Grainger Company has been known to be the leading distributor of MRO equipments, tools, materials and Industrial supplies. The supplies can be ordered online. Having been established in 1927 in Chicago, Illinois, it has been satisfying the customers with their product giving a positive feedback. It became a public corporation in 1967. Since its establishment, it has made a lot of developments in the business industry by making sure all customers’ needs are fulfilled.
Currently the company has been under huge expansion. This involves remodelling the existing locations, and trying to venture in the Chinese market. It has also been expanding in the products offered. Over 900,000 products can be purchased from Grainger.com.
The company makes use of Technical Product Support that takes care of training specialists. This makes the Grainger Company unique than other companies. The Technique Product Support helps the company to choose the proper products to sell to customers. It provides assistance in installation and troubleshooting of the applications available. In the MRO market, Grainger Company has been said to be the leading producer. The other competitor companies include MSC Industrial Direct Company and Home Depot.
In 2009, the company had financial problems. Due to the tough and unstable economy, the customers did not purchase a lot of goods. The company posted a net income of $431 million, from revenues of $6.2 billion. This was recorded as a drop from the 2008 revenues of $6.9 billion by 9.2%. The major cause of the low income was the Manufacturing customer by not supplying the company appropriately. Sales results from January 2012 increased by 17% from January 2011 (Follet 131).
The company acquires its finances from operating activities. Other sources can be commercial paper sales and bank borrowings under lines of credit. By improving its efficiency, greater profitability is earned. The capital expenditures of the company is also used to invest in it logistic network and information systems. Grainger Company examines other project in order to meet or exceed the required capital. With the invention, of the small projects the company expects to increase the amount of capital needed to maintain the company. (Birgham, 324)
The company’s distribution requires a lot of transportation of goods. The goods can either be transported by water or other means of transport. The transporting requires large use of fuel. According to this, large capital must be earned to cover for the transportation. They then apply this fuel cost to the customers. They purchase the products at a high cost to cover the fuel cost.
The growth rate of the company in 2011 appeared to be slower than in 2010. According to the statistics, the beginning of this year has proved that the rate might be highest this current year. The company intends to improve the rate in the future. Analysts of the company expect the financial growth rate will be at an annual rate of 13.4. This year the analysts predict a financial growth rate of 2.5. The growth rate of the company seems to affect the financial growth rate. As the company expands, the profit earned also increases respectively (Birgham 291)
Over the last eighty years, the company has opened many branches in the world. Some countries include Canada, US, Mexico, India, China and Panama. It has institutions in about 157 countries. These can be said to be the assets of the company. The many branches can further be analyzed and classified as the fixed assets of the company. With these assets, the company continues to grow in both aspects of size and profit.
Over the years, the company has been over dependent in the United States. It, therefore, becomes vulnerable to the economic downturns of the United States. When the company is affected by the economy, the customers also get the effect. In the year 2009, the company invested in other countries. These were in India and Japan, and, therefore; it reduced its dependency on the United States.
The main financial strengths of the Grainger Company can be said to be its low debts and strong cash flows. This makes the company able to fund its initiatives and improve its operations. The company also deals with dividends and repurchases which, they later return to shareholders. The company looks at debt ratio and maintains liquidity position. This helps the company in funding its capital needs, and taking care of its long term cash requirements. The company also takes financial health risks by trying to defend on its own. The company avoids large amount of debts that they may not be able to pay. They get financial support from other organizations and this makes the company financially stable. (Birgham 592)
The company uses its cash in reinvesting in the business. This happens so as to increase the returns to shareholders in forms of dividends.
In my opinion, the financial strengths and support would be, when the company enhances the cash processing methods. The cash processing system can be integrated with accounts receivable. This type of improvement may quickly update the customer’s accounts. When they update, the customers can now completely depend on the company for their businesses. This has been said to be one of the goals of the company. To increase the number of customers and satisfy then with the products they need. When this gaol is accomplished, the company’s earnings improve too.