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Rocky Mountain Fiberboard Case. ROCKY MOUNTAIN FIBERBOARD Rocky Mountain
Fiberboard (RMF) was established in March 1999 and is engaged ...
Submitted by 0939 on February 6, 2008
Category: Miscellaneous
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ROCKY MOUNTAIN FIBERBOARD
Rocky Mountain Fiberboard (RMF) was established in March 1999 and is engaged in the production of particleboard out of bluegrass straw. It is a joint venture between BGI (Bluegrass Growers Inc. and a Northwestern American Indian tribe. The primary purpose of establishing Rocky Mountain Fiberboard was to find a solution to unused straw residue since the state of Washington placed a ban on field burning in 1996. Another objective for creating this organization was the tribe's desire to expand into other diversified projects.
At this point in time, RMF is in deep financial difficulties. The financial statements for the year ending 2001 indicate a loss of $1.9 million on sales of $1.7 million and over $4.5 million in debt and payables of over $800,000. Its internal cash flow situation is negative putting excessive financial pressure on the owners and indicating a dire need for RMF to take major strategic actions in order to turn the company around. The company faces many strategic issues:
RMF product quality is extremely low. Over the years RMF has been using outdated manufacturing equipment which offer less flexibility and are less automated than the existing models being used by competitors. RMF does not have adequate capital to upgrade this equipment. As a result, it has huge inventories of salvaged/downgraded straw. Low quality of straw has also had a negative impact on RMF's customer retention ability.
Due to lack of funds RMF has been unable to adequately develop its storage facilities resulting in high wastage of purchased straw.
Initially RMF had decided that it would price its product low and then gradually increase the price once it had established itself in the strawboard product market. However, throughout its three years of operation, RMF faced pricing issues since it was unable to increase its prices due to a drop in market prices for particleboard.
Poor quality...
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