MARIA Case 8b

Maria was in her early twenties and worked in her mother's store "Cell Division," an independent retailer of mobile phones, accessories and a few business gadgets. The store was in a busy mall and had had a successful ten-year history when Maria's mom decided to start a brand new business as an electronics communication consultant.

The mom agreed to "give" the store to Maria, but hold a note for $35,000 which Maria could pay off from the future profits. Cell Division had absolutely no debts and had assets (mostly inventory) worth about $80,000. Maria happily agreed.

Maria was very interested in taking over the business because she believed that it had a great future. She envisioned that as electronic devices became more interactive, people would need new compatible equipment for their cell phones to communicate smoothly with home computers, alarm systems etc. This would require expansion of her product lines.

Without telling her mother, the first thing Maria did was to use some of her $55,000 equity in the firm to borrow for store renovations. New shelving and display areas would be needed. The rest of the money, Maria used to develop a slick advertising campaign, identifying Cell Division as the one-stop shopping area for mobiles. For her new inventory of smartphones, tablets and various accessories, Maria managed to secure 30 and 60 day terms from suppliers.

The sudden drop in sales was totally unpredictable. A sudden spike in energy prices had effectively frozen the economy so that businesses cut back on any new purchases. At the same time, the consumer market for mobile phones and small electronic devices had just reached a temporary saturation.

Maria had to put on sales at rock-bottom-prices, sometimes below her cost, just to get cash to meet her bills that were due. The business was disappearing before her very eyes.

1. What basic mistakes did Maria make in taking over the business?

2. Who would have been her best source of advice on strategic planning? Why? 3. What is the future of the business? Why?

4. What are the implications for Maria's relationship with her mother?