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Pearlman and Company is a firm based in Canada that deals with developing elegant jewelry. It is among the finest jewelry suppliers in the area, and it enjoys a large number of customers. The company is limited and it was first registered in 1034 under an Act of law. It first started as a partnership between Arthur Pearlman and his business partner, Len. Before starting the company, both partners had gained experience in the craft needed to produce world class jewelry. Most jewelry customers look for the best quality pieces that are worth their money, and hence Pearlman and Company control a large Canadian jewelry market. It was until the 1970’s that the company made numerous sales, increasing their profits and size of production. At first, they only dealt with diamonds before exploring other types of jewelry to meet their growing customer base.

Porter’s Five Forces Analysis Pearlman and Company Limited

Supplier Power

  • Pearlman get raw material fro three suppliers: US, Israel, Antwerp

Buyer Power

  • Pearlman has a strong base of customers in Canada, Great Britain, and Australia.
  • Pearlman enjoys high volume of sales.

Competitive Rivalry

  • Pearlman faces precipitous competition from small, medium, and large companies specializing in gold

Threat Substitution

  • Pearlman embraces innovative programs in marketing and production.

Threat of New Entry

  • It is expensive for new competitors to enter the jewelry industry since Pearlman has a strong reputation in the market.
  • Pearlman enjoys high customer loyalty

The Porter’s Five Analysis is an extremely powerful tool that endeavors to understand the power of a business. The tool is crucial because it helps business to evaluate the strength of its competitiveness and gives direction of new investment. In addition, the tool enables businesses to identify whether their new services and products have a potential to generate profits. In essence, Five Forces Analysis utilizes five components to establish competitive power in businesses. The five components of the tool include supplier power, competitive rivalry, threat substitution, buyer power, and threat of new entry.                                        

Pearlman and Company has strong suppliers of diamond. The suppliers are situated in key cities such as Antwerp, New York, and Tel Aviv. The supplies offer a unique product to the company and the small suppliers’ choice implies that Pearlman has a power supply of diamond. The huge number of customers in Canada, United States, Australia, and Great Britain puts Pearlman and Company at a commanding position (Robinson & Hatch, 2003). Thus, the customers cannot dictate terms to the Pearlman and Company Limited. In addition, the customer cannot exert a downward pressure on the company’s product.

Pearlman and Company faces both direct and indirect competitors. Some of the indirect competitors specialize in production and supply of gold to giant stores such as Wal-Mart, Home Shopping Network, and Zellers (Robinson & Hatch, 2003). However, there are direct competitors that sell diamond jewelry and pose a threat to Pearlman and Company. Although there are small manufactures of gold jewelry and supply of gold to big stores such as Wal-Mart and Zellers, the reputation of Pearlman and Company wins many customers and suppliers. The company owns many innovative programs, which makes duplication and substitution of products difficult. Thus, Pearlman and Company Limited face little threat of new competitors to enter the market.

SWOT Analysis of Pearlman and Company Limited

Strengths

  • Huge base of customers
  • Creative advertisement methods
  • Strong relationship in stores and chain departments
  • Innovative marketing and outsourcing programs
  • Reputation and quality product

Weakness

  • Personalized management
  • Strict controls of the Pearlman Company

Opportunities

  • Potential markets in North America
  • Strong demand of jewelry by aging population in North America

Threats

  • Competition from small and mid-sized gold companies
  • Competition from large diamond companies in Canada

SWOT analysis seeks to understand strengths, weaknesses, opportunities, and threats of a business enterprise. The tool helps business community to carve a sustainable environment for businesses to grow and generate massive profits. Pearlman and Company enjoys a monopoly in the supply of jewelry in Canada and has innovated successful merchandising programs. Some of the merchandising programs entail creative advertisement and display at sales points. The programs have enabled Pearlman and Company Limited to create a strong customer base and realize a financial growth. However, the company has apparent weaknesses. For instance, the manufacturing department of Pearlman and Company Limited does not embrace large corporate structures. Majorly, the personal nature of Pearlman and Company coupled with the desire to maintain stern controls of the company is attributable for delayed adoption of large corporate structure (Robinson & Hatch, 2003).

Pearlman and Company has potential of large markets in North America. The millennium diamond campaigns that endorsed giving diamonds to customers to usher in millennium created potential manufactures and retailers of diamond in the North America. The opportunities are achievable since population in the 50-60 years age brackets spend immense sums of money on jewelry. However, the company faces threats. For instance, small and mid-size manufactures has a negative impact on the Pearlman business environment. In addition, there are both indirect and direct competitors of the company such those specializing in production and supply of gold to Wal-Mart, Home Shopping Network, and Zellers (Robinson & Hatch, 2003).

