Merton Electronic Corporation
Merton Electronics Corporation
About company
-Since its founding in 1950 by Thomas Merton, Merton Electronics had been a distributor for GEC, a large manufacturer of electrical and electronics products for consumer and institutional market.
-Over the years, in addition to the GEC products, the company had added noncompeting lines of electrical appliances, records, compact discs, and cassettes.
-Four years later, it entered into an exclusive import agreement with the Goldstone Corporation of Taiwan, a major producer of television and other electronic equipment.
-By the beginning of the 1990s, the company had entered into the personal computer (PC) market distributing both hardware and software products.
-In September 1993, company became the national distributor for Fuji Electronics, a major Japanese manufacturer of PCs and related products
-Patricia Merton is a president after her father died in the spring of 1991. Together with her mother controlled 65% of the share capital of the firm. The remaining shares were held by her father’s brother and sister, their families, and a few long-service employees.
Problem
-The margin had been flat or falling for the past three years, but 1997 was the worst.
-Sales had risen by over 12% in 1997, very close to budget, but earnings fell by more than 40% reflecting increasingly difficult market conditions.
-She secured additional long-term financing and an increase in the company’s credit line.
-Although continued growth would require additional investment in new computer and office equipment, and other fixed assets, she expected this would be largely financed out of cash flow-if margins did not deteriorate further and working capital could be kept in line with sales.
-One of the things that continued disturb her was the volatility of the yen and Taiwan dollar as over half of the equipment sold in the PC, TV, VCR, and Hi-fi product lines were imported from Japanese supplier.
1. A volume of about $20 million
About company
-Since its founding in 1950 by Thomas Merton, Merton Electronics had been a distributor for GEC, a large manufacturer of electrical and electronics products for consumer and institutional market.
-Over the years, in addition to the GEC products, the company had added noncompeting lines of electrical appliances, records, compact discs, and cassettes.
-Four years later, it entered into an exclusive import agreement with the Goldstone Corporation of Taiwan, a major producer of television and other electronic equipment.
-By the beginning of the 1990s, the company had entered into the personal computer (PC) market distributing both hardware and software products.
-In September 1993, company became the national distributor for Fuji Electronics, a major Japanese manufacturer of PCs and related products
-Patricia Merton is a president after her father died in the spring of 1991. Together with her mother controlled 65% of the share capital of the firm. The remaining shares were held by her father’s brother and sister, their families, and a few long-service employees.
Problem
-The margin had been flat or falling for the past three years, but 1997 was the worst.
-Sales had risen by over 12% in 1997, very close to budget, but earnings fell by more than 40% reflecting increasingly difficult market conditions.
-She secured additional long-term financing and an increase in the company’s credit line.
-Although continued growth would require additional investment in new computer and office equipment, and other fixed assets, she expected this would be largely financed out of cash flow-if margins did not deteriorate further and working capital could be kept in line with sales.
-One of the things that continued disturb her was the volatility of the yen and Taiwan dollar as over half of the equipment sold in the PC, TV, VCR, and Hi-fi product lines were imported from Japanese supplier.
1. A volume of about $20 million