Deutsche Brauerei Essay

The agenda attached (EXHIIBT 1) became the charge of Ms. Greta Schweitzers concentration for the next 24 hours. She relied on her team from her EMBA class in Frankfurt to assist her with the recommendations she would need to character reference this board tomorrow morning. Upon initial analysis, it became clear that DB was in trouble with wish to the Ukraine market, much less the proposed cracking expansion. some(prenominal) items alarmed the team when we read the statements from both Lukas Schweitzer and Oleg Pinchuk.The sales and marketing manager has an plain different approach than that which made DB successful in the past. Oleg Pinchuk has extended credence to its distributors which is causing a rise in sales and accordingly an increase in his remuneration (as it is based on sales). This consume to be corrected given much(prenominal) a volatile environment and this plastereds recent history, a individual in his mystify should earn a salary based on accounts receivab le collections, rather than sales. Perhaps then, his discretion would be more restrictive with respect to appendix of reference point.Furthermore, if the distributors are in fact expanding and enhancing their stores by purchasing recent equipment and restocking inventories, then manifestly they have the cash to pay DB for their outstanding invoices. This raises considerable questions regarding the prudence of trade-credit extensions and pay packages offered Mr. Pinchuk, and accordingly, we recommend his termination. A new salary structure and job description delineating indispensable results can be negotiated with Mr. Pinchuks replacement.When considering adopting the calculate for 2001, we must consider the proposed expansion and investments in new plant and equipment (warehouse and distribution center). With the all overexploitation of dead-circuit term debt and a get rate over 2% higher(prenominal) than the government rate, it will be unthinkable to finance this ca pital expansion. We cannot recommend citation of the budget in its current form. at that place is not enough cash existence collected, too much inventory carried on behalf of the distributors, too much risky short term debt and too m whatever capital improvements budgeted to justify this expansion.Without actually collecting cash from the receivables, we do not recommend declaring any additional dividends, as indicated in the budget. Historically, declared and paid dividends were right at or below $2,000 (in thousands of Euros) and the proposed budget increases those to well over $3,200. We recommend restricting dividends declared to what was through with(p) in the past, without any increase. Once collections are received and with the change in marketing, credit policies, and inventory control, the company would be in a better financial position to pay additional dividends.As a matter of final note, we strongly urge on the Board of Directors of DB to consider the short term ef fects of expanding into a new market economy. The Ukraine is just noveltying into becoming a market economy (experiencing supply and demand that guides the allocation of resources). Such a transition is politically and socially difficult for businesses because of boost inflation, unemployment, and economic uncertainty. We have serious questions nigh the vitality of DB and whether it can exist until the long term benefits of this transition are realized.