What are some possible alternative solutions to be considered before buying or selling the jackets?
To ensure the stock turn for the period will come out as planned the owner of a department store decided not to make any purchases in an effort to maintain the stock-to-sales ratio just as it is. The owner directed his assitant buyer not to focus on selling the current stock and to make any major purchases.
A manufacturer presented the assistant buyer with the following offer:
Men's ski jackets in the latest colors and patterns and in a full size range. These jackets are regularly $150 retail sellers. The price on the jackets will enable the store to sell them for half price, and still get their regular markup.
The reason for the great deal, the manufacturer is having a temporary cash flow problem and has to convert a big part of its current stock to raise cash. To sweeten the deal, the manufacturer offered to pay the entire cost of an ad in two major newspapers of department store's choice.
The assistant buyer thinks if they turn this deal down, one of their competitors will take it and seize their market and accepts the deal. The promotion, despite the undeniable bargains offered, was a huge failure.
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After analyzing the reasons for the inventory problem, an alternative to an inventory freeze might be a deep markdown in existing stock coupled with purchases of new stock. Another alternative is to consider a corporate trade (merging with a larger company) thus gaining an infusion of capital. Another alternative is to reduce costs throughout the organization combined with new stock purchases and perhaps also deep markdowns.
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