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Butler Lumber Company, Case Study Example

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Butler Lumber Company has been enjoying impressive sales growth over the years and its net income has also continuously increased in absolute terms. The company’s owner Mark Butler is an ambitious individual who is well liked for his work ethics and people skills by those who know him. However, in his major focus on sales expansion, Butler has failed to notice the deteriorating liquidity and operating performance of the company. The recommended course of action to Butler is to scale back expansion plans, improve operating performance and leverage position of the company, and possibly seek a different capital structure.

This profitable company has been forced to borrow so much from the bank because it’s sales are expanding at a higher rate than what could be supported through internal funds. At first glance, it seems the company is quite profitable but a closer look at the profitability ratios reveal that the profit margins have actually been decreasing over the years. This is because the company’s expenses to support the rising sales have been growing at a faster pace and one example is Butler’s own salary which increased from $75,000 in 1988 to $95,000 in 1990.

1988 1989 1990
Profit Margin = = = 1.83% = 1.69% = 1.63%
Sales 1697 2013 2694

The profit margin was 1.83%, 1.69%, and 1.63% in 1988, 1989, and 1990 respectively which means the company’s operating performance is on a downward spiral. This makes the sales growth less appealing because marginal expenses to support the growing sales keep rising each year. The picture is mixed though when it comes to asset utilization rate such as inventory turnover rate which decreased to 6.17 in 1989 from 7.1 in 1988 but increased to 6.44 in 1990 though still below the 1988 level.

1988 1989 1990
Inventory Turnover (Times) = = = 7.10 = 6.17 = 6.44
Inventory 239 326 418

One of the reasons why the company might have been able to improve the inventory turnover rate in 1990 is by offering more generous credit facilities to the customers in order to grow sales and this assumption is indeed supported by the balance sheet that shows a huge jump in accounts receivables in 1990 at $317,000 from $222,000 in 1989. Thus, the company has been sacrificing operating liquidity in exchange for higher sales and the actual expenses may turn out to be higher due to higher risk of bad debts.

The company estimates that it needs a revolving loan facility of $465,000 which is quite an overestimation. Assuming that the company’s sales will be $3.6 million in 1991 and the company retained $9 million out of $44 million of net income in 1990, the company’s external financing in 1991 need should be approximately $215,000 as shown below.

External Financing Needs =
A/S*(S1-So) – L/S(S1-So) – M*(St)*(1-D)
933/2694(3600-2694) – 256/2694(3600-2694) – (44/2694)*(3600)(1-(35/44) = 215.650

By this estimation, the company is asking for more than twice its external financing need and going for unnecessary debt when its current debt position is already a cause of concern.

1988 1989 1990
Debt to Total Assets = = = 0.55 = 0.59 = 0.63
Total Assets 594 736 933

Debt has continued to become a greater portion of the company’s overall capital structure during the period from 1988 to 1990. This means the company’s interest expense has also continued to increase, negatively affecting its net profit margin. This is also one reason why the company’s profit margins continue to decline. In addition to direct costs, this is also costing the company indirectly because one of the reasons the company has not been able to take advantage of trade discounts by promptly paying for its purchases is because it has always been low on funds. And the opportunity cost has been quite huge.

The company made inventory purchases of $2,042,000 in 1990. If the company had paid the invoice within ten days, it would have been eligible for 2% discount which translates to $40, 840. This figure is almost the same as the company’s net income in 1990 which was $44,000. The company could have earned almost twice the net income had it taken advantage of trade discounts. Yet, instead of realizing the seriousness of the problem, the company is keen on taking more loan that is needed to fund its planned expansion in 1991.

As we looked over the figures during the period 1988-1989, the annual purchases have been about 75-76% of the net sales figure. If the expected sales in 1991 is $3.6 million, this translates to $2.7 million of purchases at 75% of the net sales figure. By taking advantage of the trade discounts, the company can save about $54,000 which is a significant number and higher than the net income in all of the previous three years. The company should take advantage of this opportunity but it seems unlikely if the past is any indication unless the company takes drastic steps to manage its deteriorating short term liquidity.

As Mr. Butler’s financial advisor, I would advise him to reconsider his anticipated expansion and plans for additional debt financing. I would advise Mr. Butler to focus on improving operating efficiency, lowering short term liabilities, and adopt controlled growth policy instead of aggressive growth policy. If we look at the short term, liquidity ratios, it is apparent that the company’s growth is coming on the shoulders of short term liabilities.

1988 1989 1990
Current Ratio = = = 1.80 = 1.59 = 1.45
Current Liabilities 260 375 535

The current ratio decreased from 1.80 in 1988 to 1.45 in 1990. Part of the reason may be higher accounts payable levels every year. So far the company is managing its relationship with the suppliers well but if the trend continues, the suppliers may demand prompt payment and become less generous with credit. Similarly, quick ratio also shows the same trend and is a better indicator of short term liquidity than current ratio because it excludes inventory.

Quick Ratio = = = 0.88 = 0.72 = 0.67
Current Liabilities 260 375 535

The company’s quick ratio declined by approximately 24 percent from 1988 to 1990. Another sign of deteriorating short term liquidity is declining days payables outstanding ratio. While it took the company about 37 days to pay its suppliers in 1998, the figure has jumped to nearly 48 days. This may also be happening because of the company’s generous credit facility to customers and, thus, a significant portion of sales is now non-cash.

1988 1989 1990
Days Payables Outstanding = = = 37.038 = 48.768 = 47.918
COGS 1222 1437 1950

As a banker, I would not approve Mr. Butler’s request of $465,000. This is because I have looked at different financial ratios and they show quite a disturbing trend. I would be concerned that Mr. Butler has already difficulties meeting his current obligations and new loan would only further worsen his ability to meet his debt obligations. First of all, the company’s ability to meet its short term interest payments is deteriorating.

1988 1989 1990
Times Interest Earned = = = 3.85 = 3.05 = 2.61
Interest 13 20 33

While the 2.61 ratio in 1990 is still not a bad figure but the three-year trend indicates signs of troubles ahead. The ratio was 3.85 just two years ago in 1988 and now stands at about 68% of the 1988 level in just two years. This is because the company has been accumulating debt too quickly and its income has not been keeping up pace. Similarly, as mentioned before, the company has been taking longer and longer to pay back its suppliers and has difficulty taking advantage of trade discounts that could make a huge difference in its financial performance. The company’s external financing need is about $215,000 and I would be willing to consider this figure but only if the company agrees to certain covenants.

One requirement is that the company will not open credit facility of any kind with any other institution except when permitted by the bank. Second covenant is that the whole amount of the remaining principle as well as applicable interest will be immediately due if the company misses any payment unless the bank agrees to change the term. In addition, the company will not pay any dividend during the term of the loan. The company will also be required to inform the bank of any capital investment plans and the bank will have the right to inspect company’s financial documents anytime. Moreover, the company will maintain a profit margin of at least 1.5% during the term of the loan.

If Mr. Dodge turns down his request for increased credit line, Mr. Butler could raise funds by offering common stock to the investors. The company could also sell its account receivables to a third party at a discounted value. Mr. Butler could also sell some of the company’s assets to raise funds. Mr. Butler could also consider obtaining loans that are secured against the assets of the company. Mr. Butler doesn’t want to follow this course of action but doing so will allow him to obtain more attractive terms from the lenders.

If I am Mr. Butler, I would follow a more controlled growth rather than aggressive growth. I will obtain only $215,000 but not to support sales expansion but to attempt to improve liquidity and operating performance. Even then, I will attempt to obtain loans against the company’s assets to get better terms and reduce interest expense. Since my focus is on improving operating efficiency and liquidity, I will also agree to covenants to further reduce my debt costs. I will sell some of the company’s assets such as warehouses and improve relationships with the suppliers by more prompt payments and working with them to implement more efficient supply chain to reduce storage costs and improve inventory turnover.

I will also implement more conservative credit facility to the customers and take steps to increase cash-based sales. Customers will be offered discounts for prompt payments. I will also try to quickly pay down debt and change the company’s capital structure to equity-intensive one. This will help improve both profit margins and liquidity and will especially be helpful in difficult economic conditions. Most of the company’s future capital investments will be funded internally instead of through debt financing.

I will replace many assets with operating leases. Operating leases would prevent the need for high capital investments as well as providing flexibility. Moreover, lower asset base would also mean lower depreciation expense and higher profits.

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Butler Lumber Company Case Study

This essay sample on Butler Lumber Company Case Study provides all necessary basic information on this matter, including the most common “for and against” arguments. Below are the introduction, body and conclusion parts of this essay.

Why has Butler Lumber borrowed increasing amounts despite its consistent profitability? How has Mr.. Butler met the financing needs of the company during the period 1 988 through 1 990? (It would be helpful to develop a cash flow analysis (use vs.. Source) and the cash flow statement based upon the income statement and the balance sheet provided in the case for the period of 1988 to 1990.

Through the period of 1988 to 1 990 Mark Butler has met the needs of financing through decreasing the amount of cash the company carries, by increasing bank loans, by increasing the size of accounts payable, and by carrying net income over into retained earnings. The needs of this cash was generated by the loan to Mr.. Stark as M. B. Needed this money to buy out Mr.

. Stark’s share in the company, an increase in account receivable, an increase in inventories, and an increase in fixed assets. Working capital turned out to make up a use Of 68% during the years 1 988 to 1990.

The buy out of Mr.. Stark made up 22% of the use of cash. Source bank note payable 49%, trading credit 28%, retained earnings 16%. All in all Mr.. Butler has been using the wrong sort of financing to raise funds. If you were to make a comparison as to how Mr.. Butler has been generating funds thus far it would be like financing a mortgage with a credit card.

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2. Has the financial strength of Butler Lumber improved or deteriorated? The ratios show that the strength of Butler Lumber is slowly deteriorating. Their current ratio has been slowly going down from 1. To 1 2, if this continues it will only be a matter often until Butler Lumber will no longer be able to cover their current liabilities with their current assets. Along with this the company is growing more and more leveraged from 54. 5% in 1988 to 71. % in 1992. As their working capital decreased through the years and into the projection BAL average payment period is increasing from 35 days to 47 days. It will not be long until their vendors grow tired of the slow payments, not to mention the fact that BAL is not taking advantage of the vendors 2% discount by paying in ten days from the purchase.

Butler Lumber Case Solution

Bless times interest earned is growing smaller also. In 1988 Bless TIE figure was 3. 8 but now the estimated figure for 1992 is 1. 9. This means that Bless BIT is becoming increasingly lower relative to the interest that they must pay out on loans. . Does rapid sales growth always result in a need for substantial external finance? (Hints: exam asset management, does the efficiency of using assets at Butler align with its rapid sales growth? ) In this case MBA needed a loan to buy out Mr..

Starks interest so that in itself caused a need for external financing. Generally when companies experience rapid sales growth they do need substantial external financing. As sales increase accounts such as A/P, A/ R, and inventory always increase also, which creates a demand for more funds, for instance in net working capital. This is needed so that the business can operate smoothly, make their payments on time, absorb increases in accrued expenses, and meet the needs of countless other needs of cash that come along with increases in sales.

The speed at which sales are growing is the reason why a company needs external financing, assuming that the company doesn’t have a rich uncle with 4. How attractive is it to take the trade discounts? A 2% percent discount will result in a savings of $41000 in 1991 and $60,000 in 1 992, which will increase net income significantly to 58,000 in 1991 and $73,000 in 1992. The increased savings in net income will show up in retained earnings and will provide a source of cash for the coming year which will in turn reduce the amount of external financing that the company needs.

The annual cost of not taking this discount works out to be 20% – Once again this shows that Mr.. Butler is not using the best source of financing because he could take out a loan at a much lower rate of interest to pay his bills in 10 days and save quite a bit of money. 5. Do you agree with Mr.. Butler’s estimate of the company’s loan requirements? That is, will a credit line of $465,000 be sufficient to meet the Meany’s needs beyond 1 991 if it takes the trade discounts? How much will Mr..

Butler need to finance the expected expansion in sales to $3. 6 million in 1991 and to take all trade discounts? (Develop projected income statement and balance sheet, and then estimate the financial needs. ) If MBA takes the 465,000 line of credit and does not take the trade discount he will be able to operate through the year of 1991 but he will need even more money to continue into 1992. By not taking the trade discount BAL will not be running very efficiently and their current ratio will continue to get worse. If Mr..

Butler does take the trade discount the projected external financing for 1991 is $666,000 so it seems that the 465 thousand line of credit will not be enough for BAL to continue experiencing the rapid growth. 6. Would you, as Mr.. Dodge, agree to lend Butler the money needed? This is a tough call based just upon these numbers. It seems a bit risky for the bank to extend this financing to BAL. I do not have industry figures or what the current home building growth is projected to be. It mentions in the book that MBA thinks that even if home building slows residential remodeling will continue to rive his sales.

I think that Mr.. Dodge should recommend BAL to scale back sales growth to a more manageable rate. 33% sales growth per year is very high. History shows us growth at this rate never continues year after year. Additionally, growth at this rate generally causes financial problems and lower chances for the company’s survival over the long run. As things are going right now Mr.. Dodge probably would not grant this loan. 7. What are the alternatives open to Mr.. Butler if Mr.. Dodge refuses his request for an increased credit line?

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Butler Lumber Company Case Study

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Case Study Butler Lumber

Case Study Butler Lumber

Butler Lumber Company, a lumber retailer with a rapid growth rate, is faced with the problem of cash flow shortage. In order to support this profitable business, BLC needs a great amount of cash. The loan of $250,000 from Suburban National and a line of credit of up to $465,000 from Northrop National Bank are the two choices provided. After a brief review of the operation and financial conditions of BLC, we first make analysis of the credit level of BLC from the perspective of banker.

Although the feedback from all the firms that had business dealings with Butler are quite positive , both solvency and liquidity condition and the mortgage indicates that it is not a wise decision for Northrop National Bank to offer a line of credit to BLC. Then we diagnose the business of BLC by examining the sources and uses of funds and find out that the increase in inventory and accounts payable occupies too much funds that leads to the shortage of cash flow. If BLC can make improvement in the management of these two items, definitely it can take advantage of the trade discount, which equals to an interest rate of 20. % per year. Based on the calculation of average days payable discount it can be concluded that BLC should reduce its days payable outstanding to 10 days. Since sales is expected to reach $3. 6 million in 1991, the projected income sheet and the balance sheet can be obtained through calculation so that we get the plug value (notes payable to bank) needed for the profitable business. This amount is so large that it exceeds the maximum amount the company can get from bank. In the third part of this report, we provide four suggestions for BLC to solve the problem of cash flow shortage.

