Tale of Three Tales Elliott Manufacturing EM produces clothing marketed toward young adults Until recently EM has enjoyed modest profits In its early years EM manufactured clothing for children ages 6 to 12 This was a lucrative market at the time but changes in the demographics began to hurt sales as the size of this age group has declined Evidence suggests this trend would not be reversed In fact these trends seem to be confirmed over time About the same time top management decided to make several major changes First the 6 to 12 years market was abandoned In its place new products would be marketed towards the teenage and young adult market Two principal reasons drove this move First EM reasoned that the people who had already bought EM clothes early in age would buy EM s clothes as teenagers and young adults If this was true EM would add ten years to their products Second young children were not clothes conscious and were insensitive to changes in style The major selling point to mothers was not style but durability since the children would grow out of their clothes before they went out of style Focusing on clothes conscious teenagers 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 The only 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 and EM s market share has dipped due to the tremendous increase in competition in designer clothing EM has held sales revenues steady by increasing their prices which has made up for the loss of unit sales Disturbed by this situation Peter Elliott chief executive officer ordered all functional areas to take a closer look at how each might help lift the company from its current funk Elliott told his functional vice presidents that unless some significant improvements were made widespread layoffs would follow EM has three functional areas production marketing and finance Elliott asked each to submit recommendations for their functional area for how to improve the performance of the firm Finance As instructed the finance accounting department must develop a number of financial recommendations Currently the firm is extremely short on cash as receivables are high some are over 120 days delinquent and might not be collectable The firm is having a hard time paying its bills as manufacturing production costs are not being quickly recouped There is some evidence that some of Elliott s customers are in dire financial positions Giant retailers EM s customers like Sears K Mart Macy s Federated and Kohl s are constantly in and out of financial distress 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 made immediately Tale of Three Tales Elliott Manufacturing EM produces clothing marketed toward young adults Until recently EM has enjoyed modest profits In its early years EM manufactured clothing for children ages 6 to 12 This was a lucrative market at the time but changes in the demographics began to hurt sales as the size of this age group has declined Evidence suggests this trend would not be reversed In fact these trends seem to be confirmed over time About the same time top management decided to make several major changes First the 6 to 12 years market was abandoned In its place new products would be marketed towards the teenage and young adult market Two principal reasons drove this move First EM reasoned that the people who had already bought EM clothes early in age would buy EM s clothes as teenagers and young adults If this was true EM would add ten years to their products Second young children were not clothes conscious and were insensitive to changes in style The major selling point to mothers was not style but durability since the children would grow out of their clothes before they went out of style Focusing on clothes conscious teenagers 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 The only 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 and EM s market share has dipped due to the tremendous increase in competition in designer clothing EM has held sales revenues steady by increasing their prices which has made up for the loss of unit sales Disturbed by this situation Peter Elliott chief executive officer ordered all functional areas to take a closer look at how each might help lift the company from its current funk Elliott told his functional vice presidents that unless some significant improvements were made widespread layoffs would follow EM has three functional areas production marketing and finance Elliott asked each to submit recommendations for their functional area for how to improve the performance of the firm Marketing The 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 are short on cash These retailers are much more likely to order and stock EM clothes if their initial out of pocket costs can somehow be reduced or if credit terms can be extended allowing longer payback 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 frequent designs concepts and trends will out perform those manufacturers that are believed to posses a more stale reputation and limited product offering Successful firms have built wide and wellknown product lines either by being all things to all people like Tommy Hilfiger or by creating different brands for different segments like the Limited and the Gap Tale of Three Tales Elliott Manufacturing EM produces clothing marketed toward young adults Until recently EM has enjoyed modest profits In its early years EM manufactured clothing for children ages 6 to 12 This was a lucrative market at the time but changes in the demographics began to hurt sales as the size of this age group has declined Evidence suggests this trend would not be