Atlas electrica

Strategy & Planning II Prof. James Biteman January 21st 2011 Case: ATLAS ELECTRICA By JORGE AREVALO SUGGESTED COURSE OF ACTION Course of action to defend current market In order to set or suggest acourse of action it is necessary to have under consideration a number of facts that affect the development of the company: All leading appliance manufacturers in the world were looking to developingcountries for growth, and the industry consist in a few large global competitors and a larger number of regional smaller players. In mature markets the production is concentrated in few companies. Jointventures and acquisitions are common in the industry. Free Trade Aggreement between several countries in the Central America Region, as well as between some economies in north and south America, aremaking that big companies move its centers of production in order to gain cost reduction and economy of scale advantages; so they try to have major factories in countries with bigger populations andthen from there also serve smaller markets. Atlas Eléctrica (AE) major investments, made in the mid 90’s to improve manufacture systems (USD15 millon); seems not to be working as should be, at leastfrom the cost structure point of view. This means that in the P&L we cannot see the effects in reduction of cost of sales from year 1995 to 1999. The Gross profits decreases since year 1996, from anaverage of 27% (year 1991 to 1995) to an average of 22% for years 1996 to 1999. Checking the P&L from AE, we can see important increases in the operating expenses in three lines: sales, administrativeand others. However is in line others where the increment is higher. This line increased over 22% from 1998 to 1999 and over 79% from 1997 to 1998. At the same time what seems to be the reason forkeeping the profit in a high positive level from one year to another since 1994 to 1998 is the Others income line. This demands a better understanding of the activities of the company, and look at the...