Garry Halper Meswear Limited: A loan request for an export order Case Solution

Problem Statement

Garry Halper Menswear Limited is operating successfully in Canada and also exporting its goods to Italy.Currently, Sutton – the United States departmental store has given a very large order to GHM that would double the sales of the company. Garry Halper Menswear would import partially completed suits from China and finished products would be completed in Canada. The company does not want to lose this customer. However, in order to complete this order, the company would be needing additional working capital requirements. Therefore, the treasure of the company has to assess that how could the company raise its funds that would enable the company to fulfill its working capital needs(Garry Halper Meswear Limited: A loan request for an export order, 2019).

Causes of the Problem

Menswear is considered as the major segment in the clothing industry. The Canadian market has faced a declining trend because of recession however, the menswear is expected to grow more than US$400 billion in 2014. The companies want to expand their operations in order to capture a large market share because there is intense competition in the clothing industry.

Although GHM is performing well in Canada and exporting a very minimum amount of order to Italy as well, the company wants to expand its operations in America.In the fiscal year 2013, Sutton’s, a large national department store in the United States, has given an order of 91,130 suits that would double the sales of the company in 2014. The company is facing issues to maintain its working capital because the company would be needing additional working capital in order to complete this order.

In order to achieve growth opportunities and to expand its operations, the treasure of the company has to find out that how could the company increase its working capital needs. GHM is a sole proprietorship company therefore, the company cannot raise funds through equity financing.Furthermore, the company’s current bank seems to be hesitant to provide loans to GHM therefor, and the company is considering to build a banking relationship with other banks. In a nutshell, the company has to raise debt financing so that the company can expand its operations.

Evaluation of Garry Halper Menswear Limited

Internal analysis of the company has been performed in order to geta deep understanding of the company’s core competencies, competitive viability and the financial performance of the company. The internal analysis of the company includes qualitative analysis which has been performed through SWOT analysis and quantitates analysis which been performed through financial performance analysis.

SWOT Analysis:

SWOT analysis is very helpful for investors to assess the competitive position of the company plus understanding of the environment of the company because SWOT analysis provides the complete knowledge of the company’s strengths, weaknesses, opportunities, and threats, which helps investors to understand the future prospects of the company(Sammut-Bonnici & Galea, 2015).

Strengths:

  • The company is that it is a sole proprietor company therefore, there would not be any interference of anyone in the operations of the company other than the founder of the company.
  • The company’s major strength is its human resource because it has a lower turnover rate which indicates the loyalty and satisfaction of its employees. Moreover, the company provides a generous compensation package in order to keep its employees loyal.
  • The company has strong brand perception because of its quality products therefore it has loyal customers.
  • One of the major strengths of the company is its integrated business model, efficient supply chain management and the passion for creativity to cater to the growing need of the customers.

Weaknesses:

  • The major weakness of the company is that the company cannot raise funds through equity financing. Furthermore, the company has fewer resources to raise funds.
  • The company requires huge working capital in order to maintain its stock.
  • One of the weaknesses is that the company does not provide its products through an online portal.
  • The strategies, practices, practices, and policies of the company are easy to imitate.

Opportunities:

  • The company has an opportunity to introduce new products in the existing market in order to improve its profitability and customer experience and improves its sales footprints in the existing markets.
  • GHM could expand its business through market development by selling its existing products in the new market with the aim to capture a large market share.
  • The company has an opportunity to sell its products through an online web portal because the e-commerce sales trend is increasing faster.

Threats:

  • The intense competition in the fashion industry and different tactics used by the competitors in order to grab, maintain and increase its customer base.
  • Rapid changing in the fashion industry trend and to manage that change at a quick pace is considered to be the major threat for the company.
  • The high regulatory pressure and the uncertainty in different economies made it difficult for the company to cater to various fashionable needs of the customers.
  • Various political and legal barriers in different countries may threaten the company to fulfill its vision of growth.
  • Change in consumers’ preferences and managing that change globally.

Financial Performance Analysis

Financial performance analysis is the process of creating a relationship between the items of the income statement and balance sheet of the company in order to gain a deep understanding of the company’s financial strengths and weaknesses.

Ratio Analysis:

Ratio analysis determines the financial strengths and weaknesses of the company and also reveals the performance and position of the company overtime. Income statements and balance sheets of the fiscal year 2009 till 2012 are used to calculate the financial ratios of the company. In the ratio analysis, different ratios have calculated which includes profitability ratios solvency ratios and liquidity ratio in order to analyze the company’s performance and financial position. Moreover, ratios have been calculated on the basis of the pro forma income statement and balance sheet as well.

Note: See Exhibit-1: Financial Performance Analysis

Profitability Ratios:

The profitability ratios are used to assess the company’s ability to generate profits, revenues, and other profit margins during a specific period of time. A profitability ratio is one of the most frequent tools of financial ratio analysis which determines the company’s bottom line after deduction all the revenues. It also used to measures the company’s efficiency in a generation the profits by cost management. The different ratio which has been calculated in order to measure the profitability of Inditex which includes gross profit margin, net profit margin and return on equity……………

 

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