Week 5 J & J Electrical Contractors CASE REPORT 2(Individual Report

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Week 5 J & J Electrical Contractors CASE REPORT 2(Individual Report
   J & J Case Reports for CR510DeSales University By Kevin Gleason Report QUESTI!S Week 5 J & J Electrical Contractors CASE REPORT 2(Individual Report 1.Evaluate the adequacy of this company’s strategic direction offering your recommendations for improvement. It is difficult to evaluate the strategy of J&J Electrical Contractors as it appears the company really does not have a strategy or at least one that can be agreed upon by the CEO andCFO. As the article mentions, residential construction has seen strong groth during the past decade in California. !he oners, John and Jean Abernathy, appear to be struggling ith choosing an ade"uate mi# of pro$ects in the public and private sectors. !he public sector seems to be J&J%s avenue of opportunity as it appears to be abundant in the state of California ith school upgrade conversions. !his is combined ith the fact that J&J appears to have a niche in this type of industry. hile the private sector allos for J&J to be less restrictive in its bidding  process and dealing ith age las, the public sector seems to provide a more consistent revenue source for the niche mar'et here J&J is more successful. !he bid submittal process in the public sector has a great deal of bureaucracy and legal re"uirements. hile this may be a detriment to obtaining the pro$ect, once the pro$ect has been accepted, the pain in obtaining it is offset by less default on payments for completed or'.!he biggest issue J&J appears to be having is that hile its (ales continued to increase from )*.+ in -++ to )/.- in -++/, its 0ross argins have declined from *12 in -++ to -2 in -++/. !his increase in (ales and decrease in 0ross argins clearly points out that J&J%s Cost of 0oods is too high and the pricing of its materials clearly needs to be addressed. /var/www/apps/conversion/tmp/scratch_3/260813648.docPage 1   J & J Case Reports for CR510DeSales University By Kevin Gleason J&J%s Contribution argin has decreased from 3.42 in -++ to -.42 in -++/. !his decline is alarming and should be addressed immediately. !he decline in Contribution 5rofit is a 'ey indicator that the company%s operational e#penses have e#ceeded sales groth. Additional inspection of J&J%s financials indicates that the company%s Current 6atio is healthy around *.+, hich suggests the company has good or'ing capital. !he company%s 7uic' 6atio is also around *.+ and indicates that the company is able to pay off its financial obligations. !he 8ebt to E"uity 6atio is appro#imately //2, hich shos good financial leverage. !his indicates that the company is using the proper proportion of e"uity and debt to finance its assets. In addition to the eroding 0ross and Contribution argins, other areas of concern e#ist for J&J. !he Accounts 6eceivable balances continue to gro and continue to stay around tenty percent of annual (ales. !his could be an area of concern as the company is not collecting it outstanding cash as "uic'ly as it should. !his limits the potential for reinvestment into the company. !he average collection period had risen almost fourteen days from -++1 to -++/. J&J is losing its ability to turn cash flo into investment. y suggestions to J&J Contractors ould be to pic' a niche area of the construction  business and focus on being the best in the business. !he article mentions that J&J has received high praise for its refurbishments of older schools and has been promised additional future or'. hile this type of strategy may produce loer margins than the private sector ould, the or' iscontracted and guaranteed. If the company as able to reign in e#penses and material costs, the company could see an increase in net profit even ith the loss of additional revenue. !he company should also focus on potential ne niche mar'ets that have yet to produce a /var/www/apps/conversion/tmp/scratch_3/260813648.docPage 2   J & J Case Reports for CR510DeSales University By Kevin Gleason  predominate vendor in the mar'et place. (uch mar'ets are the alternative energy industry, home audio installation, home internet installation and home security systems. I ould also suggest that J&J purchase their materials in bul' hen the price of copper appears to be at a lo point. 9y purchasing at loer rates, J&J can avoid the ebbs and flos of  price fluctuations and loc' in on operational e#penses. !his also coincides ith hiring contract labor to perform these $obs over employing a full time staff. Contract labor, hile more e#pensive, avoids paying staff in the inter months hen the public sector bids have a tendency to slo. I ould also suggest that during the inter months, J&J becomes more involved in the home security systems business. According to the article, the top to areas for electrician or' are home netor'ing and security systems installation. As a side note, hen creating my ratio analysis spreadsheet, I found that J&J Electrical%s -++/ !otal :iabilities column does not foot properly. 2.Describe the external environmental areas having the most favorable and unfavorable impact on the company's strategy? !he (outhern California Electrical Contracting Industry appears to have five main characteristics that are universal throughout the industry. !hey are the folloing; • 0roing Industry • 6egulation by local cities and states • Change in industry due to the economy • Fragmented industry • oderate technological innovations in recent years /var/www/apps/conversion/tmp/scratch_3/260813648.docPage 3   J & J Case Reports for CR510DeSales University By Kevin Gleason !he e#ternal environmental trends in the industry are a decline in commercial construction due to the recession, the California Energy Act that re"uires code upgrades to older  buildings, a greater demand for alternative energy sources, and a greater demand for in home internet netor's and security systems.!he increasing price of copper for piping has become a concerning issue for contractors and plumbers ali'e. J&J%s profit margin continues to slip and this is a direct correlation to the increase cost of their materials. 5urchasing copper in bul' ould at least alleviate a fluctuation inmaterials costs and allo J&J more fle#ibility on bidding. California continues to struggle financially hich in turn forces the state to refurbish its schools instead of destroying and rebuilding. !his situation provides a benefit to J&J and allos the company to have a competitive advantage over its competition based upon its reputation for successful conversions.!he state of California continues to choose remodeling over ne construction in the housing industry ith increasing housing and materials costs. J&J should capitali<e on this, as ell as enter more heavily into smaller residential pro$ects in the private sector to have a healthy mi# of private and public sector pro$ects. 5orter%s Five Forces model further demonstrates the issues and opportunities J&J Electrical face hile trying to survive in the industry. /var/www/apps/conversion/tmp/scratch_3/260813648.docPage 4   J & J Case Reports for CR510DeSales University By Kevin Gleason   !ar"ainin" Po#er$e# EntrantsIntensit% o Rivals  Of b!ers"#igh$%ternative &nerg!'er! highOf spp%iers"(edim)orces !u%ersRivalsSuppliers Pb%ic )ector*erg &%ectric+ #e%i,-ho%esa%e &%ectrica%Private homeowners (orrow+ (c*ride+  ompaniesommercia% ndstr!*c+ Power P%s +anie%s T'reat o SustitutesSustitutesEase o Entr%  oneon %icensedcontractors5ow  5orter%s model shos that the industry has a high intensity among its competitors, it is relatively easy to enter into, and there is a ris' of being replaced by cheaper non licensed alternatives. 8eveloping alternative energy sources, especially in California, is a potential mar'et that J&J should consider entering into before the mar'et becomes saturated ith competition. .Describe the internal characteristics of the company having the most significant favorable and unfavorable impact on the company’s strategy. !he internal characteristics of the company having the most significance are the niche mar'et that J&J has been able to enter, and the 'noledge and the relationships the oners have  been able to build over the years. J&J Electrical has become synonymous ith school redesign and has developed a strong folloing in the industry. As the state of California continues to redesign its schools instead of ne construction, J&J must ta'e advantage of its reputation in the /var/www/apps/conversion/tmp/scratch_3/260813648.docPage 
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