Case Study- Different Strategies

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Before starting at the case analysis let’s look at some of the basic backgrounds of the company involved. Here we will discuss about Company A, a newly established player in woollen fabrics. Company A was established two years ago. Some of the key details regarding its financials are given below- Capital- $100million (comprising of shares of face value $10 each) Last two years net profit: 2011-$7 million 2012- $12million EPS (Earning per Share): 2011-$0.70 per share 2012- $1.20 per share The company has done fairly well when compared to its peers in the past two years. The profit, the earning per share and the market share of the company has been good and shown growth in these two years. The Board of directors in their last annual general meeting decided that the company should have presence in other businesses as the business they are currently in (the woollen garments) is seasonal and because of this there sales and profit margins take a big hit. Had they been doing the business at the same pace for the full year the net profit, the earning per share and the market price would have been a bit different. The opinion of Board of Director was discussed in the AGM and most of the shareholders voted in favour of the proposal. Now the company is also entering readymade garments for all seasons. This is definitely a good move from company’s point of view as it will not only be able to have a sustained growth but also be able to maximise its profits, sales and overall wealth of the shareholders. To start with this proposal the company has decided to hire professionals from other companies and slowly diversify into readymade garment business. The company is now have a difficult situation- whether to buy a new plant and machinery that will be used for the readymade garment business or to take it on lease.This is definitely a difficult question and the decision

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