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The credit terms of net 30 days on open account offered to customers can be improved by Customer Credit Ranking System. Besides BLC must keep inventory at an optimal level so that if can save the opportunity cost of occupying funds. The third suggestion we offer is concerned with cash management. Accelerating cash inflow and controlling cash outflow are two major means to decrease the opportunity cost of holding cash. We also suggest BLC to finance through equity so that the liability rate can be reduced to a relatively low level. Key Words: capital budgeting,

As a full service building material dealer serving the needs of industry, contractors, builders and home owners, Butler Lumber Company is in the process of rapid growth. About 55% of total sales were made from April to September, and repair business accounts a relatively high proportion. In order to support this profitable business, BLC needs a great amount of cash. The maximum loan that the Butler Lumber Company (BLC) could obtain from Suburban National was $250,000 in which his property would be used to secure the loan. Northrop National Bank offered BLC a line of credit of up to $465,000 with many restrictions. BLC would have to sever ties with Suburban National if they were to have this LOC extended to them.

Perspective of Banker

From the perspective of banker, it is quite reasonable for Northrop National Bank to put restrictions on the line of credit offered to the Butler Lumber Company. From the investigation carried by the credit department, we can find several points to support our logic.

Customary investigation-qualification of the owner

Northrop National Bank had sent inquires concerning the credit level of Butler to a number of firms that had business dealings with him. Almost all the trade letter bore out the positive opinion about the operating condition of Butler Lumber Company. They also showed their confidence in Butler’s own credit by mentioning his good personality and the conservative operation he carried out which made the company’s operating expenses as low as possible.

Financial analysis

After the credit checking of Butler and his company, Northrop National Bank carried out the analysis of Butler Lumber Company’s realistic financial and operating condition by examining its financial reports.

Although the sale prospects were favorable, Northrop National Bank gave particular attention to the long-term solvency measures as well as liquidity ratios of the Butler Lumber Company. Debt position and current ratio of the business were especially carefully examined. Financial ratios using for analysis are shown as the following tables. Financial information used for calculation is drawn from the balance sheet and income statement of the company provided by the case. The company’s debt position shows that there was rapid increase in Butler Lumber’s accounts and notes payable in the recent past, especially in the spring of 1991.

Liquidity ratios

Two-year decrease of liquidity measures including current ratio and quick ratio reveals the problems concerning company’s short-term solvency and liquidity. Butler Lumber Company’s current ratio decreased to 145. 05% in 1990 from the level of 180. 00% in 1988.

The same decrease happened to quick ratio (decreased from 88. 08% in 1988 to 66. 92% in 1990). As the short-term lender, Northrop National Bank should have noticed that Butler Lumber Company’s ability to pay its bills over the short run without undue press needs to be carefully examined. The decrease of current ratio also implies the decreasing level of company’s net working capital, which is another sign of lower level of liquidity.

Operating management

The days sales of inventory, days sales outstanding and days payable outstanding kept similar over the past three years. Since we cannot get the industrial average level, we cannot determine whether the level of Butler Lumber Company is reasonable. However, we can notice the continuous decrease of cash and relatively high and increasing amount of receivables and debt shown by the company’s financial reports. These several phenomena still reveal the problems concerning operating management involving inventory, receivables and payables.

Assets condition used for securing

Since the Butler Lumber Company is possessed solely by Mark Butler, Northrop National Bank should evaluate not only the land and storage building owned by the company but also the assets owned by Butler himself. Butler’s assets contain the house which Butler held jointly with his wife cost $72,000 to build in 1979, which, however, was mortgaged for $38,000. Butler also held a $70,000 life insurance policy, payable to his wife. Butler’s wife owned independently a half interest in a house worth about $55,000.

Combined all the available assets mentioned above, there are assets worth of $131,500 can be used to secure the loan. However, the value of these assets accounts for a little portion of the proposed loan of $465000. Since the land and buildings possessed by the company had been used to secure the loan of $70,000, negotiated in late 1988 using for making the payment to Butler’s brother-in-law, Henry Stark, Butler himself and the company might not have enough assets to secure the new loan. If the company faces the bankruptcy and liquidation, the amount of money that can be repaid to the Northrop National Bank would probably be limited.

From the explanation above, we can tell that the Northrop National Bank would be probably not willing to provide loan to Butler Lumber Company. Although the credit condition of the company and Butler himself is good, the company’s weak solvency and liquidity condition and lack of assets using to secure the loan makes the probability for the bank to draw back the loan is quite low. Things would get worse and harm the interests of the bank if Large amount of Additional investments in fixed assets happened, so does the withdrawals of funds from the business by Butler.

So we conculde that the Northrop National Bank would not lend money to the BLC.

Perspective of Butler

BLC spent $105,000 buying out Stark’s interest in 1998, which caused the shortage of funds to some extent. However the most important reason of the lack of cash flow lies in the additional investments in working capital, increase in accounts receivable and increase in inventory. These two items accounts for 68. 4% of all the uses of funds and keeps rising. Usually credit terms of net 30 days on open account were offered to customers and the average collection period increased year by year.

As a company faces with seasonal sales, BLC haw to keep a certain amount of inventory to satisfy the large need in peak seasons, but the proportion of inventory is relatively high and occupied 37. 7% of the uses of funds. 3. 2 Cost of trade discount According to the material” The usual terms of purchase in the trade provided for a discount of 2% for payments made within 10 days of the invoice date. Accounts were due in 30 days at the invoice price, but suppliers ordinarily did not object if payments lagged somewhat behind the due date. However, because of the shortage of funds arising from his purchase of Stark’s interest in the business and the additional investment in working capital associated with the company’s increasing sales volume Butler had taken very few purchase discounts. From the Exhibit 1, we can calculate the actual average days payable outstanding of Butler Lumber Company.

Butler Lumber Company had two choices: the first one is taking the 2% discount and payoff all the payments in 10 days; the second is rejecting the discount and payoff in 46 days. In another word, the suppliers provide an interest rate of for 36 days. That is equal to an interest rate of 20. 2% per year, which is much higher than the interest rate of banks. On this account, Butler Lumber Company must accept the discount provided by supplies and reduce its days payable outstanding to 10 days.

Projected Income statements for 1991

According to the sales expectation, sales are expected to reach $3. 6 million in 1991 and may exceed this level if prices of lumber rise substantially in the near future. We use the number $3,600,000 to calculate the projected income sheet in 1991. All the accounts are shown as the following table. BUTLER LUMBER COMPANY Projected income statement for 1991 (thousands of dollars) Assumptions

1991 Value Explanation

  • Net sales $3,600 $3,600 given in case
  • Cost of goods sold: Beginning inventory $418
  • Purchases $2,736 76% historical % of sales 3,154

Ending inventory $562 computed value (beg inv + purch – end inv)

  • Total cost of goods sold $2,592
  • 72% historical % of sales
  • Gross Profit $1,008
  • Operating expenses $900 25% historical % of sales
  • Operating Profit $108
  • Purchase Discounts* $42 2% (of purch after discount) assumption
  • Interest expense** $53 10. 50% (of average outstanding balance) assumption
  • Net income before income taxes $97

*Assume purchase discounts of 2% taken on all purchases after April 1, 1991.

**10. % on the average outstanding balance.

The numbers of 1st Quarter are not exactly corresponding with what we get by using the approach. And precisely speaking, this approach can only apply to calculating yearly numbers, for we get the original percentages of yearly data. So improvement should be made to adapt the quarterly numbers, whose characteristics are slightly different from that of yearly number. Take purchase account for example: Total cost of goods sold, operating expense are all computed in historical percentage of sales. The percent of each is 72% and 25%.

Assume purchase discounts of 2% are taken on all purchases after April 1, 1991. So the purchase discount can be computed as follow: = According to the negation between Dodge and Butler, the initial rate to be paid would be about 10. 5% under conditions in effect in 1991. So the interest expense account is $53,000.

Projected Balance sheet for 1991

With the projected income sheet for 1991, the projected balance sheet for 1991 can be calculated as follow.

Projected balance sheet for December 31, 1991 (thousands of dollars) 1991. Value Explanation Assets:

  • Cash $54 1. 50% recent % of sales
  • Accounts receivable, net $432 12% recent % of sales
  • Inventory $562 computed value from above
  • Current Assets $1,048
  • Property, net $216 6% recent % of sales
  • Total Assets $1,264


  • Accounts payable $75 10 days of purchases
  • Accrued expenses $54 1. 50% historical % of sales
  • Long-term debt, current portion $7 $7 constant amortization
  • Bank note payable (plug) $661 computed plug value
  • Current Liabilities $797 Long-term debt $43 computed value
  • Total Liabilities $840 Net worth $424 computed value
  • Total Liabilities plus net worth $1,264

Use the same way in computing income accounts, we adapt the quarterly numbers. Accounts receivable, property are all computed in the same way as above. After take the purchase discount 2%, days payable outstanding is reduced to 10 days. The account payable can be computed as follow: We use bank notes payable as the plug, which stands for how much fund is really needed. Under the assumption that Butler Lumber Company take the purchase discount and days payable outstanding reduced to 10, the $465,000 loan from Northrop Nation Bank is still not sufficient in 1991.

What Butler need indeed is $661,000, much bigger than the number bank could offer. Apparently, Butler Company has to find another way to solve the cash problem.

Accounts Receivable Management

Quantity discounts and credit terms of net 30 days on open account are usually offered to customers by Butler Lumber Company. However, this section can be improved by Customer Credit Ranking System. If there is no secure or the finance statements (such as long-term liability rate) are not good, Butler Company can shorten the credit term of this customer. In accordance with this way, bad debt can be avoided.

Downscale Inventory

With the increase in sales, inventory also flowed up. Holding inventory can produce large quant of cost, while it is impossible to run a business without any inventory. So Butler Company must find an optimal rate of the inventory to sustain the business and make the inventory cost as small as possible at the mean time.

Cash Management

In the point of ROI, the opportunity cost of holding cash is big. But is not practicable neither for a company does not have enough cash to pay the daily activities. The objective of cash management is to make the company hold the least cash for the efficient operation. Butler Company can reduce the holding of cash significantly through such ways:

Accelerate the cash inflow. Butler Lumber Company can choose a faster way to receive funds, reduce the notes check time.

  • Control cash outflow.
  • Accounts are due in 30 day s at the invoice price, but suppliers ordinarily did not object if payments lagged somewhat behind the due date. Butler Company should make good use of these days to control the cash outflow.

Good cash management with reducing in payment in a certain period will also reduce accounts payable.

Equity Financing

It is better for the Butler Lumber Company find a PE or VC, although a general economic downtown may slow down the rate of increase in sales, Butler Lumber’s sales are protected to some degree from fluctuations in new housing construction. As the company get invest from PE/VC, the liability rate can be reduced to a relative lower level. Butler company with less pressure can make use of the funds more efficiently.

According to the finance statements of Butler Lumber Company, the debt ratio is too high, the liquidity is becoming worse, the days of inventory, days sales outstanding, days payable outstanding is relative large, in consideration of small amount of secured assets, the Northrop National Bank won’t lend the loan to Butler. Butler Lumber Company should accept the discount provided by suppliers and reduce its accounts payable. In that situation, days payable outstanding is reduced to 10days. There will be a sharp incline in account payable outstanding due to the decrease.

The loan from Northrop Nation Bank will not be sufficient in 1991 even if the Butler Lumber Company reduce its account payable. According to the projected balance sheet, the funds Butler need are $661,000, more than the bank offered. It is better for Butler reducing its inventory and account receivable than looking for a larger loan. As a company in the process of rapid growth, the inventory and accounts receivable take too much amount of cash flows. If Butler could reduce these scales, it can save a lot of money from its cash flows.

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Butler Lumber Company - Case Report

Essay by molly1122   •  November 3, 2016  •  Case Study  •  1,193 Words (5 Pages)  •  5,198 Views

Essay Preview: Butler Lumber Company - Case Report

Butler Lumber Company is a profitable company in the retail business of lumber products. From 1988 to 1990, it has experienced a rapid business growth and at the same time a shortage of cash. In anticipation of a further substantial increase in sales, the company in the spring of 1991plans to increase its borrowing from the Suburban National Bank who, however, would only grant maximum loan of $250,000 secured with the company’s real property. Therefore, the company is seeking for a new banking relationship for a larger and unsecured loan, to satisfy its liquidity and capital needs.

  • Although the company has seen rapid sales growth for the past years, it has not generate enough real cash flows and the net profit margin has been low as shown in Table 2, which result in the needs for more borrowing. A closer examination of the financial statements reveals the following reasons. Firstly, cash needs arise from an inefficient operation. As shown in Table 8, the increasing days of receivable means that the company takes longer time to collect payment. It is also worth noting that the days of receivables has always been longer than the days of payable. What’s more, a large amount of cash has been tied up in increasing inventories in order to enjoy the quantity purchase discount, which leaves less cash in hands. Secondly, the company has low working capital and high liquidity risk. As shown in Table 5, current ratio, quick ratio, and cash ratio have all worsened dramatically from 1988 to 1990. This means higher risk for Mr. Butler to go bankrupt if he couldn't pay the interest and payables in case of any unexpected events. A comparison of interest and net income as a percentage of net sales shows that the interest has eaten up much of the profit and resulted in low net profit margin. As a given fact, the company has relied heavily on trade credit and been unable to enjoy the 2% cash discount offered by some of its suppliers. If more cash available, it could take the 2% discount and well improve its profitability. Based on the above analysis, Butler Lumber Company needs more cash in order to run the business more efficiently, safely and profitably.
  • Based on the projected income statement in Table 1 and balance sheet in Table 3 for year 1991, we do not agree with Mr. Butler’s estimate of the loan requirement. Assume the same operating efficiency as in 1990, the estimated cash needs in 1991 is projected to be $372,000. Lower loan amount than this may not be sufficient for Mr. Butler to support its growing sales, while an excessive debt amount will further increase the leverage which is already at alarm, thus increasing the company’s risk. Therefore, from our perspective, a loan amount of $372,000 is sufficient enough for the company to expand its sales in the coming year and control interest expenses while being capable to handle unexpected events in the business running.
  • As Mr. Butler’s financial advisor, we would encourage him to go ahead with his anticipated expansion while being prudent with the degree of expansion. To begin with, this company is quite conservative given its personnel structure of only five employees in the office and in sales. Hiring a professional sales or marketing team might bring in even more sales and make it more competitive among the industry. Second, we support Mr. Butler’s plans for additional debt financing. Additional capital allows the company to better manage its accounts payable and take the 2% cash discount by early payment, which helps to reduce sales costs and improve operating efficiency.

