trucks is not without its share of problems. Despite sound financial standing, organization will have to find a way to finance this proposed idea. This could be done either through cash at hand, or through negotiated loan. Using cash at hand for this purpose may put the organization in liquidity problems. On the other hand, use of negotiated loan will entail payment of the principal amount along with the interest. This may offset the benefit achieved from the discounted price of trucks from GM. In addition to this, the acquisition of new trucks will also increase the operational costs of trucking operations. The increase in cost will be a direct result of the increase in salary, maintenance and insurance overheads as a result of new trucks. Nevertheless, the acquisition of the new trucks will also increase the revenue for the organization. It is estimated that the new trucks will have the capability of generating around $127,000 in the delivery income. This will provide a considerable boost to the organization and will improve its cash flow. In addition to this, this additional capability will allow the organization to bring new customers; if, the marketing and sales functions of the organization are able to effectively manage new leads.

ii. Relocation

The second option is related to the acquisition of the new site, in order to shift the premises of the business from present location. The generation of this alternative is due to external stimulus, which exists in the form of pressure from city council. It is inevitable for the organization to find and shift to the new location. In case of anticipating and conducting this change, the organization could be forced by the city government to leave the present site. In such a scenario, it will be disastrous for the organization, as it will be a shift to a new location in a haphazard manner. Therefore, it is imperative for the organization to foresee this impending risk and select remedial course of action. Currently, the organization has the financial muscle and cash flow to afford such change. The most appropriate location for the future premises for the business will be Greater Toronto Area. This is due to the presence of organization’s major client in this area. Another advantage exists in the shape of presence of accessible transportation business, which will facilitate the expansion of the business. However, this area is quite expensive in nature and could monetary constraint for the organization. Therefore, it is important for the organization to find the ideal location in this area, which may not be that expensive and at the same time allow the organization to achieve its objectives. Hence, it is important for the organization that it uses its relationship with the real estate agents to find the optimum site for the organization. At present, organization could afford new property ranging from $1.5 million to $3.5 million. Shifting to the new property will provide organization with a number of different benefits. It will provide organization with an opportunity to streamline and organize its operations, in order to increase efficiency. Secondly, it will allow the organization to increase its accessibility to the customers. This will allow the organization to increase its revenue and consolidate its position in the market. Last of all, it will also provide organization with an opportunity to acquire new customers. This is due to the fact that the presence in the downtown area will allow the organization to contact and capture large untapped market segment. Nevertheless, in order to select this option, it is imperative that cost-benefits analysis of this option is done on a monetary basis. With present financial condition of the organization, it may be suitable for the organization to shift its operations to a new location (Donald et al., 1999).