Reference no: EM131520634

Question: Current situation KJ is a manufacturer of clothes, specialising in shirts, blouses, trousers and skirts. The company has an annual turnover of $450 million and manufactures its products in three factories. It employs 600 workers and 100 management and sales staff in the country in which it operates. Sales are predominantly to the local market, although there has been some growth in exports, particularly in the more specialist and expensive products. All goods are currently sold through wholesalers, who then sell the clothes on to retail outlets such as supermarkets and dedicated fashion shops. This system proved very profitable for KJ because products were normally in demand and there was little effective competition. However, the last 5 years have produced falling profit levels resulting from: an increase in competition, particularly from cheap imports; a higher level of obsolete stock resulting from more frequent changes in preferences for different types of clothes; increased delivery time from raw material manufacturers, resulting partly from more complicated orders from KJ, but also as a result of poorer payment terms being imposed by KJ. Staff are also becoming demotivated and staff turnover has increased substantially in the last 6 months.