Polar Sports dominates the ski fashion wear market and has managed to stay profitable in an industry that has a lot of challenges. The firm uses unique production processes to manufacture high quality products which attract diverse consumers in the market.
One of the main challenges it faces is that it has to contend with high labor and operational costs which are likely to affect its future financial performance in the industry. In addition, some of its competitors manufacture their products in Asian countries which have cheap labor costs and as a result, they are likely to gain a higher market share in the long run.
SWOT Analysis
Strengths
- The firm has a strong financial position.
- It has efficient distribution systems that allow it to supply products to customers quickly.
- It has a strong brand.
Weaknesses
- Its future performance may be negatively affected by high costs.
- It has to contend with unpredictable market forecasts and future risks.
Opportunities
- It can focus on expansion into other markets.
- It needs to develop new product lines that appeal to new consumers
Threats
- Its future profitability forecasts may be affected by low prices from its competitors.
- Unsustainable hiring labor practices.
The seasonal sales volumes have helped the firm to maintain its competitive position in the industry. However, if the firm opts to go for level production, it may be able to attract new customers from other market segments and this will result in higher sales volumes.
However, some of its brands may lose their appeal due to overexposure and this may have a negative effect on its long term prospects in the industry. Even though this approach is likely to change the firm’s operations in the short term, it may be forced to change its supply chain processes to avoid antagonizing its suppliers and distributors.
The firm’s has a wide sales network which it can utilize to strengthen its financial position. However, it should not adopt a level production format for all its products because this approach is likely to expose it to different marketing risks. Wholesalers take close to two months to pay for their products.
This situation may have a negative impact on performance during periods when the firm is unable to attain positive revenues from other sales channels. The firm has low debts and this shows that it has a positive borrowing capacity which can help it acquire more funds for expansion.
However, it needs to use both seasonal and level production formats to safeguard the value of its brands in the market. Some of the potential courses of action the firm should look at include:
- Increasing its sales channels
- Developing more products
- Using online sales and payment systems to reduce distribution costs
- Increasing sales in foreign markets to grow its operations.
The firm needs to find out consumer purchasing patterns and lifestyles to come up with a more effective production format. This approach will help the firm to find out the amount of profits or losses it is likely to experience after moving from seasonal to level production. In addition, the firm needs to find out how its cash flow situation is likely to be affected by this shift.
The firm should also find out if it will be able to get adequate cash inflows to help it execute its crucial functions without any disruptions. Moreover, the firm needs to estimate quantities of products it needs to sell in the market to attain its long term objectives. Lastly, Polar Sports Inc. needs to assess the impact of this shift on consumers’ brand perceptions and if it is likely to affect their loyalty towards its products.
The key criteria that would influence my decision are: brand value, market performance of each individual product, financial implications and internal operations of the firm. The above named criteria will determine if the firm will be in a position to reduce costs to sustain its positive performance in the industry.
I would use both level and seasonal production approaches to safeguard the firm’s cash flows and to deal with different types of potential risks in the market. The seasonal approach would be used for all products when the firm registers high sales volumes from September to January. On the other hand, the level production approach would be used for specific products that are always in demand throughout the year to increase sales revenues.
The firm needs to invest in more effective data gathering techniques to find out how consumers purchase its products in the market. It also needs to invest in systems that assess existing and future demand of its products. This will help the firm to plan the exact quantities of products to be manufactured to satisfy market needs.
The firm also needs to consider using foreign manufacturers for some of its products to reduce high production costs which are likely to become unsustainable in the long term. I would ask the lender to look at the sales and revenue figures for the past four years. During this period, the firm has managed to register good results from its operations.