inventory and accounts receivable is not a good deal for SNC because of their current cash
position as SNC must keep a minimum of $300,000 on hand to meet their companys operational
needs. On the up side, SNCs second decision to go with tightening up the accounts receivables
department helped them improve dramatically by freeing up cash. By dropping Super Sports
Centers, SNC lost 20% of their sales figures but improved in their DSO numbers by
approximately 110 days. The third decision that SNC took during Phase 1 to help improve their
sales was to take advantage of a supplier discount offered by Nutrilife. This allowed for top line
growth through more sales and although their accounts receivables and inventories went up,
these numbers were offset by the contract with Ayurveda Naturals that helped increase their
EBIT numbers. The last decision made during Phase 1 was to discontinue the SNC products that
sold poorly. With over 100 products being produced and sold by SNC, the inventory counts were
quite high. By discontinuing some of the less popularly products, SNC was able to lower its
inventory levels.
Phase 2 (Years 2016-2018)
During Phase 2, SNC was presented with three different opportunities including:
pursuing big box distribution, developing a private label product and expanding its online
presence. At this phase, SNC has already increased its sales and lowered some of its inventory
levels and accounts receivables issues. The goal during this phase is to help SNC continue its
growth at a steady pace.
As SNCs CEO, my first decision was to approve a growth opportunity through MegaMart Inc. By pursuing this type of big box distribution, our overall top line numbers will grow
significantly by approximately $2,000 over the course of the 3 years. It will negatively affect
SNCs EBIT, but the plan is to counteract that by developing a private label product for Fountain
of Youth Spas. The second decision to take this company on and make their products will help
the companys free cash flow level off and finally get into the positive by 2018. Revenues and
EBIT will increase impressively and will only affect inventory and accounts receivables
minimally. The last decision during this phase will be to help increase SNCs online presence by
partnering with Golden Years Nutraceuticals. This expansion to our online presence will help
SNC reach a much larger and diverse consumer base. Over the three years in this phase, sales
will increase by 10%, 5% and 3% respectively and accounts receivables will decrease by 7 days.
Phase 3 (Years 2019-2021)
During Phase 3, there were three opportunities for SNC to consider that included:
adopting a global expansion plan, renegotiating current supplier credit terms and acquiring a high
risk client. The goal during this phase is to continue the growth of SNC without acquiring any
volatile risks.
The first thing SNC wants to do is create a relationship with its new Latin American
client, Viva Familia, which will help expand the company into Central and South America. By
adopting this global expansion through Viva Familia, SNC has increased their sales by 2% and
decreased their DSO by a couple of days. The second part of this phase is to renegotiate terms
with current suppliers to be more favorable for SNC. Dynasty Enterprises offered SNC
profitable terms of 2/10 with a net of 30. This will allow for SNC to save on costs of supplies
and free up more cash. SNC has decided not to take on the high risk potential client, Midwest
Miracles. Although this client would help potentially increase sales significantly by 2019, SNC
is not ready to risk them going bankrupt and having a less than desirable recovery rate of 50%.
Also, this client would likely increase SNCs DSO by 190 due to the fact that they have a longer
than average invoice pay period. This would increase SNCs DSO and would return the
company back to the same position it was in originally when it had Super Sports Center as a
client. SNC has decided to decline the offer from Midwest Miracles.
SNCs Final Metrics Results
Final Metric Results (Figures Reflect 2013-2021) Estimated values:
Finally, it may also be more challenging (longer and more expensive process) to implement
property and intellectual rights of privately owned and developed brand products.
Conclusion
In conclusion, the SNC simulation reflected all the different challenging ways of handling
and managing growth and capital of an organization. It helped in showing all the different
possible options a company needs to weigh in order to make the right decision for the future of
their company. There are many challenges to running a company and I believe that through this
simulation, I was able to better understand how each of these challenges affects and challenges
the future both positively and negatively.
References
Harvard Business School Publishing, 2014. Working capital simulation: managing growth.
Retrieved from: https://forio.com/simulate/harvard/working-capitalgrowth/simulation/?#page=getting_started
Parrino, R., Kidwell, D.S., & Bates, T.W., 2012. Fundamentals of Corporate Finance (2nd ed.).
Retrieved from: http://edugen.wiley.com/edugen/student/main.uni