BUSM29845- Business Policy NOTE TO STUDENTS: focus only on the information in the case as of 29" March, not your knowledge of what came next. There is no historical financial information in this case. Exhibit I is the budget for Java J's 2020 year as calculated during January. Use this to support your analysis of the alternatives. The Wool Bin is a yam and fabric retailer with one physical location in Toronto, Canada and a website for on-line sales. Its customers are individuals who enjoy knitting or making clothes at home. The company which now has 35 employees was owned by Rachelle and lan Harris Rachelle had worked in sales for an investment firm for ten years when she saw a niche in the knitting market that wasn't being satisfied and established the company in 2009 with $25,000 in savings. The Company was successful from the outset, growing from revenue of $100,000 in 2009, to $1 million in 2015, and to $4.5 million in 2017. Rachelle put in place numerous strategies to maintain revenue growth and to increase it further. However, in early 2018, the Wool Bin's sales increases had declined to zero percent and soon sales declined for the first time since the company was started. The decline continued, and the Harris's had to stop taking salaries and in some months pay employees out of their savings, as the company was not generating sufficient cash. Background Yarns are used in knitting. They are made from Natural (wool or cotton) and synthetic (man made) fibres. Knitting is the process of using two or more needles to manipulate yarn to create loops that result in a textile or article of clothing (scarf, socks, sweater, etc.). Today most clothes sold in stores and online are mass produced: made by machines in low wage countries like Bangladesh, Vietnam, and others primarily in Asia. Some high end designers produced hand made knitwear, but this was a very small segment of the clothing market The yam industry is made up of two segments: Craft Yam and Premium Yam. Craft yam is primarily sold at big box stores (eg Wal-Mart) and at craft stores (eg Michael's), while premium yam is sold through local yarn shops (LYS) and online stores. There are several thousand local yarn shops in North America. Almost all are relatively small, and many are family businesses, or have grown out of family businesses. In recent years, approximately 30 million people in Canada and the United States participated in knitting, spending approximately $3.0 billion annually. Seventy percent of knimers are women The age of knitters is spread evenly from 18-75. That is, young people are just as likely to knit as older people. The number of knitters has fluctuated over the past decades-it enjoys brief bursts of growth and popularity before sinking back to its core market five to seven years later. Wool Bin was founded near the beginning of one of these knitting "booms". Knitters overwhelmingly favour physical stores to purchase their supplies, although most do online research before purchasing, 77% buy their supplies exclusively in a store: 4% buy exclusively online; and 19% buy both at a retail store and online. Wool Bin The Wool Bin was originally a small storefront operation in Toronto that opened in 2009. Rachelle was astute in using social media, most notably posting product reviews and instructional videos on YouTube almost from the beginning. This increased the customer base of the store from its original neighbourhood to city wide. The Company purchased most of its craft yarn from one of three main distributors in North America - Ketzer, Diamond, and Coats. Premium yams (those with particular textures or colours) are higher priced and purchased from a number of independent producers. There were approximately 150 premium yarn producers in North America-most were relatively small Craft yarn accounted for 20% of revenue: premium yam for 60% and, other knitting supplies for