Aurora Textile Case Study

1710 words 7 pages
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DATE: 2/23/13
TO: Mr. Ansley Chua
FROM: Austin Johnson, Enxing Liu, Tyson Hilyard, and Tanner Strathman
SUBJ: Aurora Textile Company
EXECUTIVE SUMMARY

Aurora Textiles has historically been one of the premier textile companies in the United States and now has a decision to make. With the opportunity to invest in equipment that could help cure our slumping financials, we must carefully explore whether this investment is appropriate for a company with such an uncertain future. With that in mind we believe that the Zinser 351 is the perfect investment to pull us out of this slump. As a company that has been able to deliver a premium product for the consumers, the Zinser 351 will allow us to continue to do that while also begin
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The Zinser machine will actually decrease the volume produced and the volume of sales. This is not of much concern though because our sales revenue will increase. The projected numbers show that if we invest in the Zinser 351, next year already we will see an increase of $1.2 million. This is possible because the Zinser allows us to produce higher quality threads which in turn, create higher margins. Our projections have this increase in gross margins at almost $3 million next year. We believe this is important to Aurora Textiles because in the past we have been considered a premium-quality company, and it is widely known that our largest market, the hosiery market, is moving towards a larger demand for higher quality products instead of the cheaper, lower-quality products. This market accounts for 43% of our revenue and investing in a project that improves our place in this market can only be a positive. It is also worth noting that the hosiery market is considered the most protected against global competition because of the high transport costs and heavy usage of automated labor. With the ban being lifted on quotas in 2005 this positioning in a global-protected market is not to be overlooked. With the industry as whole looking at depressed forecasted growth in the near future, it puts more emphasis on our ability to become as efficient as possible so that we are able to stay ahead of our competitors and turn around our financial

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