Case Analysis

QUALITY
METAL SERVICE CENTER

FLOW OF THE CASE

Metal distribution Industry Quality Metal Services 
Quality Metal Strategy Organization structure Problems and their possible solutions

METAL DISTRIBUTION INDUSTRY

QUALITY METAL SERVICE

CORPORATE STRATEGY
1.

To Focus sales efforts on targeted markets of specialty metal user

2.

To identify those industries and geographic markets where these metals were consumed

3.

To develop techniques and marketing programs that would increase market share

ORGANIZATION STRUCTURE
Chairman Of the Board

President and CEO

Vice Presidents

District Manager

Managers (Sales, Credit, purchase etc.)

THE
The

CASE

case writer visit Ken Richards, district

Manager Columbus service center
Earning For

consistently above 30% ROA

1992 Targeted figure
profit $3.8 million

yOperating yAsset

$10 million

yAchievable ROA 38% Capital

investment proposal

PROBLEM STATED
1)

Is the capital investment proposal an attractive one for Quality Metal service Center?

2)

Should Ken Richards send that proposal to home office for approval?

3)

What practice will motivate the district manager to use their assets most efficiently to acquire the proper amount and kind of new assets?

INVESTMENT PROPOSAL: CASH FLOW
Cash Flow (000s) Sales Cost Of sales Earning before Tax Tax 50% Earning after Tax Depreciation Working Capital investment Cash Flow 1992 600 (560) 40 (20) 20 110 (120) 10 1993 1375 (1145) 230 (115) 115 100 (155) 60 1994 1510 (1236) 274 (137) 137 85 (25) 197 1995 1665 (1355) 310 (155) 155 75 (35) 195 1996 1830 (1490) 340 (170) 170 65 (30) 205 1997 2010 (1660) 350 (175) 175 55 (35) 195 1998 2215 (1845) 370 (185) 185 45 (45) 185 19 24 (2 38 (1 19 35 (4 18

PROBLEM
1)

STATED

Is the capital investment proposal an attractive one for Quality Metal service Center?

2)

Should Ken Richards send that proposal to home office for approval?

3)

What practice will motivate the district manager to use their assets most efficiently to acquire the proper amount and kind of new assets?

PROBLEM STATED
1)

Is the capital investment proposal an attractive one for Quality Metal service Center?

2)

Should Ken Richards send that proposal to home office for approval?

3)

What practice will motivate the district manager to use their assets most efficiently to acquire the proper amount and kind of new assets?

ECONOMIC VALUE ADDED

Thank You

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