As the banker, we will not approve such a large loan to Butler Lumber Company at its current size. However, we will consider granting a smaller loan amount such as $372,000 to it. First of all, the low liquidity ratios in Table 5 indicate higher short-term risk of the company. If these ratios still get worsened in 1991, the company will face liquidity difficulty and may have to cut its sales and business, and in the worst scenario to go bankrupt. Besides, the profit margin has been low and decreasing during the past three years as shown in Table 7. Based on the industry and company characteristic, we predict that the company’s profitability may remain stable over 1991. If the company could maintain its good growth prospects and improve its operating efficiency, we are more favorable to grant it a loan with the following conditions in addition to those mentioned in the case: 1) keep accounts receivable at an agreed level; 2) take Mr. Butler’s personal property as collateral.

  • Positive profit margin, ROA and ROE shown in Table 7 do not necessarily mean that the company has created value for shareholders. The correct measure of true value created for shareholder is the Economic Value Added (EVA), which attempts to capture the true economic profit left for shareholders after deducting the financing cost of debt and opportunity cost of equity. The calculation steps for EVA is provided in Table 10. Based on the calculation, we work out that the EVAs for year 1988 to 1991 are -$11,760, -$11,450, -$7,330 and -$9,210, respectively. The negative values indicate that the profits generated by the company did not exceed the costs of total invested capital. Therefore, Butler Lumber Company has not created value for its shareholders in the recent years.

Berk, J. & DeMarzo, P. (2007). Corporate Finance. Boston: Pearson Addison Wesley.

Table 1. Income Statements for Butler Lumber Company (thousands of dollars)  




1991 Quarter 1

1991 (projected)

Net Sales






Cost of Goods Sold

Beginning Inventory

















Ending Inventory






Total cost of goods sold






Gross Profit






Operating Expense






Interest Expense






Net Income Before Taxes






Provision for Income Taxes






Net Income






Butler Lumber Case Study Essay Example

Butler Lumber Case Study Essay Example

  • Pages: 4 (988 words)
  • Published: June 8, 2018

Statement of Financial Problem Butler Lumber Company, a growing profitable business has exhausted its credit limit and the key issues facing it are:

  • Need for additional funds to continue the growth
  • Need to consolidate debt
  • Need to improve cash flexibility.

In this case study I will be discussing following problem: Why has Butler Lumber been profitable in the increasing volume of sales but at the same time it is experiencing cash difficulties in 1988 – 1990? This is a historical problem and my calculations and assumptions are based on income statement and balance sheet for 1988 – 1990.

General Framework for Financial Analyses:

  • There are different financial ratios and questions they answer:
  • Liquidity ratio – current ratio: Will Butler Lumber be able to pay off his debts as they come due?
  • Asset management ratio: Does Butler Lumber have the appropriate amount of assets versus sales?
  • How effectively is Butler Lumber managing its assets?
  • Debt management ration: Does Butler Lumber have the right mix of debt and equity?

Profitability Ratios: Are sales high enough? Do sales exceed the unit cost? It is necessary to calculate different types of financial ratios to examine different aspects of Butler Lumber’s operations. Key accounts for sources of funds for Butler Lumber Company are: retained earnings from previous years, cash accounts, accounts receivables and borrowing funds from bank Uses of funds are: accounts payables, inventory, fixed asset accounts, buyout of Mr. Stark, long term and short term debt.

Applying of the financial framework

Before identifying the reasons in increasing/decreasing in sources/funds of cash, I have calculated following financial ratios to help understand th

trends over the years of 1988 – 1990. The financial ratios are summarized in Exhibit # Current Ratio is significantly decreasing 1988 – 1. 8, 1989 – 1. 59 and 1990 – 1. 45. This indicates that the current liabilities are increasing much faster than current assets and it should be the first indicator of possible financial problems. Current assets include cash, inventory and accounts receivable.

Butler Lumber’s current liabilities consist of notes payable, accounts payable, accrued expenses and current portion of long term debt. All of these are due within one year. Butler Lumber was paying the accounts payable more slowly and started to borrow more money from the bank. Inventory turnover ratio, part of asset management ratios, shows how many times is inventory “turned over“ during the year.

The numbers are: 1988 – 7. 1, 1989 – 6. 17, 1990 – 6. 4. The volume of inventory assets seems to be consistent with the increasing volume of sales. Total asset turnover ratio for 1988 – 2. 86, 1989 – 2. 74, 1990 – 2. 9. To improve the operations, inventories should be reduced and receivables collected faster. Another indicator is debt ratio 1988 – 58. 7%, 1989 –58. 7% and 1999 – 62. 70%.

This means that the creditor supplied more than half of its total funds and this number keeps increasing. The debt ratio is very high and this will make relativly costly for Butler Lumber to borrow additional funds without raising more assets first. Debt ratio can be used to determine the overall of financial risk. The greated the amount of debt, the greater the financial risk to bankruptcy.

Profit margin is decreasing :1988 – 1.

8%, 1989 – 1. %, 1990 – 1. 8%. This trend could be caused by two reasons: first, Butler Lumber has a high operating cost or second, Butler’s high use of debt – higher interest expenses. We can see an increase in total of working capital for 1988 - $208, 1989 - $221 and 1990 - $241. Also there has been even greater increase in non-financial working capital for 1988 - $262, 1989 - $326 and 1990 - $440. Increase in non-financial working capital is almost doubled in comparison to working capital. Nonfinancial working capital represents notes payable, accounts payable and accrued expenses subtracted from accounts receivable and inventory.

On the other hand, A/R is considered a use of cash because for every dollar that should be coming in to the company from those who owe the company money, that cash has been delayed for a collection time period. Therefore, the company does not have the money to use for its own operations. IV. Assumptions Assumptions in developing a funds flow statements as (shown in exhibit # 2) are that data presented in the case are accurate. Butler Lumber is dealing with changes in business risk. Increasing the internal financial risk by borrowing more money from the bank, Butler Lumber is also increasing total risk of the company.

Conclussions and Recommendations Mr. Butler bought out his equity partner Mr. Stark in order to incorporated the business. However, Mr. Butler became partner with the bank and had to take out long term secure loan. As his businees was booming, Mr. Butler kept increasing his debt at a faster pace than increasing his sales. I would recommend to Mr. Butler to take advantage

of the extended line of credit from Northrop National Bank. In order to be able to pay out the loan he would have to increase the amount of sales, decrease the operating expenses and decrease the amount of inventories.

Butler should also hire commission based sales representative in order to expand the business to the other parts of the large city where his business is located. The increase in sales should out-grow the cost of additional employee. Even in the case of an economic downturn his business wuld be protected because 55% of its sales are from the repair market and that’s what his sales team should focus on. The company is growing at a good pace of 19%,34% and 34% for the year 1989, 1990 and forecasting for 1991 respectively. On the other hand, Butler should not take out more loan than needed for second and third quarters of 1991.

Mr. Butler should use part of the loan to decrease his accounts payable and notes payable. Butler should take advantage of the 2% discount on purchases from his suppliers and make payments within 10 business days from the invoice date. This would decrease company’s financial risks. It seems to me that Mr. Butler wants to control the entire business on his own which may lead to inefficient management. Let’s hope that Mr. Butler will continue to pursue the growth strategy in the best interest of his company.

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Butler Lumber Company

Essay by guol25   •  November 5, 2018  •  Case Study  •  1,542 Words (7 Pages)  •  2,698 Views

Essay Preview: Butler Lumber Company

Case A Butler Lumber Company

Q1: Why does Mr. Butler have to borrow so much money to support this profitable business?

  • Current asset of the company is mainly account receivable and this can bring high uncertainty of company development. Also, company relies heavily on the sole business which is the repair business. Besides, the growth of company after 1991 is hard to predict so that lack of cash can put high effect on its sustainable profitability.
  • For note- and account- payable, these are short term liability and company needed more cash to cover this liability.
  • Current ratio is decreasing each year and its increase of operating income is much less than the increase of current liability. Borrowing much money can solve the short-term liquidity.
  • The cash is decreasing each year and the rate is quite fast. It is high time when the company to lend more money to reduce cost of debt in the predictable future.
  • Assume company is under US GAAP, the credit line granted by Suburdan National Bank is revolving loan and this is classified as current asset- cash and this is beneficial for the company to increase current asset.
  • Management set a goal to keep account payable under 25,000 and the corporate account payable is increasing. Customer may need large amount of cash to buy inventory for further development.

Q2: Do you agree with his estimate of the company’s loan requirements? How much will he need to borrow to finance his expected expansion in sales (assume a 1991 sales volume of $3.6 million)?

I don’t agree with his estimate of the company’s loan requirements. To analyze this question, we have to estimate the exact loan requirements for this company.

First, we assume that the firm will keep the same operating efficiency in 1990. In fact, the asset turnovers from 1988 to 1990 are 2.86, 2,74 and 2.89 respectively. There isn’t significant difference between these figures. Because the prediction of sales in 1991 is 3.6 million, the total asset is expected to be 1.247 million and so is the total liabilities and net worth.

Second, from the income statement and the balance sheet, we can see that the profit retention rate is 100%. In order words, all of the net income will be invested in the company again to support the development, rather than be delivered to shareholders. For example, the net income in 1989 is 34,000, which is exactly the difference in net worth in 1988 and 1989. On the other hand, we assumed the net profit margin on sales in 1990 keeps the same as that in 1991. Actually, the net profit margin remain stable at about 1.6% in the three years. Combining the estimated sales, the net profit margin and the retention rate, we can easily calculate the net worth in 1991. So the total liabilities is 840,000.

Third, we consider the remaining accounting subjects seriously. The discussion between George and Mark indicated that the revolving secured 90-day note belongs to the subject, Notes payable, bank. To solve this problem, we have to forecast other subjects in total liabilities. From the case, Mark Butler bought out Stark’s interest for 105,000 in 1988 and borrowed money from the bank to make the payment. He also needed to pay the bank 7,000 every year until 10 years later. Thus, the notes payable, Mr. Stark is ought to be 0 in 1991. The long term debt current portion is always 7000. Meanwhile, the long term debt will decrease by 7,000 in 1991. Besides, the whole balance sheet also demonstrates that this firm deals so good with the notes payable in trade and we strongly believe that this excellent situation will still remain in 1991. As for the accounts payable and accrued expenses, they are really related to the sales of the company. That’s why we decide to assume that in 1991, these two subjects will have the same proportions. Since we have discussed all the subjects in total liabilities except notes payable, bank, we can figure out the volume of the loan requirements is 163,000 by subtracting the other projections.

From analysis above, we realize that the amount of loan requirements to finance the expansion is 163,000, rather than his estimate, 465,000.

Q3: As Mr. Butler’s financial advisor, would you urge him to go ahead with, or to reconsider, his anticipated expansion and his plans for additional debt financing? As the banker, would you approve Mr. Butler’s loan request, and if so, what conditions would you put on the loan?

  • Market Risk.
  • Systematic Risks. According to the major business that Butler Lumber Company(BLC) involved in, which is the retail distribution of lumber products like plywood, moldings and sash and door products, for repairing, we recognize two major systematic risks it faces. The first one is the national or regional environmental policy. Since the lumber business is not an environmental-friendly issue, it may come up with a severe regulation whenever the environment condition in the country become worse, such as the prohibition of lumbering or price limit. As the condition is not predictable, BLC maybe not well-prepared to tackle the problems like losing its stable suppliers or buyers. Next risk comes the overall condition of local economy. While lumbering business, or repairing business is a non-essential product for local residents, it may suffer more from the downside of economy cycle, in other words, it has larger price elasticity. As the truth indicated in the article, the local economy happens to be in general economic downturn. Although the prospect of BLC appears good in the foreseeable future, we should be more cautious and conservative to make predict.
  • Non-systematic Risk. According to our calculation and the information in the case, the increasing sales volume of BLC built largely on the price competition, by control of operation expenses and by the economics of scales. The operating expenses stay in stable condition, and it expected to maintain in the same way. But in terms of price privilege, it depends heavily on the suppliers’ operating strategy and state of business, which means it is not so reliable. We ought to consider the possibility that what will be the other strength of BLC if we lose the price advantage.
  • Profitability of BLC

According to our analysis, the ratio of current liability of BLC is relatively high. As indicated in the case, BLC relies heavily on the trade credit in order to hold the borrowing within 250,000. In other word, the current cash flow is not adequate to support the amount of input that transactions need. Looking at the ROIC, the profitability of invested capital is far less that the increasing of sales and net profit, which indicates a serious problem of the company’s expansion: the BLC supports its development by loaning. Noticeably, the growth rate of net income is gradually smaller in the past few years, and if we launch more debt, the interest expense will increase, thus leading to less net income.


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Butler Lumber Co Case Solution

Posted by Adam Hudson on Dec-20-2017


The Harvard business review has published the Butler Lumber Co Case Study. Like all HBR case studies, the Butler Lumber Co Case is designed and drafted in a manner to allow the reader to experience a real-world problem and solve it accordingly. The case study, like other HBR case studies, will help the reader and students develop a broader, and a clearer understanding of the business world and dynamics.

The Butler Lumber Co Case is based on a current managerial and strategic problem being faced by the organization, which must be solved tactfully to allow progression, as well as maintain a competitive position. This paper is written to facilitate the case solution for the Butler Lumber Co Case Study.

