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Kochman, Reidt & Haigh, Inc. is a company that designs, fabricates, and installs high quality, uniquely designed cabinetry. Their primary market is residential construction for new and remolded homes in the New England area. KKRH felt they needed to define the scope and speed of growth for their business, also to increase profitability. KRH had put together a unique operating strategy of producing high-quality custom cabinets at a low cost. KRM began to focus on a financial strategy that would support the development of its innovative operating system because the partners at KRH felt they needed to define the scope and speed of the growth for their business, and also increase profitability.
In 1993 KRHs sales per worker were projected to rise to $102,505 which was much better than the industry average in 1992 at $91,678. By dealing directly with customers, KRH also avoided the 25% distribution cost charge that manufactured have to normally pay. Also, KRH had completed 116 jobs in the first ten months of 1993 which again was much better than 1992 with an increase of 49%. Through the months ending October 31, 1993, KRHs profits were almost $150,000 and were projected to total about $180,000 for the year.
In the long term, KRH thought that significant price increases could slow their growth and therefore did not show a feasible path to long-run profitability. Instead of this, KRH wanted to focus on cost reductions by continuing to increase the level of automation in the production process. To do this, it required many investments to automated woodworking equipment and in continuous upgrading of their computer software and hardware. KRH also planned to put together a marketing effort that would require around $40,000. Once this investment program was completed, KRH hoped that it would be able to grow by keeping prices steady and increasing profitability through reduced production costs.