COMPANY BACKGROUND: Science Technology Company was a leading manufacturer of computer-controlled automated test equipment (ATE) that was used to monitor and manage quality over the life cycle of electronic products. STC enjoys 31% market share :
No.1 in the design and manufacture of testers and test software for printed circuit boards;
No. 2 in semiconductors test and operation
Other products include a system to test electronic products in the field; cads , models and simulations. STC is located in Minneaapolis, Minnesota with sales, service, network , offices and representatives across the US , North and South America, Europe, Africa, Asia and Australia.

PROBLEM STATEMENT Was the company well-positioned to finance the rapid sales growth that was anticipated? WHERE IS STC NOW? The growth of the worldwide ATE market was tremendous between 1978 and 1984. The rapid growth of 28% per year was spurred by the rapid growth of electronic products, powered in part by technological breakthroughs in computers and miniaturization.

GOAL OF THE COMPANY To be the recognized international leader in providing integrated quality management systems to manufacturers of electronic devices and equipment.

SWOT ANALYSIS:
Strengths
• Extensive software
• Right products and reliability
• Excellent credit rating
• Dominant share of the printed circuit board test market
Weakness
• Forecasting problem
• Losing in competition

CORPORATE STRATEGIES:
Sharing Resources:
• Economies of Scope – STC has diversified in different types of ATEs

• Transferring Competencies – STC used their knowledge and experience in producing ATEs into producing other peripherals, software and models that would contribute to the sales of the company.

CORPORATE STRATEGY STATEMENT
Competitive Advantage : 31% market share
• Cost Leadership
• Differentiation Strategy
• Cost Focus Strategy

FINANCIAL PROFILE
ANALYSIS OF CASE FACTS : FINANCIAL RATIOS AS OF 1984 TERADYNE FLUKE LTX STC Current Ratio 3.6 3.4 2.5 3.8 rule of thumb is 2:1 or industry rate
Acid Test Ratio 2 1.9 1.7 1.9 rule of thumb is 1:1 or industry rate
Total Liabilities / Total Assets 0.35 0.39 0.52 0.33 the higher the ratio, the greater the risk not good
Total Debt / Total Equity 0.28 0.27 0.61 0.24 the higher the ratio, the greater the risk not good
EBIT / Interest Expense 14 8 8 7 the higher the ratio, the better ability to not good pay interest expense or take on more debt Earning per Share 0.63
Net Profit After Tax 10.00
Approx No. of Shares Outstanding 15.80 - 16.00

Case Facts :
Historical Annual Growth Rate 1980 – 1984 12%
Projected Annual Growth Rate 1985 – 1989 30%

FINANCIAL RATIOS ACTUAL FORECASTED 1984 1985 1986 1987 1988 1989
Current Ratio 7.89 10.21 12.75 16.16 20.66 26.54 rule of thumb is 2:1 or industry rate
Acid Test Ratio 3.86 4.88 6.42 8.08 10.29 13.20 rule of thumb is 1:1 or industry rate
Total Liabilities / Total Assets 0.32 0.40 0.40 0.40 0.40 0.40 the higher the ratio, the greater the risk
Total Debt / Total Equity 0.24 0.18 0.24 0.34 0.41 0.59 the higher the ratio, the greater the risk
EBIT / Interest Expense 6.50 6.41 6.41 6.41 6.41 6.41 the higher the ratio, the better ability to pay interest expense or take on more debt

CONCLUSION: The SCIENCE TECHNOLOGY COMPANY should modify the financial projections made by the Chief Finance Officer because it doesn’t paint the most probable picture for the next 5 years of STC. The historical growth rate of 12% should be used to forecast instead of the 30% used, which was based on the “boom” years.

RECOMMENDATION: SCIENCE TECHNOLOGY COMPANY must increase inventory turnover rate. This entails faster movement in the sales of stocks. STC should be aggressive in selling or else the competitors will eat up their market share. They should update and upgrade their checking and controlling methods and procedures. In developing sustainable competitive advantage, STC needs to understand its competitors and the nature of the competitive environment in order to understand the potential threats within the marketplace or the industry’s potential profit. It provides framework to investigate the competitive environment through number of micro factors, and enables industry attractiveness to be measured and complexity of operating markets understood making it useful.