The case solution for the Butler Lumber Co Case Study first identifies the central issue that is elaborated on throughout the case. The case solution then analyses the case through relevant strategic models and tools including the SWOT Analysis, Porter Five Forces Analysis, PESTEL Analysis, VRIO analysis, Value Chain Analysis, BCG Matrix analysis, Ansoff Matrix analysis, and the Marketing Mix analysis. This analysis is to help in the identification of a feasible strategy and solution for the Butler Lumber Co Case Study. Alternative solutions are also proposed in the case solution, primarily because alternative solutions often act as contingency plans.


2.1. harvard business school case studies.

All case studies published by the Harvard business review comprise of a central problem that is faced by the protagonist. This problem mostly holds implications for managerial and strategic directions of the company. For readers and students of HBR case studies, it is critical to identify the problem that the Butler Lumber Co faces. This problem is usually hinted towards in the introduction of the case and develops along the way.

2.2. Solving HBS case studies

As a result, for solving the Butler Lumber Co case, it is essential to read the case study thoroughly. The identification of the problem correctly is vital for undergoing the analysis rightly, and for developing relevant solutions for the Butler Lumber Co Case Study. It is also essential to identify all the appropriate parties that are being impacted by the problem as well as the decision. The correct problem identification will ensure that all the solutions developed during the case analysis of the Butler Lumber Co Case Study are applicable and pragmatic.


The external environment analysis is needed for the Butler Lumber Co Case Study to make sure that it actively, and proactively responds to the macro-environment. The macro environment or the external environment for the Butler Lumber Co Case includes those factors which are not in control of the business or the company directly. As a result:

  • The Butler Lumber Co cannot influence these factors in its favour, and in contrast, these factors directly affect the operations and workings of the company.
  • As a result, Butler Lumber Co must make sure to continually assess and review the external environment to make sure that it responds to external factors, and take them into account, during strategic decisions, and strategy devising. Businesses like Butler Lumber Co make use of strategic model tools continually to make sure that they are aware of the external environment.
  • These include tools like the pestle analysis and Porter’s five force model, as well as strategic group analysis and pentagonal analysis, to name a few. The external analysis for the Butler Lumber Co Case Study will assess and will apply the strategic models and tools to review the business environment for the company.PESTEL Analysis

3.1.1. Political

Political factors and elements can have a direct and indirect impact on the business. This is seen through the Butler Lumber Co Case Study. Policy Makings

  • Policymakers for the Butler Lumber Co Case are in all likelihood to intervene in the business surroundings.
  • Commercial restrictions and political stability are additionally integral factors that will determine the success or failure of Butler Lumber Co. Taxation

  • Tax policy will influence the cost of doing business for Butler Lumber Co.
  • An increase in organization taxation (on business profits) has a similar impact as an expansion in expenses.
  • Organizations can pass a portion of this increase on to shoppers in more expensive rates, yet it will likewise influence the bottom line of the business. Government Support

  • The government helps organizations in two primary ways: monetary help and regulatory.
  • Butler Lumber Co can use government assistance and grants for purposes of growing the business, advancement, exporting, and innovative work.
  • Butler Lumber Co can also be impacted by when Governments modify regulations and laws. Political Stability

  • Lack of political stability in a country impacts business tasks. Political stability is particularly essential for the organizations which work globally, such as Butler Lumber Co.
  • A forceful takeover could oust a legislature. The takeover could prompt mobs, plundering and general issue in nature. These disturb business tasks for Butler Lumber Co.
  • Purchasing political risk insurance is a way for Butler Lumber Co to oversee political hazard. Organizations that have worldwide activities utilise such as insurance to lessen their risk presentation.
  • The soundness of a political framework can influence the attractiveness of a specific nearby market for Butler Lumber Co.

3.1.2. Economic

The economic factors are one of the most important of PESTEL factors and can influence Butler Lumber Co in several ways. GDP

  • Economic components have the most evident effect on the profitability and overall appeal of Butler Lumber Co.
  • Even though GDP per capita is a useful economic factor, GDP per capita gives just a fractional perspective on the economic factors that may influence Butler Lumber Co.
  • Higher GDP leads to higher disposable income and hence higher sales for Butler Lumber Co. Inflation

  • Higher inflation will disintegrate the purchasing power of the consumer and the shopper
  • Higher inflation will also harm the costs of raw materials and other inputs that are utilised by Butler Lumber Co. Interest Rates

  • Fluctuations in interest rates may translate into higher or lower costs for the purchase or sale of items and administrations provided by Butler Lumber Co.
  • Higher interest rates hurt the disposable cash of consumers. Unemployment Rate

  • A high unemployment rate is also unadvisable as it dissolves dispensable income of consumers, and will harm Butler Lumber Co ’s position.
  • The high unemployment rate will lead to lower sales for Butler Lumber Co and impact its overall profitability and revenues. How can the Butler Lumber Co decrease the risk of economic instability?

  • Butler Lumber Co can work towards building economies of scale
  • Maintaining business costs and controlling the final price of the product can also help Butler Lumber Co fight economic instability
  • Butler Lumber Co can also work towards building a sustainably managed workforce

3.1.3. Social

Social influences will stem from social components of the macro environment. Under the PESTEL Analysis, they can influence Butler Lumber Co in several ways: Social patterns and consumer behaviour

  • Social patterns affect work trends and patterns and are directly related to the behaviours of consumers.
  • Social patterns also have a direct influence on buyer tastes and inclinations, and the specific kind, structure, and volume of interest for an item or service. Social patterns and changing consumer needs

  • The checking of social patterns will enable Butler Lumber Co to reposition its items or administrations to meet the changing desires and needs of consumers. Social trends in education

  • Social trends of higher education have allowed firms like Butler Lumber Co to have access to a pool of higher skilled talent – but at the same time, also face a more criticising consumer base.
  • Higher education has also made consumers more aware of different product offerings by companies like Butler Lumber Co.
  • consumers are also more educated and knowledgeable of different substitutes of a product, as well as become more readily available at different touchpoints. Social patterns make companies more consumer-centric

  • Companies like Butler Lumber Co are expected to become more consumer-centric than product-centric.
  • Similarly, Market segmentation and consumer grouping are dynamically moving towards measures of psychographics and lifestyles to understand the consumer more. How can Butler Lumber Co use social aspects for growth?

  • Use consumer-centric means of segmentation and targeting.
  • Use consumer-oriented and consumer-based marketing – which use emotional appeals to influence consumers.
  • Make products more accessible at different touch points common to target consumers socially.

3.1.4. Technological

The technological factors can influence Butler Lumber Co in several ways: Innovation

  • The quick pace of technological change at Butler Lumber Co may be driven through innovation.
  • Business leadership at Butler Lumber Co tries to push the limits of present limitations. The advent of the internet and online retailing

  • The expansion of the Internet and online business has discarded many intermediaries. Butler Lumber Co can communicate and retail directly to the consumers now, or through modern intermediaries such as eBay as well, for example.
  • Butler Lumber Co may also use current social networks to retail and use e-commerce to boost sales. Social media and business growth

  • Butler Lumber Co can make use of social media to interact and reach with consumers
  • Social media can also be used to reach the target market audience more effectively
  • Social media is cost-effective and strategically more influential for Butler Lumber Co Improved value chain network

  • For Butler Lumber Co, technological innovation can be utilised to build on competitive advantage through several different ways.
  • Butler Lumber Co can incorporate less expensive production, improved access to clients, improved marketing, improvement in product quality, and increased levels of business intelligence than the competition. Managing technology and the future for Butler Lumber Co

  • To flourish in a business world that is quick paced and receptive to innovative change, Butler Lumber Co must stay cautious.
  • It must be always be updated on any technological developments in the business and industry.
  • Butler Lumber Co should weary of how the company are probably going to influence its future attractiveness and profitability.

3.1.5. Environmental

For Butler Lumber Co, the environmental aspects of the PESTEL analysis may include: Environmental stability and business standards

  • Butler Lumber Co may be expected to incorporate maintainability standards into their business methodologies and to help resource allocation choices.
  • Butler Lumber Co may also be subject to environmental laws – which will impact and guide its operations to become more environmentally friendly. Environmental stability and budget allocation

  • Leadership in the Butler Lumber Co must measure the connection between natural activities and budgetary execution.
  • Butler Lumber Co also strategically decides and assesses if the organization have been estimating the monetary effect of natural and social activities. Environmental sustainability

  • Butler Lumber Co also distinguishes and differentiates explicit zones of concern and impediments to the coordination of environmental sustainability into corporate performance and strategy
  • Butler Lumber Co also gives explicit direction concerning how organizations can push toward a superior reconciliation of ecological and social activities in their basic leadership procedures and tasks. Environmental sustainability and business growth

  • Butler Lumber Co may use environmental issues to adjust financial, natural and social performance.
  • Concerns towards the environment will enhance the business image for Butler Lumber Co.
  • Environmental sustainability within business goals and strategy will also reflect corporate responsibility on the part of Butler Lumber Co. Environmental sustainability and improved consumer relations

  • Consumers will be more inclined towards the use of environmentally sustainable products.
  • Environmental sustainability in operations works towards improving the bottom line and overall profitability for the business of Butler Lumber Co.
  • Improvement of cost management and operations will be observed in the business as well.

3.1.6. Legal

Legal components can influence Butler Lumber Co directly, and can likewise influence the instruments through which an organization buys its stock or connects with the client. The Butler Lumber Co should be mindful, for example, of the following legal aspects: Labour law

  • Labour law refers to the guidelines in regulations that set up minimum and benchmark conditions.
  • These include identifying with the work of people.
  • Labour laws include aspects of minimum working age, least time-based compensation, etc.
  • Butler Lumber Co must be mindful of these laws in routine business tasks such as hiring, for example. Discrimination law

  • Under the discrimination law, Butler Lumber Co must ensure to avoid episodes of unequal or uncalled for treatment based on an individual's age, inability, sex, national source, race, religion, and sexual orientation.
  • Unequal hiring
  • Discrimination in recruitment
  • Internal discrimination in talent management
  • Bias in training opportunities
  • Unfair compensation systems
  • Prejudiced promotions and succession management Health and safety laws:

  • Under this, Butler Lumber Co is required to give a protected work environment to their workers.
  • Working environment security and wellbeing laws build up guidelines intended to dispense with individual wounds and injuries from happening in the work environment.
  • all operations of Butler Lumber Co should be designed to physically and emotionally safeguard and protect the employees and the labour force employed

3.2. Porter’s five forces

  • The five forces identified in Porter's model can effect Butler Lumber Co ’s ability to serve its clients and make a profit.
  • A change in any of the five forces may regularly require a business unit from Butler Lumber Co to reassess the market place given the general change in industry data and dynamics. The general industry appeal and attractiveness.
  • Butler Lumber Co should apply and centre their skills, plan of action or business models to accomplish profits above the business average. This may be done in multiple ways, each distinguished in their application to the forces individually as is elaborated below:

3.2.1. The threat of new entrants market and industry share.

  • New entrants to an industry bring new potential and a choice to increase the market share and overall share of the pie that puts pressure on price, costs, and the investment price essential to compete.
  • For Butler Lumber Co, particularly while new entrants are diversifying from different markets into the chief industry, they will be able to leverage existing talents and cash flows to shake up the opposition. Limitation on earning expectation and capability of firms in an industry

  • The threat of entry in the industry, consequently, puts a cap at the earning capacity and profit capability for Butler Lumber Co.
  • While the threat of new entreaty is high, Butler Lumber Co should maintain their prices or increase funding and investment to discourage new competition. The risk to new entrants because of high entry barriers

  • The risk of entry in an industry depends upon on the peak of entry barriers and limitations that are a blessing for players such as Butler Lumber Co and on the response that new entrants can count on from existing players.
  • If entry barriers are low and novices count on little retaliation from the entrenched competition, the chance of entry is high, and profitability for Butler Lumber Co will be moderated.
  • It is the danger of entry, not whether the entry of new players takes place that holds down profitability. Some barriers to entry for new entrants in favour of Butler Lumber Co :

  • Capital requirements: a strong barrier to entry as new entrants will require strong financial and resource cushioning for operations to take off and be sustained.
  • Economies of scale: a strong barrier to entry as existing players in the industry operate with high economies of scale, which new entrants will take time to achieve.
  • Product differentiation: the strong barrier of entry if products within the industry have high levels of differentiation on which they operate and approach customers.
  • Access to distribution: a standard barrier to entry since new entrants will have equal access to the retailers and distributing agents within the industry.
  • Customer loyalty to established brands: a strong barrier to entry since customer loyalties and perceptions are emotionally built and strongly enforced as long as the brand continues to deliver on its core promise and quality. What can Butler Lumber Co do to face this challenge?

  • Build and invest in marketing to distinctly establish a point of differentiation in customer perception as well as strengthen customer loyalty.
  • Invest in research and development to make sure that it continues to have competitive differentiation from other players at all times.
  • Focus on building economies of scale in production and sales.

3.2.2. The threat of substitute products or services substitute form.

  • There are always different alternatives or substitutes for various products that lead an industry.
  • These substitutes may be direct or indirect– the direct substitutes are the same category products. produced by different players; indirect substitutes are the ones from different product categories that can replace the product for Butler Lumber Co. Switching cost to substitutes for consumers

  • Switching costs for direct substitutes is not very high for consumers.
  • The per-unit-volume prices may be higher or lower.
  • This makes the threat of substitute high. Substitute and product benefit

  • Alternatives to the product or substitutes may not be able to provide the same benefits
  • May often lead to additional costs incurred.
  • Switching costs towards alternatives becomes higher, and consumers may not switch to substitutes.
  • This, in turn, will make the threat of substitutes low. Substitutes and consumer behaviour

  • From the point of view of the consumer, there are some differences between the ways different products of the same or similar category are used, but many consumption decisions are a matter of personal taste - this makes products vulnerable to the threat of other substitutes.
  • Overall, the threat of substitutes is assessed to be moderately high. How can Butler Lumber Co combat the threat from substitute products?

  • Focus on delivering consistently high quality.
  • Focus on maintaining strong consumer relationships.
  • Integrate strategic marketing to form an emotional connection with the consumers and strengthen consumer loyalty.
  • Invest in pop up stores owned by the company to stock the Butler Lumber Co brand exclusively, and integrate it with brand characteristics and personality to attract consumers.

