ABSTRACT
Investigate standard door market: Since the growth rate of the standard door market segment is below average, and the profit margins are lower, CSC has to investigate if the investments in this market segment make sense. From Table 5.2, we can see that the cost of setting up a warehouse on the West Coast, to increase the sales of standard doors, is about 2% of sales. In the past, the management team had believed that the standard door market would grow substantially and, to penetrate the West Coast, they should set up this distribution center. The cost of 2% of sales is only for the increase in freight and lease of the warehouse; it does not include the cost of operating the warehouse and the personnel there. There are 20 employees in that warehouse. Table 5.3 shows the operating expense of the warehouse. The CSC team decides that the cost is not justified. Since growing the standard door market segment is not a primary growth strategy for the company, the CSC team feels confident in closing this warehouse and supporting the West Coast sales from the factory. This will yield an additional $2 million increase in profit.
