Introduction
Star River Electronics is a joint venture between Starlight Electronics Ltd., United Kingdom and an Asian venture-capital firm, New Era Partners. Star River Electronics is based in Singapore. It manufactures and supplies CD-ROM’s to major software companies. Due to its production of high-quality discs, Star River gained fame in the industry. Even though the volume of sales is increasing, there is a fall in the unit prices due to price competition and the growing popularity of substitute storage devices, mainly DVDs. With newly installed capacity, the company hoped to increase the proportion of revenue from DVDs.
On 5th of July 2001, Koh was appointed as the new CEO of Star River Electronics and on her first day itself she had to make several financial decisions or with outcomes that will have major financial implications for the firm. The following analysis will state the problems in Star River, analyze the situation, explain the major strategic alternatives, list the criteria for decision making, analyze the strategic alternatives and recommend a list of actions for Koh to deal with the current situation at Star River.
Problem Statement
New Era looked at Star River as one of its promising venture-capital investments. But this optimism cannot be warranted until they get a solid understanding of the firm’s past and future performance and find out the significant positive and negative insights. Also, Koh is not sure, whether they can repay the bank loan within the reasonable period. To avoid over borrowing from bank, Star River has to request its parent companies, the New Era Partners and the Star River Electronics United Kingdom for an injection of equity. For this, the company has to offer an attractive return on...
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...raw material costs, labors costs and other costs and utilizing the labor and raw materials more effectively.
• To generate more sales, the utilization of assets has to be done more effectively. Avoiding an unnecessary purchase of a fixed asset will result in less capital expenditure and less depreciation expense.
• To increase the return on assets and the return on equity, the company can aim at a higher turnover rate. Also, they can widen the profit margin by cutting down the costs. These will increase the profits and in turn increase the return on assets and the equity.
Conclusion
The current and the forecast financial statements of Star River Electronics show that the company is not financially healthy. I believe, by following the above recommendations and by efficiently managing the company, Star River will become healthy within the next four to five years.
U.S Bank, Maximize your return on assets: six steps to getting more profits from your property, plant, and equipment assets. Retrieved May 1, 2014.
Price increases in the raw material mean that prices needed to be increased, but customers were still willing to pay for a quality product.
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Sweet, Bill. "China's Suntech in Bankruptcy Proceedings." - IEEE Spectrum. Energywise, 12 Mar. 2013. Web. 18 Nov. 2013. http://spectrum.ieee.org/energywise/green-tech/solar/chinas-suntech-in-bankruptcy-proceedings