3.2.3. Bargaining Power of Buyers who is the buyer.

  • The buyer for Butler Lumber Co is not necessarily the group that consumes the product – but rather refers to the group of customers that purchases the product from Butler Lumber Co to either distribute further, retail it, or even consume it.
  • Hypermarkets and supermarkets, as well as independent retailers and distribution agents to end consumers, are the core buyers for Butler Lumber Co that make up the market’s volume.
  • Supermarkets and hypermarkets, along with many food chains that are concentrated, which increases the buyer power.
  • Products are stocked with buyers and retailers by Butler Lumber Co based on consumer demand. Buyer power and costs

  • Butler Lumber Co will not experience switching costs for switching buyers.
  • Multiple product offerings by buyers also increase buyer power. Retail product differentiation

  • Products offered by retailers are differentiated based on several characteristics – not only reliant upon product characteristics but also consumer segment characteristics. Because of this, retailers are expected to offer a wide range of the same product category. This works towards negating and weakening the overall buyer power.
  • Buyer power is assessed to be moderate to high. What can Butler Lumber Co do to ensure risks against high buyer power?

  • Butler Lumber Co can focus on differentiating its product and increasing its demand with the end consumers through different marketing tactics, this will increase the demand of the product with different buyers, and will work towards moderating buyer power.
  • Butler Lumber Co should employ economies of scale to manage costs of production. If it offers products at moderate prices to buyers, it will again be able to attract a large number of buyers for its product, and in this way, will be able to break off the high bargaining power.

3.2.4. Bargaining Power of Suppliers who is the supplier.

  • Supplier power refers to the power that is held by the suppliers in terms of pricing of the raw materials and inputs used for the business. Sources of production for Butler Lumber Co

  • The main sources for production are the following:
  • Supplies from vendors – sourcing from independent suppliers.
  • Own manufactured equipment and resources: this model is practised by companies that are well integrated backwards and forwards. Independent suppliers

  • For Butler Lumber Co, there are numerous independent suppliers within the industry, and all comprise of a few pretty small operations that lead to weakened overall supplier power.
  • Independent sellers and suppliers, however, can locate different opportunities and invest in alternative markets – which can be a challenge for Butler Lumber Co. Supply quality and business dynamics

  • Suppliers can integrate forward into the decision making and business dynamics themselves as well.
  • Also, to the buyers, the quality of the supplies and the raw materials is of utmost importance.
  • However, in an industry with a high number of suppliers, Butler Lumber Co can switch to different suppliers at any time without experiencing any costs of the business.
  • Overall bargaining power of suppliers is assessed to be moderate. How can Butler Lumber Co deal with the challenge?

  • Get contracts with multiple suppliers and get resources and raw materials from them accordingly.
  • Invest in manufacturer controlled production facility to maintain consistency in quality.

3.2.5. Competitive Rivalry among Existing Firms. nature of fragmentation.

  • The market is highly fragmented, which makes it more competitive.
  • The market is never too concentrated, and as a result, it has players of varying size of operation – from very small to big players. Brand management

  • Producers have begun to make use of brand management techniques and contemporary merchandising by launching bold brands, label designs and marketing campaigns to become more identifiable to the public. Diversification

  • Purchasers and buyers have a wide range of products to choose from, with relatively low switching costs. These factors tend to intensify rivalry.
  • Though players in the industry may off niche or premium products, they also continue to operate in the mass markets at large, which again leads to high competition. High business costs

  • The high fixed cost and the high bargaining power of the buyers, which can lead to the lowering of the prices from manufacturers add to the highly competitive nature of the industry.
  • The overall rivalry is assessed to be high. How can Butler Lumber Co combat rivalry and competitive forces of the industry?

  • Focus on research and development to identify market niche as well as to be able to add differentiating factors t its products. This will increase its shield against influence from competitive forces and their actions.
  • Build a strong and loyal consumer base by focusing on quality and marketing strategies.
  • Focus on capturing new markets – in the same region as well as new regions to avoid saturation of resources in one market only.

3.3. Pentagonal analysis

3.3.1. the threat of new entrants, restriction into industry.

  • The ease of entry into the industry is restricted.
  • There are high barriers to entry.
  • These are government policies, consumer loyalty, brand differentiation etc. Switching costs for consumers

  • The high number of direct and indirect alternatives available also make Butler Lumber Co vulnerable to the high threat of substitutes.
  • Low to negligible switching costs experienced on the part of the consumers and buyers. Profitability

  • New entrants are attracted to the industry because of high profitability.
  • If there are high barriers to industry, the industry will continue to maintain high profitability
  • Low barriers to entry will result in a lower average of industry profits.
  • Lower entry barriers will also lead to higher operational costs because it will increase the intensity of competition within the industry.

3.3.2. The threat of substitute products/services increased competition.

  • High threat of substitutes.
  • This is because of higher competition.
  • The higher competition leads to imitation of products and systems.
  • This imitation makes substitute products similar to each other – as much as possible. The offering of similar benefits

  • Consumers readily adopt alternative and substitute products.
  • They offer similar benefits.
  • They have similar functional benefits and features. Low costs of switching

  • Consumers often experience a low cost of switching between substitute products.
  • Low switching costs are also developed because competition often produces at lower operational costs.
  • Low switching cost results in lower overall product prices for the consumer.
  • Industry players, therefore, also start competing on aspects of price.

3.3.3. Bargaining power of buyers market fragmentation.

  • The industry in which Butler Lumber Co operates is highly fragmented.
  • It has numerous local and international players.
  • It is not very likely for players in the industry to integrate forward into on-trade or retail businesses.
  • This results in the players experiencing high bargaining power of the buyers from the market. The concentration of retailing agents

  • It also results in a high concentration of individual retailing agents.
  • Retailing is also done through hypermarkets and supermarkets.

3.3.4. Bargaining power of suppliers backward integration by producers.

  • Backward integration from producers is more commonly observed and seen,
  • Many players in the industry have their own production facilities for raw materials as well.
  • The industry has seen a large number of players needing to outsource resources and raw materials. Outsourcing raw materials

  • This outsourcing is done by third-party manufacturers.
  • A large number of suppliers present lowers the bargaining power of suppliers.
  • Players in the industry have low switching costs between suppliers.
  • Suppliers usually are contracted by producers.
  • Producers may change suppliers frequently.

3.3.5. Industry rivalry intensity of competition.

  • There are strong competition and rivalry in the industry.
  • There is a high number of players.
  • All players provide similar products.
  • Switching costs for consumers is low, which increases competition. Differentiation

  • Platers try to differentiate products on different aspects.
  • Functional aspects and appeals for all products across the industry remain the same.
  • Competitors and players use emotional appeals, and modern brand management techniques for differentiation.
  • Industry players try to gain consumer loyalty by developing strong emotional bonds and ties.

Figure 1 Pentagonal analysis for Butler Lumber Co

3.4. Placement of the business along the industry life cycle

3.4.1. identifying where butler lumber co is on the industry life cycle curve.

Identification of the place and placement on the industry lifecycle is important as it will help Butler Lumber Co make important decisions and strategies for the future. Strategic decision making

  • Expansionary plans and investment decisions.
  • Decide on various marketing strategies and tactics for targeting different consumer segments to establish and establish the product.
  • Selection of new geographic regions for expansion and exploration of new consumer bases. Budget allocation

  • Resources and alternative routes for future growth and establishment.
  • Exploration of different diversification options.

Figure 2 PLC Placement along the Industry Lifecycle curve

3.4.2. Introductory stage firm strength.

  • The industry is in the infancy stage.
  • Firms are generally small, entrepreneurial and compact during this stage.
  • Butler Lumber Co will be focused on research and development during this phase. Financial Position

  • Looking for investment and funds for growth. Nature of product

  • Products offered during this stage re doubtful as success and life of the product is unproven and not known.
  • Butler Lumber Co will use a focused strategy during this phase to emphasise the uniqueness of the product.
  • The product or the brand will have a small market of consumers – known largely as early adopters
  • Marketing strategies adopted by the company will focus on generating awareness of the product and therefore, will largely use a functional appeal.

3.4.3. Growth stage financial position.

  • Butler Lumber Co will require high capital during this stage.
  • Butler Lumber Co will need investment and funds for launching strategic marketing campaigns.
  • Funds will also be required for fuelling physical growth of the company in the form of investment in equipment and property to facilitate growth. Growth factors

  • Companies may increasingly encourage economies of scale because of standardisation experienced during this stage.
  • Consumer feedback from the introductory phase will be incorporated, and research and development will be conducted to make appropriate changes in the product design and offering.
  • Success in this stage for Butler Lumber Co will lead to growing demand, which in turn will fuel sales demand. Nature of Product

  • Products in this stage have high growth and high market share.
  • There is also increasing competition and rivalry in the market – new entrants will enter and compete looking at the success of products during this stage.

3.4.4. Maturity stage sales and growth.

  • Butler Lumber Co will experience slowing growth during this stage of the industry life cycle.
  • Sales will be expanding, and earning will be growing – however, the rate will be slower than the growth stage.
  • Competition from late entrants will be present, and obvious during this stage – who will all try to fight for Butler Lumber Co ’s share of the market. Strategic Marketing

  • The marketing strategies must now focus on building loyalty.
  • Marketing tactics must be strong and should focus on the uniqueness of the product. Increasingly emotional appeals may be used. Firm size

  • Firm size is generally larger and is more dominant over players if successful- compared to growth stage.
  • Innovations continue but are stable and not radical.

3.4.5. Decline stage industry changes.

  • New technological changes and upgrades may make an industry obsolete.
  • Players within an industry may also fall back and lose on market share if they do not keep up with innovations, and investment in research and development. Sales and Competition

  • Sales during this phase are decreasing at a high rate.
  • Competing players also exit the industry because of the changes and low demand. Surviving in the decline cycle

  • Butler Lumber Co may also experience mergers and acquisitions during this phase.
  • Diversifications are also most common during this phase as a means of survival.

3.5. Strategic Group Analysis

3.5.1. butler lumber co and strategic group formation.

  • The strategic group analysis will look at an industry’s players' situations in focused conditions and scenarios.
  • It will assess different players competing with Butler Lumber Co through the basic strategic factors that will decide an organization's profitability, similar to how the profitability will also be impacted and influenced by the competitive nature of the industry.
  • The strategic group analysis will describe the procedures of every single noteworthy competitor of Butler Lumber Co along different strategic dimensions.
  • These dimensions of comparison differentiate players into strategic groupings and must be selected as the basis of comparison by taking into account industry structure, productivity factors, and the venture issues being tended to.

3.5.2. Different aspects of strategic grouping

Key strategic groupings of players within an industry can be made based on numerous different aspects, such as:

  • Specialization
  • Brand identification
  • Push versus pull strategies
  • Channel determination
  • Product quality
  • Technological position
  • Vertical joining
  • cost position
  • Price strategy
  • Financial or working influence
  • Parent organization relationship
  • Government relationship

Despite the various aspects available for comparison of competing players, it is often important to differentiate strategic groupings of players of aspects of how they compete with each other, and on aspects of where they compete as well

3.5.3. Procedure for strategic group analysis for Butler Lumber Co

  • Collect results of the player’s analysis.
  • Distinguish the players and pick the most important aspects that separate the players into strategic groups comparing to the issues being tended to.
  • Dimensions may include price strategy and product quality.
  • Group the players: position Butler Lumber Co and rivals along with the matrix.
  • Evaluate group mobility and direction. Assess the key purpose of individual organizations competing with Butler Lumber Co, similar to assessing industry patterns and barriers to entry/exit to be able to decide potential developments inside and between groupings.

3.5.4. How will strategic group planning help Butler Lumber Co

For Butler Lumber Co, strategic group analysis is important because it will: Strategic industry dynamics

  • Help in reviewing the strategic dynamics and shifts in the industry.
  • Identify the closest competition and competing players for the business; help in assessing the strategic direction of these competing players; and lastly, aid in developing strategies to stay ahead of the competition. Assessment of market position

  • The strategic group analysis is also important for Butler Lumber Co because it will assist in analysing the current market position of players, as well as help in assessing future strategic moves and directions of the competition in the market.
  • Assists in evaluating and identifying different underlying factors that will influence the company’s profitability.
  • Makes use of standard comparison aspects between different players in an industry to group them as per strategic directions as well as strategic dimensions. Identification of barriers to entry in an industry

  • Different strategic dimensions along the matrix of strategic groupings are often characterized by barriers to entry and exit along the strategic groups’ dimensions, as well as by mobility barriers.
  • These barriers make it difficult for companies to move along, and in between different strategic dimensions – often forcing it to stay in place with the same competition.

3.6. Scenario planning

Scenario planning for Butler Lumber Co ’s strategic direction will take form through speculation and contingency form – methods used by the military for strategic planning and direction.

3.6.1. Butler Lumber Co ’s Utilization of Scenario planning

For Butler Lumber Co, scenario planning comprises of making suppositions of what's to come, of what will be and how the business condition will adapt, fluctuate, change, and respond to the future conditions, and changes in the futuristic strategic planning. Identify the driving forces of the business:

  • Changes in the macro environment
  • Changes in technology
  • Changes in the economic trade system
  • Changes in production methods
  • Changes in consumer demands and tastes
  • changes in technology and economy Identify basic vulnerabilities:

  • Changes in technological advancements and developments. These changes can be in the form that the industry has progressed to install more modern and contemporary technological developments.
  • Changes in consumer demands and needs.
  • These two uncertainties of the future are those that will have the largest impact and influence on the business. Develop a scope of conceivable situations:

  • Butler Lumber Co will now be able to place these two uncertainties along a matrix.
  • Install new technology, or update current technology to be on par with new technology.
  • Do market research.
  • Engage in innovative marketing to influence consumers.
  • Change vertical and backward integrated systems to ensure in-house or out-house production of technology to stay ahead of the competition. Discuss the suggestions:

  • Each scenario should be discussed in detail.
  • Possible strategic direction and responses for each scenario should be developed.
  • Realignment of business goals and direction, as well as a mission during each scenario, should also be done to ensure future resilience.


  • This inner analysis and assessment of Butler Lumber Co decide the centre skills based on the resource based view (RBV) of the premium company.
  • Utilizing its core capabilities and capacities, Butler Lumber Co can maintain a competitive distinction, and leadership over other local as well as international players in the industry.
  • In the VRIN analysis and assessment, Butler Lumber Co makes use of its core capacities to strengthen its worth and the to continue to deliver the promise of consistent quality and taste to consumers – as well as guarantee futuristic and long term gains in the industry.

