Astral Records Ltd. North America Harvard Case Solution & Analysis

Introduction

Astral Records was founded by Count Francisco Smirnovin the year 1967 who had a vision of building a new kind of record company. Astral Records obtained a 50 room Georgian mansion on 187 acres near the top of the Cynwyr valley, England. The focus of the company was on developing their own process rather than licensing CD technology from the largest manufacturers. Astral Records was the first company to produce CDs two years before than its major competitors. The Count Francisco Smirnov expanded its business operations in the U.S market and Sir Maxwell S. Hammer’s ran the operations of U.S that looked after every major decision.

Additionlly,the had 27 employees and  profit of GBP 600,000 in the year 1980 where as in the year  1992, Astral Records had 500 employees and a pretax profit of GBP 2.7 million on the sales of GBP 20 million. Astral Records initiated the use of new packaging system that used recyclable paper as well as its current focused was on developing the skills in order to compress feature length motion pictures onto a standard 5 inch disc.

Problem statement

Since Sarah Conner joined at Astral Records as Chief Executive Officer after the tragic death of the Sir Maxwell S. Hammer’s, she faced several problems in the company. However, the most important challenge for Sarah Conner was in deciding from where to start and what actions needs to take in order to overcome the problems of the Astral Records. She also need to go through all the memos, phone messages, faxes and other correspondence in order to prepare the report that are stored over the past week.

Challenges that need to be overcome

One of the challenges that needs to be addressed by Sarah Conner is a lawsuit against the company. Chief legal counsel of Master Vision, Richard Milhous has offered a settlement on behalf of his company. The offer has a deadline of 24th August. The company has to decide from a cash payment of $5 million or a 4% per-disc royalty over the next 10 years of production as settlement.

Another crucial decision pending is about the financial structure of the company. As the debt limit is reached and there is an offer for renewal of the revolving credit agreement at an increased commitment up to $0.6 million, which previously was up to $0.5 million. All the other conditions are same. The bank increased the credit limit by seeing the financial needs of the company, and due to the fact that the business will be out of the bank loan at least 45 days during the next 12 months. This decision is also important because of the need of the new packaging equipment and also because the company is out of the bank currently. Some major decisions are also linked with the financial position of the company.

The company is overdue a payment by 90 days to the supplier of Resins, Polycarbonate Substrate. The company owes them an amount of $ 27,914.22. The company has to pay this amount by 26 August 1993 to avoid the stoppage in supply of resins which will ultimately affect the production processes.

The company has two options related to packaging material of the discs. Richard Cory, the treasurer, is of the view that there is a great opportunity of buying a new packaging equipment. This equipment having cost of $ 1 million will increase the value of firm by $ 0.2 million. This will also help in increasing the production. But this can be financed by the renewal of revolving credit agreement. The second option is put forward by Phil Kreutzman of the purchasing department. He has a new plastic supplier who can cut the total cost of goods sold by 20%. It has an advantage that it is biodegradable in 10 years as well as a disadvantage that the package is not serviceable after three to five years of normal usage.

Some other issues which Sarah Conner has to face include the request of Human Resource Manager to hire 20 shift workers immediately. This request is made because there is an increase in production, and to cater the needs, staff personnel’s require an increase in pay due to strain they face. Otherwise the only option left is hiring the new workers without any delay. Another issue is about the research and development project. The Project Future Vision is at the breakthrough and the research team is very confident that they will succeed in their efforts to develop the new technology. This technology will give a boost to the sales. But they will need $ 3.5 million within the next month to carry on this project..................

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This case is in the basket exercises. Sarah Conner only on the management Astral, a successful compact disc manufacturer with some looming challenges. Previously run by an autocratic manager, Astral is paralyzed after the death of Sir Maxwell S. Hammer. Sarah Connor must work through a stack of messages, memos, and faxes, and to decide where to start and what to do. "Hide
by Lynn A. Isabella, Forbes Ted Source: Darden School of Business 38 pages. Publication Date: January 1, 1993. Prod. #: UV3095-PDF-ENG

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