Investment and Cost Savings Essay

IntroductionThe purpose of this report is to address the key strategic issues facing Coast4Life with the judge downturn ahead. Included is a financial analysis, realization of major issues, analysis of alternatives and a recommendation.Financial Analysis for the Year end 2012 (Appendix 1)* Current ratio of 1.6 indicates that the order can meet its short end point obligations. There is a 46% improvement versus last years current ratio of 1.1. Quick ratio of 1.8 shows a 50% improvement. * nub debt- to-equity of 1.5 shows a 12% improvement over prior years ratio of 1.7 indicating that the firm is relying less on debt. Times interest pull in ratio of 6.4 improved by 30%. * Profitability ratios indicate boilers suit earnings growth. Net margin of 15.2% grew by 18% comp bed to 12.9% in 2011 sequence Return-on-Equity (ROE) of 27.4% grew by 16%. Return on Investments (ROI) of 11.2% shows a significant 28% growth from 8.7% and posted a 14% favourable variance compared to rank. * rec eipts and net income grew by 13.4% and 33.3%, respectively.Major Strategic IssuesWith the expected estimated 30%-35% rule out in the overall booking, the expected impact is a decline in income by $7M (Appendix 2). The proposed alternatives to generate additional revenues and or/ court savings are evaluated using a required after tax rate of descend of 16%.Alternative 1 Change Customer MixObjectives maximise Repeat Customers from 20% to 40%Maximize Age Group 40-60 days old from 30% to 38%Pros* Incremental Income of $721K in 2013 $2.1M for the 3 old age ahead have (Appendix 3)* opportunity to expand extra-services* Maximizes capacity/resourcesCons* Marketing constraints to target customer mix* May require additional hails to reach out targetThis option addresses the incremental income compulsion. It maximizes profitability and provides opportunities to expand business ( in line with the orders mission).Alternative 2 Implement a web-based booking systemPros* Incremental savings of $24K in 2013 $226K for the 3-yrs ahead combined (Appendix 4)* Opportunity for additional costs reduction (i.e. advertising, promotion)* Provides information about passengers* Opportunity to target more than customers* Meets demand for Internet-booking* Accounting module improves financial accountCons* Loss of customer service* Technology must be up to date and well maintained* Security (i.e. financial data, customers)This option meets the cost savings requirement. It also addresses the immediate need of the company for market/customer information and addresses constraints in alternative 1 (customer mix). This is in line with the companys mission to provide unique services.Alternative 3 remove Crew and Hospitality Workers from Underdeveloped Countries Pros* Incremental cost savings of $883K $2.1M for the 3 days ahead combined (Appendix 5)* Cheaper wagesCons* May damage write up (poor service quality)* May dampen employees esprit de corpsThis alternative meets the req uirement for cost savings. To ensure quality service, the company must invest in training. The company should also keep key employees (pros assists in training, promotion could keep morale high). Long-term cost savings is attractive.Alternative 4 Divest the Fraser modify dockPros* Incremental Income of $3.1M in 2013 $2.5M for the 3-years ahead combined (Appendix 6)* Focus on core businessCons* Incremental costs of $438K per year (maintenance and lost income from the teetotal dock operations (Appendix 6)* Decline in company-wide morale* Damage to temperament and local ties* Quality of third-party maintenanceThis alternative meets the incremental income required. This allows the company to cogitate on its core business. However, long-term, the negative impact on income, reputation and ties with the companionship are non desirable.It is recommended to change customer mix and implement a web-based booking system. Both alternatives achieve the income requirement (total $745K in 20 13 $2.4M for the 3 years ahead). Both alternative have low risk and provide more opportunities to maximize the use of its resources and capacity and expand business. Hiring crew and staff from developing countries is recommended if the high risk is mitigated i.e. by retaining key employees. Divesting the drydock is not recommended due to the incremental expenses associated in future years.ConclusionThe recommended alternatives meet the requirement to generate revenue and/or cost savings to counter the expected downturn in 2013.