Rocco Rapini, owner of Decorative Interiors Inc (DI), aged 47 years has suffered an unexpected heart attack on 8th July, 2006 and is advised by doctors to reduce stress significantly in daily routine. This has forced him to take an appropriate decision about his business. He is in a dilemma and not able to decide which course of action will be beneficial both for his business as well as his health. Keeping this in mind, he has hired the services of a management consultant to help him take a decision on how to proceed.
Keeping ourselves in his shoes, we have analyzed various alternatives based on the following data:-
a) Balance Sheet as on 31st December 2005.
b) Statement of earning for year ending 2005.
c) Population and housing statistics of Canadian suburb.
d) Business history and experience of Rocco Rapini.
The criteria of our analysis is that he must change his life style as advised by doctor and
at the same time earn sufficient money for the future financial stability of his family.
Selling the present big size show room and moving to suburb area:
He will have to incur a rental expenditure of $1,200 per month ($14,400 per annum), which is quite comparable to the rentals at GTA ($16,200 per annum as of 2004). In addition, his travel expenses will increase by 5%. Moreover, as per the statistics, there is a meager population growth in the Meaford and Thornbury suburb area as compared to the township of the Greater Toranto Toronto Area (GTA) where it is to the tune of 37%. Since he has recently suffered from heart attack, he will require constant medical supervision which is least likely to be available in the suburbs. His daughter has come to continue her higher studies from Toranto and wishes to stay with her parents. Though by moving to suburb area, there will be saving on the cost of living, yet he will have to arrange for his daughter’s stay in GTA.
Although he has been doing this business for the past 18 years, the growth in his business is due to his familiarity with the Italian community to which he belongs. He will be deprived of his community connection incase he shifts to suburb. Establishing new business connections will be very difficult as he will be new to that area. Being suburb area, there will not be enough opportunity for his wife to support him financially, if needed.
Continuing the business in the same showroom:
It is estimated that the cost of hiring a sales manager and part time installer to run his business from the current show room will be $90,000 per annum. Although, his sales figures will increase to the level of 2004, [How can you assume that? Morris was an exceptional person. The spurt in sales in 2004 was due to her.] the monitoring of hired personnel will also add to his stress. Moreover, his past experience with Mary Morris was not less than a nightmare for him. Being a perfectionist, he is not at ease with anyone he hires. If the work undertaken by the hired personnel is not...