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Stewart Box Company

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Submitted By sheilaling
Words 1060
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CRITICAL ISSUES

What are the strong points of Stewart Box company’s current sytem?

Marketing
Stewart Box company differentiated itself from competition by focusing on custom-made orders and targeting a small niche market only. By doing this they are able to actively cater to its customer’s individual wishes, and strictly adhere to promised delivery dates.

What are the weak points of Stewart Box company’s current sytem?

Marketing Reach
Stewart Box Company has a very limited customer base. They only market their products within a radius of about 500 miles from its factory, which was located in a fairly small town. A limited customer base results to low volume of orders which will lead to the carton factory operating below its capacity thereby resulting to inefficiencies in its operations.

Production Process
Due to low volume of orders, the carton factory is under utilized. This is evident by the paperboard mill operating continuously on three shifts but the carton factory operating only an average of only one and one-half shifts per day. The underutilization of the carton factory will lead to cost inefficiencies which could result to higher production costs and consequently higher selling costs which will prevent the company from being competitive in terms of pricing.

Costing
In the carton factory, each order was a job. Both labor and factory overhead costs were estimated annually. Estimating costs annually may be a cause for concern and can lead to erroneous estimation of costs due to the long length of time considered in the estimates. Costs of raw materials and manufacturing equipments can have very rapid fluctuations in prices within a year, and if they base their costs only annually, it might lead to innacurate cost estimates.

Pricing Strategy
Stewart’s quoted prices were usually higher than the calculated estimate about 65% of the time, and lower 15%

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