Duncan J Kachasu

Computer Science

R1810106

HBS 201 Assignment

Question One

Explaining a benefit for SM of taking over the business

 Taking over will widen their products base and making them recognizable. Production costs
will lower due to increased production. Revenue streams and markets will also boost.

Explaining one problem of taking over businesses

 Business growth is affected by real estate and legal fees, given that SM does not have
adequate cash.

Question 2

Justifying on which company SM should take over:

i. Comparing Cost of Sales

HIJ has higher costs than EFG, SM should take over HIJ because it will get high profits.
ii. Comparing Return on Capital Employed(ROCE)
ROCE shows how much each dollar invested in capital generates. SM should take over HIJ
because it has a higher ROCE of 25% as compared to EFG of 20%. This means that HIJ
generates more dollars of profit by each dollar of capital employed.
iii. Comparing Current Ratio
SM should take over HIJ because it has a higher current ratio of 3 as compared to EFG of 2.
Current Ration is a liquidity ratio used to measure whether a company has enough resources
to complete its short term obligations.
iv. Comparing Acid Test Ratio
Acid test ratio = (Current assets – inventory) divided by (current liabilities)
Also termed quick ratio, Acid test ratio is the liquidity ratio that measures a company’s
ability to pay its current liabilities with its current assets.
As HIJ has higher acid ratio test of 1.5 than EFG of 1, SM should take over HIJ.

Question 3

Justifying which method of promotion SM should use for its production in export markets

SM should choose advertising on national television as a method of promotion. Promotion is rising

the commodity on top such that customers come to purchase building relationship with the
customers.

The majority of the population watch national television which makes it a benefit when using it as a
method of promotion because the larger part of the population watches the advert.
National television produces a variety of television shows and some of the content very popular, SM
can negotiate a deal with a popular television show to showcase its products during the show. This
guarantees that a lot of people will watch the advert hence potentially increasing the number of
customers.

Most elderly people are not familiar with internet technology, method of promotion through a
website might not be a recommended way to attract the elderly crowd, but they do watch national
television, therefore it is a preferred method of promotion.

Some part of the population cannot read hence the website method of promotion is a deal breaker
as compared to national television where audio is provided. Also some part of the crowd are deaf
and national television advertisement is preferred because it produces graphics and product images.

Question 4

Justifying which method of motivation SM should use for its production workers