Polaroid Essay examples -- GCSE Business Marketing Coursework

PolaroidIn March 1996, Ralph Norwood, treasurer of Polaroid Corporation, was asked to meditate refinancing proposals from investment bankers of $cl million of debt due to mature in January 1997. Gary DiCamillo, juvenilely appointed chief operating officer of the firm,in reaction to the companys lagging share price, had set forth a new plan to agressively expoit the existing Polaroid brand, introduce product extensions, and enter new rising markets. Before Norwood can choose a refinancing proposal, he must consider the funding needs of DiCamillos new corporate strategy and the capital mental synthesis which would provide the lowest cost of capital and most financial flexibility. Norwood in any case needed to consider the maturity structure of debt.COMPANY PROFILE record of productPolaroid Corporation has been engaged primarily in the business of designing, manufacturing, and marketing flash photographic imaging products worldwide. Since 1948, this mission has led them to develo p strident black-and-white film in 1954, instant color film in 1960, and the SX-70 camera in 1972 which no longer required users to coat the growing picture. However, most r regularues generated from the instant photography market were not through camera sales. Cameras were often sold on low margins to encourage film sales. By increasing the base of instant camera users the company enlarged shoot sales, its primary margin product. However, the advent of digital photography in the nineties threatened to erode Polaroids base of instant film camera users. consume for Instant Photographic ServicesIn the consumer market, demand for film on newly purchased cameras tended to be nobleest and then tappered off to somewhat predictable patterns. then film demand often correlated to camera sales. In the technical market, demand was derived from instant photography for indentification purposes such as I.D. badges, as sanitary as various applications in medicine and law enforcement.The market for instant film photography in the U.S. had matured. Sales in 1994 and 1995 had fallen 2 percent and 12 percent respectively. International sales, on the other hand, offered operose growth potential. With rising standards of living and no infrastructure to process 35 mm film in many emerging market countries, in that respect was a large untapped market for instant photography. Polaroids cameras were in high demand. Growth in int... ...over, the companys EBIT coverage ratio would shift downward.If Norwood, were to reduce the companys debt extremity to under $690.47, Polaroid would swear its investment-grade bond rating and benefit not only if from a dismount cost of debt, but also from a lower cost of total captial as shown in Appendix B. In addition, Polaroids EBIT would repose above 2 over the next 5 years.Norwood could also arise the bond rating to A if he were to reduce the required debt inwardness to $574.47 million. At this level of debt, the companys EBIT c overage ratio would shift upward even more and remain above 4 over the next 5 years. Yet, lowering the amount of debt used would also raise the companys WACC.RECOMMENDATIONSNorwood should choose to maintain the companys current bond rating of BBB. Allowing Polaroids bond rating to drop to BB could not only cause damage to the firms brand name, but it would also increase the companys total cost of capital. Polaroids current level of debt financing surpasses the benefits of debt. Although it increases the companys credit honesty as measured by their EBIT coverage ratio, it also raises their WACC do to the increase risk of default.