Introduction
Polar Sports is one of the successful companies in the United States. In 1992, Richard Weir formed this company because he was motivated to make superior skiwear products. Since 1992, Polar Sports has been growing steadily. Today, it is one of the leading manufacturers of high-end sportswear in the US. This company experienced rapid growth in the late 1990s because it had good marketing and advertisement strategies.
For example, it sponsored a number of play-offs. Moreover, it endorsed some gifted athletes who excelled in international competitions. Thus, its products gained high reputation in the market. Hence, it sold many goods in the past few decades. Nonetheless, the prosperity of this company dropped slightly between 2008 and 2009 due to economic decline in the US.
In 2001, Thomas Johnson was appointed vice president of this company. Unlike other companies, Polar Sports has been producing most of its products seasonally. Currently, it is experiencing production and marketing challenges. Therefore, this essay examines the production and marketing trends of Polar Sports. It also recommends measures that can be used to overcome these challenges.
Situational Assessment of Polar Sport Market Position
Polar Sport mainly targets high-end consumers. Thus, it produces unique products that attract high-end consumers. Polar Sport has been able to compete favorably in the market because it is producing high quality products. Nonetheless, some of its products are quite expensive due to high cost of production. Therefore, high prices affect marketability of its products.
Moreover, demand for its products has not been constant per annum. Hence, it has been producing most of its products when they are highly demanded. Thus, it can make huge losses if sports events reduce. Moreover, it faces serious competition from its rivals. Thus, it has to monitor market trends regularly to enable it increase its sales volume.
Market, Operational, and Financial Analysis
Quantity of Sales under Seasonal Production
Through seasonal production of goods, the amount of sales grew tremendously from $4.65 million in 2001 to about $ 16.36 million in late 2011. Due to production of high quality products, the sales volume of this company was expected to reach $18 million by 2012. Nonetheless, the success of the new items was dependent on the market forces. Thus, seasonal manufacturing of goods led to significant increase in sales.
Operation Costs under Seasonal Production
Production activities were labor intensive under seasonal manufacturing of goods because designers had to develop new products regularly to make the company competitive in the market. Polar Sport strived to deliver orders on time. Hence, it had to increase its workforce. In this case, new workers were trained and existing ones were requested to work overtime.
Seasonal production led to over working of machines. This often led to frequent breakdown of machines, which led to high maintenance costs. In 2012, the cost of operation was expected to be approximately 24 percent of sales. Therefore, seasonal production activities had many challenges, which led to high operation expenses.
Volume of Sales under Level Production Model
Polar Sports decided to adopt level production because seasonal manufacturing of goods led to a high cost of production. In 2012, the vice president of Polar Sports anticipated a high demand for new products. He also thought that the company would save approximately $480,000 by reducing overtime payments and repair costs.
Moreover, the company would save about $600,000 through minimizing the cost of hiring and training new employees. The price of commodities sold was presumed to be 60 percent and would remain constant if the company adopted level production. Level production was expected to increase sales because goods would be produced regularly.
Operation Costs under Seasonal Production
Level production had some challenges. Intensive production of goods led to high maintenance costs. High rate of manufacturing distinct designs of sportswear led to regular modification of machines. This led to regular repair of machines. Furthermore, level production required hiring and training of new employees.
It is important to note that the challenges of level production occurred due to poor implementation strategies. For example, the company did not purchase appropriate machines for large-scale production of goods. Instead, it used small machines that could only produce limited amounts of products. Thus, over utilization of small machines led to inefficiency in production of goods.
Therefore, this company should develop proper strategies to facilitate implementation of level production. Indeed, level production has a great potential to reduce operation costs if it is properly implemented. For instance, level production can facilitate quick production of highly demanded goods.
Analysis of the Current Financial Situation of the Company
Through seasonal production of goods, Polar Sport had a net income of $897,000 in 2011. Financial analysts expected the net income to reach approximately $1,147,000 in 2012. At the end of the 2011 financial year, Polar Sport had not repaid loans worth $826,000. The local bank that financed it was willing to give it a maximum credit of $ 4 million in 2012. Polar Sport repaid its loans at an interest rate of 11 percent.
The current financial situation of Polar Sport is not good because it has to repay a huge loan within the stipulated time. Moreover, it is repaying the loan at a high interest rate. High interest rates affect profit margins; hence, leading to losses.
Moreover, the financial situation of this company may not improve in the near future because it is planning to restructure its production activities. Restructuring of production will lead to high expenses. Thus, it must look for more funds to implement a new model of production.
Market Influences to be considered in Restructuring Production
The managers of this company should consider the following factors when restructuring production. First, they should be able to predict future demand for various goods to avoid producing irrelevant items. Second, they should assess the potential impacts of the new model of production on the capital needs of the company.
Third, they should predict how a given model of production would affect financial income and expenditure. For example, they should adopt a cost effective model of production that will mitigate operation expenses. Last, managers of this company should monitor new products introduced by its rivals to avoid duplicating goods.
Solutions to Current Production Challenges
At present, Polar Sport Company needs to increase its sales volume in order to make more profits. In this case, it should produce goods that are demanded throughout the year regularly. Conversely, it should produce products that have a low demand seasonally.
Polar Sport should adopt level manufacturing of products because of the following reasons. First, level manufacturing will increase production and sales. Therefore, it will be able to make profits throughout the year.
Second, level production will reduce the cost of production in future since goods will be produced a head of demand. Thus, it will be able to mitigate unnecessary production costs such as overtime allowances. Level production will facilitate production of superior products since designers will not hurry to complete urgent orders.
The following production issues should be taken into consideration when adopting level manufacturing of goods. First, this company should invest in better technology that will lead to efficiency in production. For instance, it should acquire sophisticated production equipment that will reduce wastage of materials.
This will lead to a significant reduction of operating costs. Indeed, large-scale production is cheaper than small-scale production of goods. Second, it should produce most of its products in countries such as China and India because they have cheap labor.
Proper implementation of level production model will require additional financial resources. Thus, it will have to seek more capital to buy better machines. It will also need more resources to hire and train additional workers. Furthermore, level production will require quality control measures.
Currently, Polar Sport does not have adequate income to facilitate implementation of level production. Thus, it should seek funds from financial institutions to acquire modern production equipment and to hire more workers. Alternatively, it can buy new machines on credit and pay manufacturers within a given period. It can also acquire machines through lease agreements.
Conclusion
Polar Sport Company can make more profits if it adopts proper production and marketing strategies. Therefore, it should adopt level production because it will lead to increase in sales.