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MG11A – 1M

Time Context : 2007- present


Summary :

In 1961, Cellox was founded in Reedsburg, located 65 miles Northwest of Madison-


Wisconsin. Celloxmanufactures three types of polystyrene products, which comprise three
decisions of thebusiness as follows:(1)Protective Packing Material (PPM) (2)Point of Purchase
Products (PoP) (3)Insulated Concrete Forms (ICF)
Cellox has been in business for over 50 years. The purpose behind its existence has not
changedover those years: we are "Making It Happen!" producing Visual Merchandising items
and Point-of-Purchase advertising displays from expandable polystyrene. Cellox also serves
protectivepackaging customers with 100% recyclable custom-molded shapes. In August 1996,
Cellox was acquired in its entirety by a single owner. From that time until June1998, Cellox
underwent a complete makeover. Presses were re-built, a new office buildingoccupied,
production floor space added, and a move consolidated Lucky Street operations intothe
Industrial Street facility. All facets of our operations are now together under one roof forthe first
time in 18 years, giving our customers total control over their production.Cellox has continued its
charge into the future with the acquisition of four new state-of-the-artshape molding presses in
July and September 1998, and October 1999. A new batch expanderin January 2000 gave us
uniform control over bead density. Each improvement provided ourcustomers with cost-control
efficiencies, and reliable delivery times.
Mission Statement:

 Cellox itself has no mission statement

Vision Statement:

 “Cellox is committed to the ideals of Quality, Service, People, and the Utilization of
technology dedicated to ‘Making it Happen.’”
I. Statement of the Objectives
 To identify whether Cellox is still capable of continuing its operations.
 To evaluate the financial performance of the corporation.
 To minimize losses
 To measure the competitiveness of the institution in its industry.

II. Central Problem

 Howcan Cellox endure and continue pursuing forward despite having operating at loss?

III. Areas of Consideration (SWOT)

Strengths

 High quality products like ICF and PoP


 Cellox possessed a committed and hard-working staff
 Cellox has a strong leader/owner, David Pace, a 62-year old successful entrepreneur
and professional management expertise in plastic injection molding and plastic sheet
extrusion.
 Well-built light material in their products, as the material is light in weight and resistant to
anydisaster.
Weaknesses

 High cost for their product maintenance CELBLOX


 Distant onsite location, a 1000 miles away
 Use of VOC’s, as polystyrene is a volatile organic compound so some peopleconsider it
dangerous as it easily catches fire
 Currently operating at negative income and has a $2 million long-term debt on its
balance

Opportunities

 There is an increase in population in U.S.since houses (shelter) are the needs of the
people.
 Discovering other business related to the industry or other business where David Pace
can use its other business expertise.
 Development of international market
 Expansion of Cellox

Threats

 Liquidation is a threat to company as financial position is not strong for the last
threeyears.
 Increase competition in the industry. Saturated Market is there as 100 manufacturers are
of PPM and 40 of ICF.
 Market is growing rapidly, probability of more competitors to enter.
 Demand for high variety in terms of steel, bricks and woods.

IV. Alternative Courses of Action

1. More extensive marketing development


Advantages:
 Increase Income
 Accommodate to a broader variety of customers
 Product will be more well-known
Disadvantages:
 Costly to develop into new geographical area
 Higher risk of loss.
 Increase research and development cost
2. Development of new products and services

Advantages

 Developing new products and services will help stay competitive in the market.
 This will assure an increase in sales.
 They have a better marketing and advertising efforts compare to their
competitors.

Disadvantages

 Additional research and development costs.


 This requires taking more risks because this in entering a new market entirely.
 Competitors may already have the products/ services or maybe competitors may
provide better products and services.
3. Cellox may undergo business combination
Advantages:
 The acquiring company will absorb the deficiency on Cellox working capital.
 It can still run for more years in the industry.
 There will be a source of capital to fund Cellox further expansion and to improve
competency in the market as well as in the industry.

Disadvantages:
 It is probable thatCellox may completely lose its existence as an entity.
 Additional layoff on employees will occur.
 Cellox will sacrifice the established company design, quality, service and
reputation.

V. Strategy Formulation

I therefore conclude that the best solution for the problem is alternative course of action
number 2 because going with the trend is what best helps a company to stay competitive in the
market. It is especially important to keep developing products because there are so many
competitors which do not stop finding new products that can attract customers. Although
research and development will be very costly, in the long run, there is a good chance that these
products will earn a good percentage as a return on investment. Having a great leader in the
company it will be easy for Cellox to handle new products. The expertise of David Pace will be
the great advantage of the company, by using this strength it will surely improve the position of
the company. It is risky but it is the best way to take the risk because the higher the risk, the
higher the return.

VI. Plan of Action

1. Gather data that will be essential for the development of new product.
2. Hire professionals who can work on the planned products that the company wants to
develop.
3. Develop a long term plan for advertising and marketing effort.
4. Advertise the new products.
5. Test the market by producing only few products or providing some services first; if the
market embraced these products/ services, then they can produce more to satisfy
demand.
6. Implement the strategy

VII. Potential Problems


1. What if other competitors already offering their new product categories and services?

2. What if applying this strategy the overall company will still incur a negative income?

3. What if Cellox was not able to develop a product worthy of attention from the general
market?

VIII. Contingency Plan

1. They can include additional services or to the new product categories that is not covered
by other competitors that can meet consumer demands.
2. It is not an immediate positive outcome after implementing a new strategy. Test the
strategy twice, if the chosen strategy still incurs a decrease in profit. The company may
choose another strategy.
3. The company can continue improving its new products or it can stop innovating and
focus instead on its profitable products/services.