2. Phase 1
This stage is a detailed evaluation of the Company. You are a consultant working for Davis, Davies, Jones and Faniente. Your company has been called in by Cyclermate’s bankers to take an
independent view of the company and see if the company can be made viable in the short term.
What is required is a rigorous, systematic analysis of the company.
In the initial week it is expected that you will assess the company and its environment. A PEST and SWOT should be produced which should be used to focus on the key issues in the company .
The Bank has requested to see this urgently and a WIKI system will be established for initial results to be communicated to them. This will be used to guide the work in subsequent weeks and to
provide a prioritization for a series of “what ifs” which will enable the consultancy to identify if the company could be stabilized in the short term.
In view of the short timescale, the Bank has requested Davis, Davies, Jones and Faniente not to conduct any market research into the potential for increasing sales in phase 1. They wish to
determine if the base operation is viable before proceeding with any investigation of future opportunity. The report has been specified not to exceed 3,000 words (not including diagrams and
appendices). The Bank has also told Davis, Davies, Jones and Faniente that the award of the Phase 2 contract is contingent on the quality of this first report.
3. Detailed notes
In a separate meeting between Cyclermate’s Bank and Davis, Davies, Jones and Faniente the detailed requirements for the report were discussed. These are the notes taken by the engagement
Prepare a report dealing with these issues:
1. What immediate or short-term options could be considered by the company to alleviate the difficulties it faces with liquidity and capital structure?
2. Review the production methods used by the company and suggest what improvements might be made to increase efficiency and reduce costs in the manufacture of the existing
3. Identify and comment upon any human relations issues, suggesting, where appropriate, possible changes.
4. Enumerate the investigations that should be made to provide options for the Company to ensure its longer term survival and profitability.
In answering the questions above (most particularly the first one), consider these issues where appropriate (not a definitive list):
• Are there any assets that might be sold, leased or mortgaged to raise funds?
• Does the performance of the company over the last five years give any additional clues as to what might be going wrong?
• Are there indications from the statement of financial position that efficiency gains might be achieved in order to raise funds?
• Does the statement of financial position suggest that the capital structure of the company is appropriate? If not, what might be done?
• On the assumption that prices and costs remain the same, how many more cycles would need to be sold to eliminate the budgeted loss and to make a reasonable return on the capital
invested (you could perhaps assume that the proportion of sales through the different channels remains constant)?
• Are there obvious cost savings that could be made relatively easily?