Deutsche Brauerei Analysis Essay Example

having bad debt estimated at only 2% seems like a very low estimate considering the lack of faith even by local banks in the area. Oleg says, “Where we we great opportunity in these distributors, the banks see no collateral, low profits, negative cash flow, and high risk. I know these distributors better then the banks know them. ” This statement is very scary when relying on these small ‘entrepreneurs’ to finance growth and building a new distribution plant in a new region. 5. ) Based on the above analysis it does not look like Oleg Pinchuk deserves a raise anyway.

His financial analysis would actually put the company in enormous financial troubles. However, DB cannot deny the sales growth in the Ukraine region that Oleg has initiated with his prior knowledge. Based on Oleg’s experience of the Ukraine region he should still be at a high ranking position within the company, but another consultant with better financial knowledge should be hired. Oleg’s significant raise should not be granted, but his guidance in the region is still needed. 6. ) This is a crucial time for an organization like DB, and there is high demand for their product.

In order to meet the needs of this high demand, DB needs to increase their production and streamline distribution channels to allow their product to be reach their customers quickly. During this time DB needs to reinvest their earnings into the company to help finance their needed growth. They may not want to decrease dividends because this would send a bad message to the shareholders, but under no circumstances should DB increase dividends when it needs to finance the

construction of a new plant to increase production levels.

Recommendation: I think that Deutsche Brauerei is a company which has an outstanding product but has a poor strategic and financial plan. DB is experiencing significant sales growth in a very unstable region wish they are looking to enter. If this region can stabilize, DB can get a strong footing in the market and reap the benefits for years to come. This is clearly a crucial time for the organization. DB needs to realize the risk in this region instead of gambling such a large price in the benefit.

DB should begin to implement a more strict A/R policy and lend fewer funds to the region then even local banks. DB is looking to expand and build a new production plant, but doing so in this volatile region can be dangerous, I think they should look into increasing production in current facilities while continuing to explore various distribution channels in the region until the Ukraine economy settles down. Oleg Pinchuk has solely handled the current growth of DB into the Ukraine region and although he has increased revenue, he also exposed DB to many risks and provided false financial figures.

Oleg should be kept as a consultant for his knowledge of the region but should not receive a raise anymore then his current substantial salary. The shareholders of DB, although many retired family members who need this payment to survive, need to understand the importance of this time. They can keep there current share of dividend but DB cannot afford to increase dividends. DB needs to reinvest to increase production and not increase any unnecessary liabilities.