QUALITY METAL SERVICE CENTER

Case Analysis

FLOW OF THE CASE

Metal distribution Industry

Quality Metal Services

Quality Metal Strategy

Organization structure

Problems and their possible solutions

METAL DISTRIBUTION INDUSTRY

QUALITY METAL SERVICE

CORPORATE STRATEGY

1. To Focus sales efforts on targeted markets of specialty

metal user

2. To identify those industries and geographic markets

where these metals were consumed

3. To develop techniques and marketing programs that

would increase market share

ORGANIZATION STRUCTURE

Chairman Of the Board

President and CEO

Vice Presidents

Managers (Sales, Credit, purchase etc.)

District Manager

THE CASE

The case writer visit Ken Richards, district

Manager Columbus service center

Earning consistently above 30% ROA

For 1992 Targeted figure

Operating profit $3.8 million

Asset $10 million

Achievable ROA 38%

Capital investment proposal

PROBLEM STATED

1) Is the capital investment proposal an attractive one for Quality

Metal service Center?

2) Should Ken Richards send that proposal to home office for

approval?

3) What practice will motivate the district manager to use their assets

most efficiently to acquire the proper amount and kind of new

assets?

INVESTMENT PROPOSAL: CASH FLOW

Cash Flow (000s) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001

Sales 600 1375 1510 1665 1830 2010 2215 2435 2680 2945

Cost Of sales (560) (1145) (1236) (1355) (1490) (1660) (1845) (2051) (2290) (2545)

Earning before Tax 40 230 274 310 340 350 370 384 390 400

Tax 50% (20) (115) (137) (155) (170) (175) (185) (192) (195) (200)

Earning after Tax 20 115 137 155 170 175 185 192 195 200

Depreciation 110 100 85 75 65 55 45 35 20 10

Working Capital investment

(120) (155) (25) (35) (30) (35) (45) (40) (50) 535

Cash Flow 10 60 197 195 205 195 185 187 165 745

PROBLEM STATED

1) Is the capital investment proposal an attractive one for Quality

Metal service Center?

2) Should Ken Richards send that proposal to home office for

approval?

3) What practice will motivate the district manager to use their assets

most efficiently to acquire the proper amount and kind of new

assets?

PROBLEM STATED

1) Is the capital investment proposal an attractive one for Quality

Metal service Center?

2) Should Ken Richards send that proposal to home office for

approval?

3) What practice will motivate the district manager to use their assets

most efficiently to acquire the proper amount and kind of new

assets?

ECONOMIC VALUE ADDED

Thank You