TOOL 5.1
The symptoms and the causes of the problem must be properly identified before the Bank can choose a sensible course of action.
Internal Factors
| Product | – What are the company’s 3 main products and their sales percentages? – If goods, are they perishable or durable? – Is there a clear demand pattern? – Are the products fashion items? – Are the products subject to rapid technical obsolescence? – What are the product life cycles? Are any of the products nearing the end of their life cycle? – Are any of the products subject to seasonal factors? – What are the competitive advantages/disadvantages of the company’s products? |
| Production | – What is the condition of the production facilities? – Is there a need for capital expenditure? – If Yes, within what period and how much? – What is capacity utilisation? – Can any unused machinery be sold easily? – Is the company a technological leader in its industry? – Is the production process automated? – Is production seasonal or level during the year? – What quality control systems does the company have? – Is the production process labour intensive? |
External Factors
| Economics | – What is the state of the relevant economies? (Domestic & International) Growth / recession / inflation / deflation? – Is the company’s business subject to volatility as a result of economic changes? – Are the company’s major customers subject to economic changes? – Are interest rate changes important? – If yes what is the outlook for interest rates? – Does the company have any protection against rate rises? – Are foreign exchange rate changes important? – If yes what is the outlook for FX rates? – Does the company have any protection against rate changes? – Is the company’s business dependent on the success of one major industry? – Is the company’s business affected by movements in the equity and debt capital markets? |
| Industry | – Industry composition – many small companies or one dominant player? – Entry barriers? – Current state of the industry. Are other companies reporting problems? – Where is the industry in its life cycle? – Who is the industry leader? – How does this company compare to the industry leader? – Is the industry cyclical? – If Yes, where is it in the cycle? – Is the industry seasonal? – Is the industry highly regulated? – Are those regulations expected to change in the short term? – Is the industry unionised? – What is the current state of labour relations in the industry? – What is the current state of labour relations in the company? |
| Market | – Is this a diversified market with many customers? – What is the financial strength of those customers? – What is the normal customer profile? – Is this a domestic or international market? – What is the impact of demographic changes? – What is the impact of buying pattern changes? – Who are the major players in the market? – What is our company’s market share and position? – What is the impact of/need for ongoing advertising and promotion? – What are the normal distribution channels in the market? – What are our company’s distribution channels? |
