which increased the profitability of company and also increased the market share of the company. These reasons provided the competitive advantage to Du Pont especially in TiO2 market.
Althoughthe benefit is that Du Pont’s strategy for its product and future success is always aggressive and the management of Du Pont tried to introduce a strategy and forecastednew strategy and analyzedthose strategies,which are more feasible for it.Moreover, recently the management wanted to go with one strategy, which is analyzed in other sheet. This behavior from the management helpedthe companyto get more market share in the future.
As discussed earlier the management of Du Pontwanted to opt for one strategy from growth strategy and maintain strategy. Therefore,the intentions of management are toadopt some strategies, which helped them in future to increase their market growth as well as sales and net income. These things will help Du Pont in future to retain its competitive advantage.
Expected incremental free cash flows associated with Du Pont’s growth strategy and maintain strategy for the TiO2 market.
The forecasted evaluation for expected incremental cash flows is attached with the file and it is associatedwith Du Pont’s growth and maintains strategy for TiO2. However,the cash inflows figure has increased by 3% growth rate and the working capital has increased by 20% of the forecasted sales. These figures clearly show that the future cash inflows will be better and would helpTiO2 to capture the market share.
Risk and uncertainty surround these future cash flows
The risk factor is always there for any strategy; however the factors which influence the cash flows and strategic decisions of Du Pont are discussed in the next question.Nonetheless,it is difficultto determine the level of risk being there however,some important factors are there, which influence the future cash flows of a company.
According to the evaluation of both projects through Net Present value, there is a significant difference between Growth strategy and maintain strategy. The growthstrategy has higher NPV than the maintain strategy and therefore, the feasibility of growth strategy project is higher in terms of numbers. Nevertheless,there are several factors which can easily affectthe strategy because onecannot predict future and therefore the risk associated with the growth strategy is always present.
On the other hand, the maintain strategy also has positive NPV therefore; it is up to the management’s perception that which project they would adopt. Although the growth strategy looks more attractive than the maintain strategy in terms of numbers however,the external factors will always be presentif the company goeswith growth strategy.
Competitors respond to Du Pont’s choice of either strategy in the TiO2 market
Du Pont is considering choosing onlyone strategy from the two. However, both strategies have their own competitive advantage. Both strategies need to be analyzedby implementing different techniques as they have been analyzed in the excel sheet. Although the growth strategy provided the cash inflows in future and limit the competitors ability to capture market share in the industry and will also help to capture around 65% of market share in the future..............
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