SIS Covington Corrugated Fa Larisa Harrison grimaced as she tossed her company\'
ID: 400032 • Letter: S
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SIS Covington Corrugated Fa Larisa Harrison grimaced as she tossed her company's Cov latest quarterly earnings onto the desk. When sales at ers were Virginia-based Covington Corrugated Parts &Services take. IfC surged past the $10 million mark some time back, Larisa going to was certain the company was well positioned for steady way to a growth. Today Covington, which provides precision ma- ing for r chine parts and service to the domestic corrugated box and serving paperboard industry, still enjoys a dominant market share, the plan but sales and profits are showing clear signs of stagnation. ployees, More than two decades ago, Larisa's grandfather loaned as she h her the money to start the business and then handed over what w the barn on what had been the family's Shenandoah Valley that eff farm to serve as her first factory. He had been a progressive which thinker compared to many of his contemporaries who scoffed market at the idea of a woman running a machine parts plant, and would he saw no reason why a smart, ambitious 27-year-old woman custom couldn't run anything she wanted to.His old-fashioned friends which no longer scoffed when Larisa became one of the major em rugated ployers in the local area. Today, Covington operates from a beyond 50,000 square-foot factory located near 1-81 just a few miles equipm from that old family bam. The business allowed Larisa to real any ma ze what had once seemed an almost impossible goal: She was als, wh making a good living without having to leave her close-knit ambiti extended family and rural roots. She also fel a sense of satisfac investi tion at employing about 150 people, many of them neighbors. ties. T They were among the most hard-working, loyal workers you'd merge find anywhere. However, many of her original employees were ing ma now nearing retirement. Replacing those skilled workers was meetir going to be difficult, she realized from experience. The area's preser brightest and best young people were much more likely to partsg move away in search of employment than their parents had financ been. Those who remained behind just didn't seem to have the before I disa Other problems were looming as well. Covington's cious. market share, once at a formidable 70 percent, was slip direct ping fast, brought about not only by the emergence of mark new direct competitors but also by changes in the indus anyw work ethic Larisa had come to expect in her employees try. The box and paperboard industry had never been par- ticularly recession resistant, with demand fluctuating with meeti manufacturing output. The rocky economy had hurt the uate whole industry, including Covington's largest customers. he p Added to that, alternative shipping products, such as flex- loose ible plastic films and reusable plastic containers, were be- cuse coming more prevalent. It remained to be seen how much to be of a dent they'd make in the demand for boxes and paper- befo in the industry be to had wiped out hundreds of the smaller U.S. plants that As s Covington once served, with many of the survivors either pull entering into joint ventures her a board. Even more worrying, consolidation opening overseas facilities or abroad. The surviving manufacturers were investing in. higher quality machines from Germany that broke down . less frequently, thus requiring fewer of Covington's parts. .Explanation / Answer
1. Identification of issues:
2. Problem identification statement: Covington Corrugated Parts and Services is facing the problem of continuously decreasing sales and market share
3. Alternatives to address the problem:
4. Evaluation of alternatives:
Moving into new products and services or other industries using mergers and acquisitions: Good opportunity for growth and development of business but financial risk is associated with the same
Increasing efficiency and profitability by layoff of employees and offering products at lower costs: Lay off of employees would result in poor employee morale and also hamper their quality and productivity. It would also impact company goodwill and reputation.
Expanding market share by globally exporting the parts: market risk and uncertainty. Besides it also requires huge investments
The best alternative for the company would be to move into other industries and design and distribution of new products/services. It would provide good opportunity for growth of business.
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