The following section presents a brief analysis of the VRIN strategic tool as it is applied to Butler Lumber Co and its impact on the strategic direction.

4.1. VRIN analysis

4.1.1. valuable, international distribution network.

The company has an international distribution system with agents and contracts in countries across the world. This helps the company in making sure that its products are widely available and easily accessible to all consumers. Experience in expansion to other countries

The experience of expansion to other countries directly as well as indirectly has allowed the company to gain exposure and experience in international business, culture and trades. Marketing skills

The company has a unique blend of marketing skills, which allows it to reach consumers directly through various channels, in a creative way. This is a valuable resource for the company as it allows the company to ward off potential competition. Market research

The company invests in market research regularly, which allows it to stay updated with market trends, consumer needs, demands, as well as the changes that take place in different markets and consumer groups. This is also valuable as it then allows Butler Lumber Co to make changes in product and service offering accordingly.

4.1.2. Rare use of progressive technology.

The company makes use of progressive technology and invests in new technology to help it make the business more effective and efficient. This is important for maintaining competitive differentiation. The technology used by the company also allows lower chances of human error and increases precision. Use of progressive harvesting methods

The company makes use of modern as well as new and innovative means of cropping and harvesting as well. The means of production are important for a business to maintain cost efficiency. This allows lower levels of spoilt raw materials and enhances the quality as well as the feel of the final product. Also, it allows the company to maintain the product quality in-house, and maintain consistency in the raw material. Efficient use of economies of scale in production

The company’s effective and efficient use of resources has allowed it to maintain economies of scale. The company uses economies of scale as a rare resource available to maintain costs, enhance production, and increase sales – all the while maintaining a high focus on premium quality and consistency of taste. The uniqueness of product portfolio

The company has a unique and diversified portfolio. This has allowed it to penetrate different consumer groups. And maintain income from different streams. Into urn, that gives a strong financial cushioning to the business.

4.1.3. Inimitable human resource management.

The company has taken part in exemplified human resource management in all its function – from recruitment to training of talent management. This has allowed the company to develop an inimitable resource that is aligned with the organizational goals, and mission, and which is synonymous to the organization itself. R&d - new product development

The company’s continued investment in r&d allows it to generate ideas for new products, as well as test these new products in limited market settings. This allows the company to assess the viability of new ideas, as well as generate feedback for improvement where needed. This is an inimitable resource for the company because it has become part of the company’s system and culture. Innovation

The innovation at Butler Lumber Co is an inimitable resource that allows the company to stay ahead of the competition as well as maintain high leadership in the industry by having the first mover advantage in its product portfolio continuously. Organizational culture

The organizational culture at Butler Lumber Co is supportive and innovative. Employees share information freely. The organizational hierarchy is flatter, which makes leadership and follower relation smooth and easy. This organizational culture and its aspects cannot be imitated by competition. Cost control

The company has employed progressive means of controlling costs and maintaining economies of scale. In this way, prices of the products are maintained and controlled, and very few cost increases are passed to the consumers. This allows the product to be easily affordable by the company’s target audience.

4.1.4. Non-substitutable brand recognition.

The brand value and brand recognition enjoyed by Butler Lumber Co is a non-substitutable resource. The high brand recognition across different consumer group’s in different countries allows the brand to enjoy high consumer ship, high sales, and a unique bond with the consumers. This cannot be imitated at all by the competition as the brand recognition and resonance has been built over the years through hard work and quality deliverance. Brand equity

The Butler Lumber Co enjoys high brand equity. This has been developed through the different stages presented by Keller in his model for brand equity. The high brand equity also reflects a high emotional appeal that Butler Lumber Co has for the consumers. Emotional affiliation with consumers

This means that the brand fulfils not only functional but also emotional and psychological needs of the consumers. Again, this is an inimitable resource which the company has developed because of its honest and trusted relationship with the clients over some time.


4.2.1. strong global presence, valuable.

Having a strong worldwide presence is significantly valuable for an organization attempting to expand its size, deals, and piece of the overall industry. It is a competitive and sustainable method to acquire incomes from new and existing buyers. Rare

Butler Lumber Co is one of the greatest company all inclusive. Even though there are other worldwide and international chains of competing companies, Butler Lumber Co has made a distinct name for its quality and offers. Non-substitutable

For the time being, no competition of Butler Lumber Co could match such an enormous international presence in terms of quality and consistency. It would require critical investment and assets to achieve this. Organized to exploit

Butler Lumber Co is effectively exploiting this capacity.

4.2.2. Claim to premium products valuable.

Butler Lumber Co offers numerous exceptional and fulfilling products that different contenders don't offer all the time. Butler Lumber Co additionally incorporates information and detailed ingredients for its products to interest an assortment of clients. Rare

Other competition also offers different products that are offered by Butler Lumber Co, which means that it is not a rare resource for the company. This is because other players also have access to similar products and portfolios. Inimitable

Considering other businesses and players are now using this capacity as a means of expansion and penetration, it can, therefore, be imitated. Organized out to exploit

By offering an assortment of choices and ceaselessly changing the portfolio through active innovation and new product development, Butler Lumber Co is exploiting this resource. With plenty of alternatives, the vast majority can discover something they like, and individuals who like to attempt new products and services every now and again can undoubtedly do as such with Butler Lumber Co.

4.2.3. Upscale brand name valuable.

The Butler Lumber Co brand name enables clients to enjoy and feel a bond of association with the brand. This allows consumers to feel emotionally attached with the brand, and experience it as an extension of themselves as well. As such, this becomes a valuable asset for the company. Rare

Butler Lumber Co is a contemporary brand name that has a premium touch to it and is upscale, modern and lively. Most other companies and competing brands don't have the quality and packaging to urge clients to engage in a way they do with Butler Lumber Co . Non-substitutable

It would be generally simple for other companies to revamp their packaging and duplicate the plan of action of Butler Lumber Co. In this way, the upscale and comfortable promise of the offering by Butler Lumber Co could be imitated. Organized out to exploit

Butler Lumber Co is effectively using this resource and enhancing the brand and the brand promise that numerous clients altogether appreciate. The organization is exploiting the stylish way of life that is right now present in numerous urban communities where the brand’s products are widely appreciated and consumed.

4.3. Porter’s value chain

4.3.1. butler lumber co: drawing value from vrin/vrio.

  • The core competencies and strengths of Butler Lumber Co are organizational sources and capacities that enable the business to flourish regardless of substantial challenge and strategic difficulties in local and international markets.
  • As the VRIO/VRIN analysis have shown and highlighted, the important core abilities depend on intellectual properties and related propriety data or related technological structures.
  • Different resources and abilities appeared in the VRIN/VRIO analysis and review that are non-core, and non-central skills but that help the business and its value chain.
  • Butler Lumber Co ’s core abilities are strong yet restricted.
  • In the resource based view, this constraint presents key difficulties, as the organization wards off competing players from local and international markets.
  • The core capabilities in the VRIN/VRIO analysis assume critical jobs in Butler Lumber Co ’s value chain. Considering the resource based view and Michael E. Doorman's value chain conceptualization, Butler Lumber Co ’s value chain gives reasonable and tasteful products to target buyers.
  • The accompanying outline shows the value chain for Butler Lumber Co and its situation in the bigger value arrangement of the industry:

Figure 3 Value chain for Butler Lumber Co

4.3.2. Value framework

Butler Lumber Co ’s value chain is a segment of the business' value framework. The value framework is made out of different other value chains of the speciality units of all associations included, for example, the organization's producers and the remainder of the inventory network. In the value chain representation, Butler Lumber Co works directly, as well as through contracted third parties.

4.3.3. Example from value framework for Butler Lumber Co

  • The organization has an internal transportation system of vehicles for making deliveries to other companies that are in business with stocking and serving Butler Lumber Co products – in the local markets.
  • In this value chain and value framework, Butler Lumber Co ’s competitive advantage and abilities are distinguished through the VRIO/VRIN assessment are huge in how the organization's procedures offer some incentive and advantage to the consumers.

4.3.4. Value chain activities

Brief details of Butler Lumber Co ’s value chain are discussed in the next section: Primary activities inbound logistics.

The inbound logistics for Butler Lumber Co refers to producers in different designated and appointed locations by the company. Also, it also refers to selecting the finest quality raw materials from in-house production as well as from third-party contractors. These are transported to the storage sites after which the raw materials are used for producing different products by the company. Operations

Butler Lumber Co operates internationally directly or indirectly. The company has owned offshore shops, as well as stocks its products with other shops across different countries. Outbound logistics

The company has contracted agents in offshore countries and sites to manage product selling. However, a majority of the products are sold directly to licensed sellers and shops locally as well as internationally. Marketing and sales

Butler Lumber Co produces and invests in high quality and premium products. It also invests in a high level of customer servicing and marketing. All its marketing activities, however, are based on strong market research and market data. Service

Butler Lumber Co invests in customer service to develop customer loyalty and build strong relations with its clients. The company invests in gaining and incorporating customer feedback and in solving customer queries effectively. Support activities infrastructure.

This includes different departments like management, finance, legal, etc. which are required to keep the company’s business running. Human resource management

The company’s committed and trained workforce is considered to be a valuable and an inimitable resource that has played a vital role in the success and growth of Butler Lumber Co the employees of the company are motivated, professional, trained, and work alongside the company’s mission and goals. Technology development

Butler Lumber Co has been commended and celebrated for the use of effective technology not only production but also to make the overall system of production and sale, as well as in house production more effective and efficient. Also, the company also uses technology to communicate and connect with its consumers effectively. Procurement

This involves purchasing the raw material for the final product. The company has appointed agents that work for the company in different countries and regions to purchase consistently high quality raw material so that the company can produce the finest product qualities for delivering to the consumers. Bottom line

The concept of the value chain for Butler Lumber Co helps in understanding how value is added in each process and stage of the value chain. It also helps to understand and separate useful activities from those that are not useful as such. This improves the overall bottom-line of the company and increases the profit margins for the company as well. Virtual chain customer-centrism.

  • Renewed and enhanced way of engaging with consumers.
  • Installation of sophisticated consumer data management systems.
  • Made use of artificial intelligence to enhance the value chain. Improved technological use

  • Installed progressive technology for primary and support activities.
  • The overall purpose is to provide a better experience to consumers.
  • Allows the company to predict future market conditions, and prepare strategic contingencies accordingly.
  • Allows understanding of consumer behaviour and market movements. Generic strategies

  • Managed to establish core competitive strategy in the market.
  • Competes in the premium sector.
  • Does not engage in competition with other cost groups.
  • Worked towards improving the service of premium target groups.
  • Consumers understand and perceive the brand as a high quality and premium.
  • The brand is appreciated for its focused strategy and standing.
  • The brand is appreciated and engaged in for its offerings.


5.1. porter’s strategic options.

  • Leading organizations such as Butler Lumber Co have obtained sustainable competitive advantage and have had the option to achieve the strategic position.
  • There can be different sources of sustainable competitive advantage for Butler Lumber Co. A firm can depend on innovation to decrease its overall production costs and would then be able to pass this advantage on to its clients.
  • Butler Lumber Co can also concentrate on making a differentiated item or administration to increase its overall share of the pie.
  • Butler Lumber Co can generate considerable sustainable competitive advantage utilizing these systems. This is done through means of traditional as well as modern procedures embraced by Butler Lumber Co to competitive advantage hand and increase its share of the pie.

5.1.1. Differentiation strategy organizational leadership.

Butler Lumber Co has made use of the differentiation factor to maintain higher leadership and differentiation from industry competition. Differentiation of effective leadership may be achieved through different forms and basis. Broad product portfolio product quality.

Moreover, this differentiation can fluctuate from item to item, market to market and industry to industry. Generally, the essential bases of differentiation are quality, durability, usefulness and in a few consumer loyalty, and brand image. Butler Lumber Co has differentiated its items and products dependent on the quality and set a completely different, and engaging consumer experience. Brand image Brand Image

Aside from these things, it has developed a distinct and distinguished brand image which is additionally a premise of differentiation and encourages Butler Lumber Co to advertise, promote and market its products and brand better than the competing players in the local and international markets.

5.1.2. Focus strategy overall quality of product and service.

The essential premise of differentiation for Butler Lumber Co is quality and premium taste. It serves just premium quality products, which enables it to charge a top notch and a premium cost. It has embraced the most astounding measures as far as the nature of its raw materials used for producing its products. At each progression, Butler Lumber Co puts forth an admirable attempt to guarantee that its product fulfils the most noteworthy quality guidelines. Value addition at each step of the value chain

However, the account of value does not finish at getting incredible quality of raw materials. It goes more remote from that point. A great deal of contrast originates from the readiness. Butler Lumber Co prepares its product diligently to draw out the quality. Human resource management

Rest of the credit goes to the human resource and employees at Butler Lumber Co. The brand carefully picks its raw materials - just when they in ideal condition. Products are tested from each cluster in any event thrice before endorsement. This is how Butler Lumber Co makes the quality that each client looks forward to, and is excited about.

5.1.3. Leadership and differentiation through cost

Porter’s traditional methodologies are methods for increasing and developing a sustainable competitive advantage for Butler Lumber Co - as it was, building up the "edge" that will get the company the ideal position and differentiates it from the industry rivals. There are two primary methods for accomplishing this inside a cost leadership methodology:

  • Increasing profits by decreasing expenses, while charging industry-average prices and costs from consumers
  • Increasing share of the overall industry by charging lower costs, while at the same time making a sensible profit on every trade since Butler Lumber Co has controlled and reduced expenses.

