Cima Case

Like many family held businesses, CIMA Mountaineering, Inc. (Cima) finds itself at a strategic crossroads. After having enjoyed a whirlwind rise to success, Cima has now begun to experience a slow down in growth in revenues and profits. Faced with a substantially changed environment, Cima must decide either to remain in its present niche or to move the company into new markets. These two different alternatives are represented by two distinct proposals. One of these is to pursue the "Weekender" segment with two to-be-designed boots for the recreational hiker. The second alternative is to follow a product line extension strategy and increase the breadth of the offering within the "Mountaineers" and "Serious Hiker" segments.

The company's financial condition (highly leveraged, high liabilities and below industry average return on assets) is not particularly good. The situation is such that it is very unlikely (almost impossible) that Cima could entertain both plans simultaneously. But an unusually strong cash flow could support one of the two proposals. Next I am going to review one of the proposals and make projections regarding its potential impact on Cima.

Select one of the proposals and submit with the completed test your prepared sketch showing the style that you propose for the boot's uppers. Be certain to include your rationale in support of your sketched style. Also include a statement justifying your choice of leather and color combination.

Next take either of the proposals (assumably the one that you have already prepared) and complete the following:

Boot Model

#HX10 Boot Model

#HX50 Boot Model

#MX350

Retail's Unit Price $__________ $__________ $__________

Manufacturer's Unit Price $__________ $__________ $__________

Sales Commission Expense per Unit $__________ $__________ $__________

Sales Promotion per Unit $__________ $__________ $__________

Materials Cost per Unit $__________ $__________ $__________

Labor, OHD, Transportation Cost per Unit $__________ $__________ $__________

Per Unit Profit $__________ $__________ $__________

Next, complete the pro forma information below for each of the five years from 1997-98 to 2001-02 for just one of the proposed new products: This is worth 300 Points.

Boot Model #________ 1997-1998 1998-1999 1999-2000 2000-2001 2001-2002

Unit Sales __________ __________ __________ __________ __________

Total Revenue $__________ $__________ $__________ $__________ $__________

Total Production, Marketing and Administrative Expense $__________ $__________ $__________ $__________ $__________

Before Tax Estimated Profit $__________ $__________ $__________ $__________ $__________

Profit in 1997-98 Present Value