Monforte Dairy Essay

1437 Words6 Pages
Critical Issues Cost Structure & Profit – There is a restaurant style cost structure of a 30/30/30, leaving only 10% for profit. Being manufacturing and a highly leveraged company they have a large amount of fixed costs and their cost structure does not reflect this. Expansion – There is inadequate capital to expand Monforte and securing financing from banks is unlikely due to Monforte’s low profit margins of 10% as well as her unfavourable financial ratios, specifically her acid test ratio of 0.9. Focus – The focus of the organization is blurred. There is a need for expansion; however, there is also a need to meet the requirements put in place about locally grown and produced products as well as high wages for workers. There is also a lack of ability to make “SMART” business growth decisions by the owner. Analysis Current Situation Monforte Dairy (Monforte) is a specialized cheese company currently being run by Ruth Klahsen whose background is in the culinary industry. Her business background comes from this foundation and has thus set up Monforte in a similar fashion. She has grown to have a loyal customer base as her cheeses are agriculturally sustainable, use locally produced products and uses healthy methods of producing her cheeses that does not harm the environment. Currently, Klahsen is deciding whether to expand her business into one of four different ventures or to keep Monforte going the way it is. Criteria The recommendation chosen for Monforte will need to be financially feasible as well as profitable. They will also need to be in line with Klahsen’s values including using sustainable agriculture, being socially conscious, and staying local. Alternatives Changing costing structure The current pricing model/cost structure of Monforte is that of a restaurant. Klahsen is allocating 30% of sales to cover food costs, 30% of sales to cover
Open Document