Critical Factors Facing Fetc’s Management

Jan Karl Karlsen – CFO, to meet his financial controllers

Critical factors facing FETC’s management

1. Cash flow
2. Confidence
3. Control

• Expected to suffer losses from the current Asian crisis. Due to currency exposures, working capital financing shortfalls, and the general economic slowdown

Sweden – FETC’s home country

Case Background

The Far East Trading Company Ltd is a global trading company incorporated in Stockholm, Sweden in 1897 by H.N. Johansson, an experienced sea captain. FETC is a trading house that serves as financial base for continuous between the Far East and Europe. As the company grew, it also made shipping as a major part of its business.

The Company does not have real domestic business base but it served to provide cultural and corporate center for the conduct of global trade. Due to the distance involved for the conduct of its business, the firm was a loosely knit collection of independent country units from its very beginnings. These units are under direct and active management of the country manager assigned from the Swedish head office and that basically made the company’s organizational structure a decentralized one. This set up gave each unit freedom to do business in any area of trading or distribution they thought were profitable.

The Company had undergone a major reorganization and management change after it had incurred losses both in its European and Asian country businesses. In 1992, a new management took control of the company headed by Jesper Erickson, the new Managing Director and Jan Karl Karsen, the new CFO.

Erickson asserted central control over the loosely linked worldwide operations. He also sold much of the groups remaining European business units to focus on its units in the Far East which comprised about 75% of its earnings. The long term strategy of the company under Erickson’s leadership was to concentrate FETC’s activities in fewer business areas in order to pursue growth prospects in line with the company’s expertise. This makes up 70% of FETC’s turnover. INstaed of the old per country set up, FETC plans to organize activities around these core businesses.

Analysis

Core Business.

• Consumer products

• Made up of:

*marketing services – provided marketing, sales, distribution and merchandising services to consumer product firms without significant in-country operations in the ASEAN countries and the greater CHINA.

 and nutritional products – composed of newly operational state of the art dairy plant in Shanghai China,. Not yet operating in Full capacity.

• Foods – newest of the three core businesses.

• Purely south American and headquartered in Bogota, Columbia.
• Focused on meats and meat products, including manufacture of concentrated animal feed, pig farming, slaughterhouses, meat processing plants and their associated distribution networks.
• Very successful to date
• Only composed of 9% of FETCs core business but created over 30% of operating profits. 

• Graphics – provide material and service solutions to the graphics art industry in East Asia. Includes importation and distribution of equipment, services and solution consumables to this rapidly growing business.

• Received significant boost with the signing of the agreement to represent Eastman Kodak’s graphic art products.

Other Businesses

All remaining businesses that did not fall under its core businesses were collected under FETC Businesses. Leftover businesses from earlier era.