Roy Nat Criteria to Loans

Roy Nat gives loans to companies that have sales volume ranging between Cdn$ 5 and Cdn $ 100 million in North America (Robinson & Hatch, 2003). However, the criterion above does not apply to companies that offer hospitality services. Roy Nat finances hospitality companies with sales volumes of Cdn$2 million and Cdn$10 million.  Pearson Company Limited is eligible to loan because it meets Roy Nat criterion. Statistics indicate that the company registered huge volumes of sales between 1996 and 1999. For instance, in 1996, 1997, 1998, and 1999 the sales were $ 13,366, $15,867, $21,768, and $ 23,033 respectively (Robinson & Hatch, 2003).

Pearlman and company need extra funding so as to expand their economies of scale, and produce more high quality jewels. The company needs to borrow money from a stable financial institution that it can pay later with an interest. The company has been enjoying economical prosperity with time and increasing their market base beyond Canadian borders. The company wants to invest in the production of more jewels and diamonds for the growing market. Roy Nat is a financial institution that lends money to leading companies at a fair interest and security for the loan. Pearlman and Company has contacted Ray Nat for negotiations on a loan, but before it is given, several processes have to be followed. The company has invested in assets, and they only need the money to increase on production.

A leveraged buyout is a company’s acquisition where a set purchase price is met by combining its equity, and debt. The company’s asset and cash flow is used to finance the debt on an agreed rate, mostly calculated as a percentage. Debts are normally lower than equity, and an increase in equity is directly proportional to the increase of the company’s debt. The debt borrowed is invested by the company to give returns, and hence the theory behind leverage buyout. Pearlman and Company needs to make an agreement with Roy Nat, so as to agree on the rate of interest on the debt. Normally, the accrued interest is computed monthly from when the company purchases or develops the required asset. When the company expands, it is probable that it will also lead to a rise in its profitability, and decrease in cost of manufacture. This can be attributed to most of the production being done in wholesale. Pearlman and company can decide to pay Roy Nat a portion of the income from the new asset, or on the whole company’s proceeds. However, most companies prefer the procured asset financing its own loan without involving the rest of the company. The company is taking the loan so as to expand production, and a fraction of the general value of the product goes towards financing the loan. Pearlman and Company has been enjoying a steady growth over the years, controlling a numerous part of the jewelry market in Canada and neighboring countries. An increase in the size of production will cause a significant increase of profits. The latter will be used to finance the debt accrued, in this case, by RoyNat. The rate on returns will determine the term taken to totally pay the debt accrued. The accord is made amid the company and the financing institution.

Cash sweep can be defined as the computerized process where the cash available to a company is moved to an account that bears interest from a non-interest account. Incase Pearlman and Company have some cash deposited in an account that does not bear interest, they can carry out a cash sweep that will help in raising more returns. The returns generated can be used to pay the loan taken from Roy Nat, with the company only adding funds to fill the balance on the monthly or annual installments. Collateral can be defined as the asset that a given borrower issues the lender to act as security for a loan taken.  As earlier stated, a company is normally given a loan that is lesser in value than the total worth of its assets. When being allocated the loan, Pearlman and Company, can use some of their assets as collateral. Incase Pearlman and Company is not able to pay the agreed premiums in time; Roy Nat has the authority to possess the assets set as collateral, and even auctions them. The company’s jewelry products can also be used as collateral since they are of a high monetary value, and can be used to settle the loan. Roy Nat would not be hesitant to provide the loan to Pearlman and Company on a collateral basis since the company’s assets surpass the value borrowed.

Pearlman and Company should include their financial advisors as well as their legal advisors in the process of negotiating the loan. This will allow the making of proper covenants where each party is content with what is agreed upon. The covenant to be made should be water tight to ensure no loop holes are left in the contract. Any loose ends included in a contract can lead to exploitation from one party who it favors. The covenant should explicitly highlight the mode of compensation by Pearlman and Company including the premiums and terms agreed.

Sensitivity analysis involves gaining insight on the uncertainties in the results of mathematical models, and how they can be allocated to sources of uncertainty at the point of input. The analysis is closely related to uncertainty analysis where more focus is given on quantification of uncertainty, but different origins of uncertainty.  Sensitivity analysis can be used in a range of situations to determine the viability of given projects. The analysis will be aimed at checking if any unforeseen events can compromise the deal. The company procures its inputs in time and has a wide market to sell their outputs. It is, therefore, not likely that it will run bankrupt any time soon, and the probability of repaying the loan is high. Uncertainties in the company are highly reduced as they have a geared up market for their commodities, and the demand is higher than the supply they can give. The main reason behind seeking the loan is to improve their economies of scale, and produce more. During the sensitivity analysis, influential decision makers should be involved to approve that the company can be able to repay the loan.

Custom Pearlman and Company essay writing service. Samples, help


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