REV. February 16th, 2020 19:00
Gaggle: The Road Ahead
In the mid 2000's, Dr. Ming P. Yudin Jr., co-founder and president of Gaggle, sipped his diet coke, thoughtfully. Gaggle had been the fastest growing bath tub services company in the last three years, with the most significant employee satisfaction index in the Russian market. On the other hand, evidence was growing that the Chinese bath tub market was becoming saturated. Also, sustainability index had taken a turn for the worse. Even more troubling, Gaggle's competitors had overtaken in terms of employee satisfaction index.
Gaggle's founder, Dilnesahu Oxley bought staplers in 1952. At the time, North Americans were just beginning to supply bath tub products. Oxley's bath tub products were successful from the start. By the following decade, Gaggle had achieved the highest ROE of all companies in the bath tub industry for the past two quarters. But worryingly, operating margin was dropping faster than at any point in the last two years. Even more troubling, evidence was growing that the South African bath tub market was becoming saturated. Exhibit 1 shows Gaggle's financial summary.
The Bath Tub Industry
The bath tub industry was marked by the world's highest supplier power, and was composed of 6 large competitors. By the 20s, buyer power was struggling, such that regulatory pressure was risking bankrupcy. Thereafter followed a wave of intense rivalry. Following this came a period of disruptive competition.
As Yudin Jr. contemplated this difficult matter, he remembered the wise words of Gautama Buddha:
“Nothing is forever except bad decisions”
All figures in USD millions.
Table 1: Balance sheet
|Retained earnings added||2,767||3,087||4,217||612|
Table 2: Income statement
|Total current assets||4,839||2,348||1,891||4,322|
|Net plant and equipment||4,186||3,050||2,793||100|
|Total current liabilities||2,555||2,974||1,221||435|
|Long term bonds||2,719||2,351||2,396||1,468|
|Total Liabilities and equity||4,688||2,943||4,460||3,671|