The cost-based strategy and system are that – it includes Butler Lumber Co being the pioneer regarding cost in the industry and market where it operates. Just being among the most minimal cost producers isn't adequate, as the company leaves itself wide open to aggressive attacks by other producers and players in the industry. These players may undermine Butler Lumber Co ’s costs and in this way hinder the company’s endeavours towards the expansion of its share of the overall market pie. Achieving cost differentiation

Based on this, Butler Lumber Co should be sure that it can accomplish and keep up the leading position before deciding on choosing the cost leadership strategy. Butler Lumber Co will be able to become effective in accomplishing cost differentiation by having:

  • Access to the capital expected to put resources into innovation that will cut expenses down.
  • Very proficient coordination’s.
  • A minimal effort base (work, materials, offices), and a method for economically cutting expenses beneath those of different competing players. Achieving cost leadership

However, Butler Lumber Co should ensure contingency for imitation by competition, as well as be prepared for competing payers to imitate its cost-effectiveness strategy to decrease and control their costs, and increase the overall share of the pie for their products as well. It is therefore important that Butler Lumber Co does not only settle for one means of cost leadership but continually improves. This can be done through several different methods:

  • Engaging and applying the Japanese technique of kaizen
  • High efficiency
  • High limit use
  • Use of dealing capacity to arrange the least costs for generation inputs
  • Lean production techniques (for example JIT)
  • Effective creation process
  • Effective dissemination channels Overall Cost Effectiveness through Cost Leadership and Cost Differentiation

  • Cost differentiation and leadership strategy for Butler Lumber Co will be based on the nitty-gritty.
  • Cost initiative endeavours towards slicing expenses to a base to give clients lower costs and in this manner will help the company of Butler Lumber Co to reserve funds.
  • Cost leadership strategy requirements regularly identify with high specialized abilities and access to capital
  • The company should also resource into innovation and guarantee economies of scale.

5.2. SWOT Analysis

  • Butler Lumber Co maintains its competitiveness as one of the best and the most premium locally and internationally through inventive systems that use business strengths in overcoming the weaknesses present in the business inherently.
  • Also, they make use of these internal strengths and weaknesses to make use of opportunities and ward off potential threats, for example, the dangers in the business condition and market.
  • These factors can be distinguished, assessed, and analysed through the strategic SWOT tool.
  • The SWOT analysis and review for Butler Lumber Co talk about the strengths and weaknesses (internal core strategic components) intrinsic in tasks in the business, and for the Butler Lumber Co organization.
  • The assessment and analysis of SWOT likewise look at the opportunities and threats (external key variables) identified with the nature of competitiveness in the market and industry, which is mostly founded based on the level and intensity of competition and rivalry – as may be gauged through Porter's Five Forces analysis of Butler Lumber Co.

5.2.1. The need for SWOT because of expanded operations of Butler Lumber Co

  • Butler Lumber Co is present and operational in different markets, and each of the markets poses unique yet various difficulties in developing the business.
  • Butler Lumber Co and its portfolio in these many markets have expanded over time and as the organization grows, more items are added to its portfolio in addition to its pioneer product.
  • With regards to the SWOT analysis model, these circumstances of multiple operations and multiple presences in various markets make a difficult business situation where the organization needs to utilize various arrangements of skills that match different markets.
  • Core elements of different nature – both internal and external to the organization, can help increment Butler Lumber Co ’s accomplishment in contending with different companies and other businesses – both locally and internationally.
  • The SWOT analysis for Butler Lumber Co is presented below:

5.2.2. Butler Lumber Co Strengths (Internal Strategic Factors)

This section of the SWOT analysis model works with the inner variables that the organization can use as competencies and strengths to address shortcomings and ensure the business against rivalry. For this situation, Butler Lumber Co ‘primary qualities are: Strong brand image

  • Butler Lumber Co is one of the world's most premium, well known and most famous brands.
  • The organization has a developing populace of steadfast clients, which adds to the soundness of the business. International distribution network

  • In the SWOT analysis model, the global distribution network through directly owned subsidiaries, or contracts with third-party agents further strengths Butler Lumber Co by supporting activities.
  • For instance, the organization has a worldwide system of providers that are deliberately chosen dependent on criteria relating to quality, for example, of raw materials as has been discussed in the value chain - primary and supporting activities. Strong investment in research and development, and high focus on innovation

  • The focus on innovation not only keeps the company apart but also facilitates its industry leadership.
  • The internal core strengths and competent variables recognized in this section of the SWOT analysis of Butler Lumber Co demonstrates that the business has qualities that advance strength through expansion and a worldwide production network. Focus on market research

  • Additionally, the organization steadily expands its business
  • This is done through contracts with offshore agents and licenses. Also, the company continues to broaden its portfolio by adding new products based on market research and consumer data.

5.2.3. Butler Lumber Co Weaknesses (Internal Strategic Factors)

Business weaknesses or shortcomings are recognized in this part of the SWOT analysis. Shortcomings are inward factors that diminish or cut off business capabilities and strengths. Butler Lumber Co shortcomings are as per the following: Premium prices for most portfolio products

  • Butler Lumber Co has a premium brand image attached, and thus all its products in the portfolio are priced highly
  • This expands overall revenues yet decrease the affordability of its items.
  • This internal key factor is a shortcoming since it confines the organization's share of the overall industry, particularly in territories with generally lower disposable earnings Standard and benchmarked regulations and business procedures for all portfolio items generalization.

  • Likewise, this SWOT analysis highlights that generalized standards for all portfolio products may be a weakness because it restrains the adaptability of these products and items in the business. Imitability

  • What's more, numerous Butler Lumber Co items are imitable.
  • Several items in the portfolio have been imitated by completion, and are also being provided by them at different price points.
  • Though the quality is unique to Butler Lumber Co, the competing players have also developed close enough, and acceptable products.
  • This business condition engages competition, as has been highlighted already. Fighting the challenge of imitation

  • The internal factors in this section of the SWOT analysis of Butler Lumber Co demonstrate that the business must create qualities to diminish the unfavourable impacts of impersonation and the impact of high value focuses on the organization's share of the overall industry in the international and local business.

5.2.4. Opportunities for Butler Lumber Co(External Strategic Factors)

This section of the SWOT analysis and strategic model focuses on external components that opportunities for business development and advancement. For this situation, the key opportunities accessible to Butler Lumber Co are: Green business products

  • With an increased focus and awareness of health and wellness lifestyles by consumers, it is important that Butler Lumber Co recognizes this as a viable business opportunity.
  • Increased numbers of consumers are shifting to the green lifestyle of consuming environmentally friendly and organic products.
  • Butler Lumber Co should focus on the expansion of the product portfolio: inclusion of green products and environmentally sustainable services are suggested. Expansion in emerging markets

  • Butler Lumber Co can expand its income streams through expansion and developing presence in emerging markets – such as Brazil, China and India.
  • This opportunity draws consideration far from the U.S. region, where the majority of the organization's incomes are created. Business enhancement

  • Likewise noteworthy in this SWOT analysis of opportunities is the opportunity of business enhancement and further business development.
  • This can help improve the long term position of Butler Lumber Co.
  • For instance, through higher diversification of the portfolio and the overall business, the Butler Lumber Co organization can diminish its reliance on its present enterprises, and along these lines work towards improving its general income development. Partnerships with different firms diversification through partnerships.

  • Diversification is right now a minor strategy as can be observed from Butler Lumber Co ’s competitive strategy and its overall directive strategy as well.
  • The business environments likewise display the chance to enhance the organization's competencies and strengths
  • This will also increase its share of the overall industry through the association’s s with different firms. For example, a partnership with real retailers improves dispersion. Development of corporate clientele

  • The company can also formulate new B2B relations and contracts with other companies and corporate entities.
  • The external key factors in this section of the SWOT analysis demonstrate that Butler Lumber Co can improve its industry position by building up its activities to make use of the opportunities in the international business markets.

5.2.5. Threats facing Butler Lumber Co(External Strategic Factors)

Threats against the Butler Lumber Co business are distinguished in this piece of the SWOT analysis. Threats are external components that decrease or breaking point of business execution. In this case of Butler Lumber Co, the following section looks at, and assesses threats that apply to the organization in question: Price wars by competition

  • Butler Lumber Co competes with a wide assortment of firms in the local as well as the international market.
  • For instance, the organization competes against significant premium companies as well as against cheaper companies that offer cheap priced items and products.
  • This external but important factor in the SWOT assessment undermines Butler Lumber Co because such competing players can lessen the organization's share of the overall industry by competing based on low prices and overall low costs of production. Increased competition

  • Additionally, this SWOT assessment also analyses increased competition as a noteworthy threat against the business.
  • In light of the organization's shortcomings, the risk of imitation includes firms that attempt to duplicate the taste, look and feel of Butler Lumber Co items.
  • Saturated market place and industry can also lower sales of the organization and shrink its share of the overall pie
  • Increased competition can also lead to the increased cost of doing business for the organization if they bring innovative processes, and implement novice systems to control costs Independent players

  • The industry environment and profitability are liable to invite independent developments, and small-scale players.
  • These players may not have high levels of integration and may be retailers and marketers for items produced during backward integration.
  • Strategic marketing techniques and promotional communications are expected to neutralize the impacts of these patterns.
  • This section of the SWOT analysis of Butler Lumber Corecognizes external key factors that force difficulties to international expansion and growth of the company as well as highlight market infiltration.

5.3. TOWS Matrix

TOWS analysis will allow Butler Lumber Co to identify and understand the strategic choices and future strategic options and directions available to the company. The TOWS matrix and analysis will help Butler Lumber Co to look at various possible future and long term situations, and ill force Butler Lumber Co to look at these options by questioning strategic directives such as:

  • How will Butler Lumber Co make the most of its strengths and core competencies?
  • How will Butler Lumber Co Circumvent its weaknesses and shortcomings?
  • How will Butler Lumber Co capitalize on the various opportunities present in the business environment?
  • How will Butler Lumber Co ward off, and manage the threats that are present in the external business environment?

The analysis of the SWOT and the subsequent assessment and development of the TOWS matrix will allow the Butler Lumber Co to be able to identify the following answers:

  • Strengths and Opportunities (SO) – How would Butler Lumber Co be able to utilize on its strengths to exploit the opportunities?
  • Strengths and Threats (ST) – How would Butler Lumber Co be able to exploit its strengths and core competencies to keep away from genuine and potential threats?
  • Weaknesses and Opportunities (WO) – How would Butler Lumber Co be able to capitalize on its opportunities to overcome the weaknesses that Butler Lumber Co is encountering?
  • Weaknesses and Threats (WT) – How would Butler Lumber Co be able to limit its weaknesses and evade threats?

5.3.1. TWOS matrix visual presentation

Table 1 TWOS matrix for Butler Lumber Co

TWOS Matrix
  • The TOWS Matrix is a moderately basic strategic tool used by Butler Lumber Co for producing key alternatives and identifying key strategic alternatives that may be pursued by Butler Lumber Co.
  • By utilizing it, Butler Lumber Co can take a look towards understanding that it can best exploit the opportunities present, while at the same time also limit the effect of shortcomings and ensure itself against threats.

5.4. ANSOFF Matrix

  • Butler Lumber Co has viably utilized this instrument to develop a procedure for accomplishing competitive advantage in the industry and various markets it operates in.
  • Market development
  • Market penetration
  • Product development
  • Product penetration

The following section highlights the various strategies that may be used through the Ansoff matrix. These strategies have been highlighted and identified through vigorous research methodologies, as well as through expert analyst data and opinion.

5.4.1. Market development strategies advertising and promotion of products.

  • One of the most popular means of developing a market is to use marketing strategically.
  • By making use of advertising and marketing communications, the company will be able to disseminate information about its product, and the various benefits of consumption to its target market easily.
  • Also, the use of social media for marketing will, at the same time allow the company to communicate directly with the consumers, and answer their queries. Education about product consumption.

  • The company can make use of widespread marketing campaigns using traditional means as well as means of social media to increase awareness of their product amongst the target market.
  • This task of educating the markets will give the company a first-mover advantage, as well as develop important functional appeals for the product.

5.4.2. Market penetration strategies geographical expansion.

  • The company can expand into other markets through its previous experience, as well as through partnerships and contracts with other agents and parties.
  • The company can also develop subsidiaries, as well as offer its products through franchising as well as licensing.
  • The geographical expansion is suggested into emerging economies because of the favourable income levels of the consumers, as well as the growing infrastructure. Increased number of retail outlets and retail presence

  • The company can penetrate existing markets by offering more shops or making its product more widely available.
  • This may be done through increasing the accessibility of the product at places where the target consumers are expected to purchase from, as well as improving the interaction of the product with consumers at different touchpoints. Online retailing

  • Another means of improving market penetration is through online retailing. Butler Lumber Co can stock its products on online retailing sites locally and internationally.
  • This would help the company improve sales, accessibility, as well as reach higher levels of target consumers. All of this, in turn, would increase market penetration.
  • Besides, it would also help the company maintain and control costs for Butler Lumber Co, and thereby help it achieve cost leadership in the industry

5.4.3. Product development strategies research and development.

  • To be able to develop new products, the company should have a focused interest and budget sending allocated to new product research and development.
  • This research would take a basis in the consumer market and the overall market trends, to identify the gap in consumer demands, and market availability of different products.
  • The new product would then generally be aimed towards fulfilling this gap. New product development labs

  • The company should have dedicate incubation labs for the development of new products.
  • This means that this development should be a focused and separate entity that should focus on the company’s innovation.
  • The company should also hire the right talent for business development and innovation to be able to achieve targets and goals accordingly. Market testing

  • New products should follow PD cycles for testing before launching in a market.
  • This will ensure that the company can fix any loopholes present in the product, as well as incorporate positive feedback. Strategic Marketing

  • The company should also have a focused and strategic budget for marketing and communications allocated for new product development.
  • This is because the company will need to increase the appeal, as well as develop functional and emotional appeals and characteristics of the new product.
  • Communicate with the consumers to enhance sales as well as increase likeability and rate of consumption and trial.

5.4.4. Product penetration strategies acquiring personally owned retail to strengthen its presence..

  • One way of increasing product penetration is that the company directly manages and controls sales operation through owned retail.
  • This will give the campy leverage over communication, as well as product stocking and placement. Diversification of portfolio

  • The company can further expand its portfolio as a means of product penetration.
  • The expansion of the portfolio will allow the company to reach a different and diverse target group, thereby increasing the overall share of the pie for the company
  • This will also increase Butler Lumber Co ’s products’ accessibility to different consumers.

5.5. SAF criteria

5.5.1. how butler lumber co can strengthen its strategic position using saf criteria.

