Johnson graduated in diploma in mechanical engineering and decided to start his own automobile workshop. It has
Question:
Johnson graduated in diploma in mechanical engineering and decided to start his own automobile workshop. It has moderately grown and has 5 employees though his capital is still limited. Due to limited capital, whenever clients' vehicle requires replacement of parts, he has an arrangement with well-established part dealer where he is given a day credit i.e. all parts taken during the day have to be paid for at the end of that day. He has maintained this relationship with the dealer who even allows the day's credit on expensive parts. Johnson intends to maintain this relationship since most of his clients pay on cash basis. One of his long outstanding key client, Musa Tours owns a fleet of cabs. All cabs repairs are done in Johnson's workshop who extends a day credit i.e. any parts replacement and labour charges are paid for, the next day. This means, despite his limited capital, he finances parts replacement for a day for Musa. Musa Tours has been hit by covid pandemic and have requested for an extension of credit term to one week. Johnson does not want to lose this client because he is the largest source of income to his business. He has approached the part dealer for credit extension who has agreed for three days credit only. Johnson has analysed his liquidity and found finance Musa credits for 4 days will scale down his business especially to the other clients whom he has served for years. Johnson has approached you with proposal and is concerned about his business, and his relationship with part dealer, Musa Tours and other clients.
Required. As his consultant, propose two alternative solutions to the current situation. For each proposal, describe how it should be implemented, opportunities, challenges and risks.
International Marketing And Export Management
ISBN: 9781292016924
8th Edition
Authors: Gerald Albaum , Alexander Josiassen , Edwin Duerr