Dsl Company Mexico

The DSL Company valuated in $200 million which is based freight consolidator in the US. As a long run the company decided to set up a business in Mexico. Even though the big success at the beginning the Mexican economy factor affect the company in a huge scale which caused the decreased of the net revenues and the increase the costs. Later on with the loss of Wal-Mart, DSL de Mexico decreased their capacity from 80% to about 35%. Now that they have the SuperMart offer an opportunity for the company which motivates Cook to start the evaluation of Mexico through the tough times doing whatever it take. One part was the financial status of the company, he decided to look at the company ROI and ROC which was not appropriate information given in the case. In addition, this will help to identify if the company produce enough cash that return the investment in the facility.

ROC = Net Income after Tax = 137,326.00 = -0.02428

Total Assets - (Cash + Invests + Non-bearing Liability) (5,655,886.00)

The results of the formula shows that the company only used the money wrong for their operations which leave as a conclusion that the capacity increase also was a wrong decision. However, the dependency created to Wal-Mart was huge giving as importance the expansion of their clients portfolio that it is one of the things that should be done a long time ago. In addition, Cook (General Manager) needs it to invest more time on any operating part of the company such as finance, sales, operation and warehousing. However, he did not pay careful supervision to all of those and that is why that the company was having financial problems.

The options for them where the ones presented below:

DO NOTHING (No possible)

• They need to increase the sales which the possibility to cover all their expenses.

• If the company wants to stay in Mexico, it will be possible going to bankruptcy.

• Reducing cost would not be making the company profitable for the next period.

LEAVE MEXICO (No possible)

• The company has a two year lease so it is impossible to rent it as a depot.

• The economic environment was really hard for them, because meanwhile the peso devaluated, the cost of the factory was increasing.

• The company would not be able to cover the losses.

PARTNERSHIP (SuperMart, Gigante or Comercial Mexicana FAILD)

• Make partnerships with other retailers it is too late.