CALIFORNIA STATE UNIVERSITY, SACRAMENTO

College of Business Administration

MGMT 170 – Fundamentals of Business Strategy

CASE STUDY QUESTIONS

(Case: Afterglow Lighting Company)

1. Please state in (bullet-point format) what the numbers tell us in this case.

INTERNAL

Numbers Implication

Return on sales down from high of 11%

in 1977 to –3%

Return on assets down from 24% in 1977

to –4%

900 item product line (up from 800)

High inventory levels (up 33%)

Inventory turns down from 5.8 in 1977

to 3.2

G&A expenses up from 24% in 1977 to

32%

Gross margins down form 45% in 1977

to 38%

90% of Afterglow products sold through

distributors, or independent showroom

Sales made through 54 agents that carry

other lines

$600,000/year advertising expense

EXTERNAL

Numbers Implication

3 large competitors; many, many small

competitors

Afterglow sales are 2-3% of decorative

lighting market

Industry dependent on economic cycle

Some competitors (like Juno with 50%

gross margin) doing fine

Industry growth rates stable at around

3%/year

Entry of low cost off-shore producers,

able to market knockoffs in 6 months

2. What do you think of the new 150,000 foot

facility (obtained in 1979)? What are the

potential effects of moving into a big, nice,

new facility?

3. You are on the Board of Afterglow in 1983.

You’ve been examining the company, and

you’re going to meet with Brad Baker

tomorrow afternoon to discuss the situation.

Is the company healthy? Are you happy with

what you see? Why or why not? What are

you going to tell Baker?

4. If Brad decides to bring in a professional

manager with experience in managing turn

around situations what specific things that

the new manager should do?

336 MGMT 170 AFTERGLOW LIGHTING COMPANY CASE CM