Tale of Three TalesElliott Manufacturing (EM) produces clothing marketed toward young adults. Untilrecently, EM has enjoyed modest profits. In its early years, EM manufactured clothing forchildren ages 6 to 12. This was a lucrative market at the time, but changes in the demographicsbegan to hurt sales as the size of this age group has declined. Evidence suggests this trend wouldnot be reversed. In fact, these trends seem to be confirmed over time. About the same time, topmanagement decided to make several major changes. First, the 6 to 12 years market wasabandoned. In its place, new products would be marketed towards the teenage and young adultmarket. Two principal reasons drove this move.First, EM reasoned that the people who had already bought EM clothes early in agewould buy EM's clothes as teenagers and young adults. If this was true, EM would add ten yearsto their products.Second, young children were not "clothes conscious" and were insensitive to changes instyle. The major selling point to mothers was not style, but durability since the children wouldgrow out of their clothes before they went "out of style." Focusing on clothes consciousteenagers and young adults would give EM the opportunity to capitalize on changing styles,allowing seasonal variation to drive repeat sales. Clothing has grown much more trendy. Theonly firms performing well were those that were able to compete in the designer market.Initially, this new strategy was very successful. However, sales are now stagnant andEM's market share has dipped due to the tremendous increase in competition in designerclothing. EM has held sales revenues steady by increasing their prices, which has made up forthe loss of unit sales.Disturbed by this situation, Peter Elliott, chief executive officer, ordered all functionalareas to take a closer look at how each might help lift the company from its current funk. Elliotttold his functional vice presidents that unless some significant improvements were made,widespread layoffs would follow. EM has three functional areas: production, marketing, andfinance. Elliott asked each to submit recommendations for their functional area for how toimprove the performance of the firm.FinanceAs instructed, the finance/accounting department must develop a number of financialrecommendations. Currently, the firm is extremely short on cash, as receivables are high: someare over 120 days delinquent and might not be collectable. The firm is having a hard time payingits bills as manufacturing/production costs are not being quickly recouped. There is someevidence that some of Elliott's customers are in dire financial positions. Giant retailers (EM’scustomers) like Sears/K-Mart, Macy's/Federated and Kohl’s are constantly in and out of financialdistress. Decisions about 1) credit terms, 2) budgeting/line items and expenditures, 3)capital/equity, 4) cash position, and 5) how the firm's cash must be spent need to be madeimmediately.Tale of Three TalesElliott Manufacturing (EM) produces clothing marketed toward young adults. Untilrecently, EM has enjoyed modest profits. In its early years, EM manufactured clothing forchildren ages 6 to 12. This was a lucrative market at the time, but changes in the demographicsbegan to hurt sales as the size of this age group has declined. Evidence suggests this trend wouldnot be reversed. In fact, these trends seem to be confirmed over time. About the same time, topmanagement decided to make several major changes. First, the 6 to 12 years market wasabandoned. In its place, new products would be marketed towards the teenage and young adultmarket. Two principal reasons drove this move.First, EM reasoned that the people who had already bought EM clothes early in agewould buy EM's clothes as teenagers and young adults. If this was true, EM would add ten yearsto their products.Second, young children were not "clothes conscious" and were insensitive to changes instyle. The major selling point to mothers was not style, but durability since the children wouldgrow out of their clothes before they went "out of style." Focusing on clothes consciousteenagers and young adults would give EM the opportunity to capitalize on changing styles,allowing seasonal variation to drive repeat sales. Clothing has grown much more trendy. Theonly firms performing well were those that were able to compete in the designer market.Initially, this new strategy was very successful. However, sales are now stagnant andEM's market share has dipped due to the tremendous increase in competition in designerclothing. EM has held sales revenues steady by increasing their prices, which has made up forthe loss of unit sales.Disturbed by this situation, Peter Elliott, chief executive officer, ordered all functionalareas to take a closer look at how each might help lift the company from its current funk. Elliotttold his functional vice presidents that unless some significant improvements were made,widespread layoffs would follow. EM has three functional areas: production, marketing, andfinance. Elliott asked each to submit recommendations for their functional area for how toimprove the performance of the firm.MarketingThe marketing department must focus on increasing EM’s ability to sell clothes.Marketing recognizes that times are tough and customers like Macy’s, Sears and Kohl’s, areshort on cash. These retailers are much more likely to order and stock EM clothes if their initialout-of-pocket costs can somehow be reduced, or if credit terms can be extended (allowing longerpayback periods). In this industry, you can't please end consumer with a single product or style.Multiple products, reflecting multiple styles/colors/features will dramatically increase sales.Those “hip, street savvy” firms that can reach the teen/designer market with fresh and frequentdesigns, concepts and trends will out-perform those manufacturers that are believed to posses amore stale reputation and limited product offering. Successful firms have built wide and well-known product lines, either by being all things to all