  • When Butler Lumber Co is deciding upon a certain strategic direction for the future, it will face challenges.
  • Choosing the right strategy at the right time can be a daunting task for managers.
  • It is therefore important that managers look at the strategy from aspects of its value and viability.
  • The principal thing the managers of Butler Lumber Co will have to do is settle on a foundation by which to evaluate the different strategic alternatives.
  • They will also need to choose a viable methodology is to assess the different strategies independently.
  • Strategies can be evaluated and assessed using criteria of suitability, acceptability and feasibility (SAF).
  • The following section weighs different strategies and possible future directives for Butler Lumber Co based on the SAF criteria.

5.5.2. Creation of a menu for high-income groups suitability, new market development.

  • This strategy is suitable because it will allow Butler Lumber Co to develop new markets by tapping into new consumer groups.
  • At the same time, it will allow the company to penetrate higher into existing markets.
  • Both these possibilities can be realized because Butler Lumber Co invests in consumer research and has a strong financial standing. Acceptability alignment with organizational goals.

  • The strategy is acceptable because it is in line with the company’s goals and mission.
  • Also, it is also in line with the internal marketing and culture of the organization. Financial risk

  • As such, the strategy does not pose any risk – financially and otherwise and is also palatable for stakeholder reactions.
  • Lastly, the strategy promises to give high returns. Overall, the strategy appears to be highly acceptable. Feasibility market research and financial cushioning.

  • This strategy is highly feasible.
  • This is because the company already operates along with this mission, and has high levels of market research and information regarding high-income groups.
  • This information could be utilized for creating a suitable menu for high-income groups.
  • At the same time, the company also has the financial power to introduce premium menu items for the higher class – to expand its menu accordingly.

5.5.3. Creation of a healthy menu for existing target consumer groups suitability, diversification of product portfolio.

  • This strategy would require a high diversification of the product portfolio.
  • This is suitable because the company has the resources and the information to make strategic decisions about diversification. Innovation

  • Moreover, the company also innovates regularly, which can be an added benefit for the suitability of the strategy. Acceptability risk of financial investment.

  • This strategy appears to be moderately acceptable.
  • This is because it poses a risk through diversification with high levels of finances invested, the company can never be too sure of the consumer reactions. Risk of new product development

  • Therefore, the risk of new product development and consumer reaction would be there.
  • Also, the acceptability is also low because of stakeholder reaction – who might not all agree with the expansion of the portfolio horizontally – i.e. The broadening of the portfolio away from the core offerings.
  • Lastly, if the strategy works, it promises high returns, which make sit low to moderately acceptable. Feasibility market research and financial cushioning.

  • This strategy is also feasible for the company.
  • This is because of the company’s strong financial position, as well as its ability to researching into different market trends and patterns.
  • The identification of these trends and patterns is important for being able to decide which market and industry to diversify into for the company.

5.5.4. Increasing existing advertising expenditure suitability, focused budgeting.

  • This strategy is suitable because the company has high and focused budgeting for marketing and communications.
  • This would also allow Butler Lumber Co to withdraw from failing markets or markets that have a weak share, and gain access to rising markets. Strategic marketing

  • The company will be able to exploit its research and development for strategic marketing
  • Butler Lumber Co will also make use of existing systems and products to reach new consumer groups through marketing. Acceptability return on investment.

  • The strategy is acceptable because it poses a low risk in terms of investment in strategic marketing.
  • Also, it promises high returns on investment in marketing through the promise of increased awareness, increased penetration, increased brand recall and brand recognition – all of which will translate into higher sales.
  • Lastly, stakeholders will also not frown upon this strategy, which makes it more acceptable to implement. Feasibility market research and financial cushioning.

  • The strategy is highly feasible because the company has a strong financial standing.
  • This means that the company can afford to increases budget for marketing purposes.
  • However, for the stagey to be successful, it is important that the company aces sure that all promotional campaigns developed are in sync with consumer needs, demands and behaviour.
  • This is again possible for the company because of its investment in research and development.


Based on the overall internal and external analysis done for Butler Lumber Co, this section will offer recommendations which will help the company take on strategic directions that will enhance its core competencies and capabilities, as well as reduce its chances for risks and threats? The following recommendations are thus made for Butler Lumber Co:

6.1. Strengthen distribution network

6.1.1. control.

This is an important strategic recommendation as it will allow higher control to the company over its products in different markets. The company will be able to control where its products are placed, and thereby, will also be able to enhance the accessibility and easy availability of its products.

6.1.2. Stronger relation with consumers

At the same time, the strengthening of the distribution network will allow the company to work more closely with end consumers by being able to reach them with the same high quality of products across different markets.

6.2. Develop unique marketing tactics

6.2.1. higher penetration.

This strategic recommendation will help the company reach a higher number of consumers and penetrate deeper into target consumer groups. Also, this strategy will allow the company to increase trial and consumption and sales of its products.

6.2.2. Forming a partnership with consumers

Unique marketing tactics will involve new and informed strategic means of communicating with the consumers and engaging them with the brand. One way that this can be done is by making consumer co-producers for the brand. Another way that Butler Lumber Cocan do this is through co-branding with other similar, yet dissimilar brands and companies to enjoy higher market visibility amongst target consumers.

6.3. Adapt to different cultural aspects of different markets

6.3.1. identify different consumer group characteristics.

Each market and target group has distinct characteristics. This recommendation is suggested so that the company can connect better with different target groups in different markets.

6.3.2. Adapt to and respond to characteristics

By adapting to different cultural and regional characteristics, the company will be able to present itself better to target consumers – who would then feel a greater affinity, and more likeliness of consuming the product and the service.

6.4. Expand into new regions

6.4.1. market expansion.

Another strategic recommendation for Butler Lumber Cois to expand into newer regions and markets. This can be done by expanding into new markets, firstly. This expansion will give the company exposure to new consumer groups. Increase the overall consumption rate, as well as diversify income streams. Also, it will give the company related expansion exposure regionally as well as internationally.

6.4.2. Product diversification

Another means of expansion is through product diversification. By adding new products, the company will be Abe to penetrate deeper into existing markets bye exploring new consumer groups, and new target consumer groups. This will also diversify income streams for the company, and increase its overalls hare of the market.

6.5. Strengthen value network

By strengthening the value network further, and by adding quality and enhanced elements at different stages, the company will be able to maintain competitive advantage, as well as put off new players from the industry by increasing barriers to entry. This will allow the company to maintain sustainable competitiveness over other players, as well as maintain a possible leadership position in the local and international markets and industry.

7. References

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Collier, D. & Evans, J., 2009. Operations Management. Boston:MA: Cengage Learning.

Haron, A., 2016. Standardized Versus Localized Strategy: The Role of Cultural Patterns in Society on Consumption and Market Research. Journal of Accounting and Marketing, 5(1).

Hartline, M. & Ferrell, O., 2006. Marketing Strategy. Boston:MA: Cengage Learning.

Keller, L., 2006. Strategic Brand Management Process, in Perspective of Modern Brand management. s.l.:s.n.

Kotler, P., 1997. Marketing management: Analysis, planning, implementation and control. New Jersey: Prentice-Hall.

Kotler, P., 211. Reinventing marketing to manage the environmental imperative. Journal of Marketing, 75(4), pp. 132-135.

Kotler, P., Armstrong, G., Adam, S. & Denize, S., 2014. Principles of Marketing. Melbourne: Pearson, Australia.

Kotler, P. & Keller, K., 2009. Marketing Management. New Jersey: Prentice Hall.

Lehman, D. & Winer, R., 2005. Product Management. New Delhi: McGraw-Hill Education.

Murray, A., 1988. A contingency view of Porter's “generic strategies”. Academy of management review, 13(3), pp. 390-400.

Reddi, C., 2009. Effective Public Relations and Media Strategy. New Delhi: PHI Learning Pvt. Ltd.

Schivinski , B. & Dabrowski , D., 214. The Effect of Social Media Communication on Consumer Perceptions of Brands. Journal of Marketing Communications, Volume 12, pp. 1-26.

Thompson, J. & Martin, F., 2010. Strategic Management: Awareness & Change. Hampshire: Cengage Learning EMEA.

Weng, X., 2002. Local Brand Strategy. Hangzhou: Zhejiang People’s Publishing House.

Wirtz, J., 2016. Winning in Service Markets: Success through People, Technology and Strategy. Singapore: World Scientific.

Witcher, B. & Chau, V., 2010. Strategic management: Principles and practice. s.l.:Cengage Learning EMEA.

Witcher, B. J. & Chau, V. S., 2010. Strategic Management: Principles and Practice. Boston: Cengage Learning EMEA.

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The Unique Burial of a Child of Early Scythian Time at the Cemetery of Saryg-Bulun (Tuva)

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Pages:  379-406

In 1988, the Tuvan Archaeological Expedition (led by M. E. Kilunovskaya and V. A. Semenov) discovered a unique burial of the early Iron Age at Saryg-Bulun in Central Tuva. There are two burial mounds of the Aldy-Bel culture dated by 7th century BC. Within the barrows, which adjoined one another, forming a figure-of-eight, there were discovered 7 burials, from which a representative collection of artifacts was recovered. Burial 5 was the most unique, it was found in a coffin made of a larch trunk, with a tightly closed lid. Due to the preservative properties of larch and lack of air access, the coffin contained a well-preserved mummy of a child with an accompanying set of grave goods. The interred individual retained the skin on his face and had a leather headdress painted with red pigment and a coat, sewn from jerboa fur. The coat was belted with a leather belt with bronze ornaments and buckles. Besides that, a leather quiver with arrows with the shafts decorated with painted ornaments, fully preserved battle pick and a bow were buried in the coffin. Unexpectedly, the full-genomic analysis, showed that the individual was female. This fact opens a new aspect in the study of the social history of the Scythian society and perhaps brings us back to the myth of the Amazons, discussed by Herodotus. Of course, this discovery is unique in its preservation for the Scythian culture of Tuva and requires careful study and conservation.

Keywords: Tuva, Early Iron Age, early Scythian period, Aldy-Bel culture, barrow, burial in the coffin, mummy, full genome sequencing, aDNA

Information about authors: Marina Kilunovskaya (Saint Petersburg, Russian Federation). Candidate of Historical Sciences. Institute for the History of Material Culture of the Russian Academy of Sciences. Dvortsovaya Emb., 18, Saint Petersburg, 191186, Russian Federation E-mail: [email protected] Vladimir Semenov (Saint Petersburg, Russian Federation). Candidate of Historical Sciences. Institute for the History of Material Culture of the Russian Academy of Sciences. Dvortsovaya Emb., 18, Saint Petersburg, 191186, Russian Federation E-mail: [email protected] Varvara Busova  (Moscow, Russian Federation).  (Saint Petersburg, Russian Federation). Institute for the History of Material Culture of the Russian Academy of Sciences.  Dvortsovaya Emb., 18, Saint Petersburg, 191186, Russian Federation E-mail:  [email protected] Kharis Mustafin  (Moscow, Russian Federation). Candidate of Technical Sciences. Moscow Institute of Physics and Technology.  Institutsky Lane, 9, Dolgoprudny, 141701, Moscow Oblast, Russian Federation E-mail:  [email protected] Irina Alborova  (Moscow, Russian Federation). Candidate of Biological Sciences. Moscow Institute of Physics and Technology.  Institutsky Lane, 9, Dolgoprudny, 141701, Moscow Oblast, Russian Federation E-mail:  [email protected] Alina Matzvai  (Moscow, Russian Federation). Moscow Institute of Physics and Technology.  Institutsky Lane, 9, Dolgoprudny, 141701, Moscow Oblast, Russian Federation E-mail:  [email protected]

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Past Cities

Balashikha, Moscow Oblast, Russia

butler lumber case study solution essays

Balashikha is a city in the Moscow Oblast of Russia, located about 20 kilometers east of Moscow. It is a densely populated city with a population of over 500,000 people as of 2021, making it one of the largest cities in the Moscow Oblast.

The history of Balashikha dates back to the 15th century, when the first settlement was established here. At that time, the area was inhabited by the indigenous Finno-Ugric tribes. In the 16th century, the area came under the rule of the Moscow Grand Principality, and the first written record of Balashikha appeared in the 17th century.

In the 18th and 19th centuries, Balashikha became an important center of trade and commerce. Its location on the road to Kazan and Siberia made it a strategic point for the transport of goods. During this time, the city's population grew rapidly, and many new buildings and public institutions were constructed, including the first hospital, school, and post office.

During the Soviet era, Balashikha became an important industrial center, with a focus on the production of machinery, metalworking, and textiles. The city's population continued to grow, and new residential areas were built to accommodate the increasing number of workers.

The political environment had a significant impact on the history of Balashikha. During the Soviet era, the city was tightly controlled by the government, with strict regulations on personal freedoms and limited opportunities for political expression. This had a profound effect on the lives of the city's residents, many of whom struggled to make ends meet under the harsh economic conditions of the time.

Following the collapse of the Soviet Union in 1991, Balashikha experienced significant changes. The city's economy shifted from heavy industry to a more diverse mix of manufacturing, services, and retail. The political climate also changed, with greater freedom of expression and more opportunities for civic engagement.

Today, Balashikha is a vibrant and rapidly growing city, with a strong economy and a diverse population. Its proximity to Moscow and the city's transportation infrastructure make it an important hub for commerce and industry. The city is home to a number of universities and research institutes, as well as cultural institutions, museums, and theaters.

In terms of geography, Balashikha is situated on the east bank of the Moscow River, which provides a natural boundary to the west. The city is surrounded by a dense network of forests, which provide important ecological services and recreational opportunities for residents.

Balashikha is a city with a rich and complex history, shaped by political and economic forces over the centuries. Today, it is a thriving center of commerce, industry, and culture, with a diverse and growing population. Its location on the Moscow River and proximity to the capital make it an important strategic point for the region, and its natural surroundings provide important ecological and recreational benefits.


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    Burial 5 was the most unique, it was found in a coffin made of a larch trunk, with a tightly closed lid. Due to the preservative properties of larch and lack of air access, the coffin contained a well-preserved mummy of a child with an accompanying set of grave goods. The interred individual retained the skin on his face and had a leather ...

  23. Past Cities

    Balashikha is a city in the Moscow Oblast of Russia, located about 20 kilometers east of Moscow. It is a densely populated city with a population of over 500,000 people as of 2021, making it one of the largest cities in the Moscow Oblast.