LEATHERWORLD, INC.

ABALOS, Richard
HALOG, Loremar Ellen
RAGUCOS, Brian
TANGALIN, Glendell
 I. Company Background
History:
Leatherworld, Inc. started its operation in the 1960. Located in Marikina, it
was engaged in the manufacture of ladies leather shoes. Up to 1979, it had been a
single proprietorship operated and owned by Mr. and Mrs. Lucio Amane with
some 1.15 million pesos in capital. In 1980 the company was incorporated with
authorized capitalization of 5 million pesos, divided into 500,000 shares at P10 par
value.
The company’s products were principally for domestic and to some extent,
for foreign markets. These were their product lines:
 Class A: Ladies’ shoes, utilizing about 70 percent raw materials of imported
origins.
 Class B: Ladies leather shoes utilizing about 98 percent locally produced
raw materials.
 Class C: Men’s and Children’s leather shoes utilizing 100 percent locally
produced materials.

II. Statement of Objective

 To increase production capacity from 20,000 pairs 60,000 pairs of shoes per
year throught the construction of new plant and the acquisition of
equipment.
 To satisfy domestic and foreign markets.
 To feel up the present demand of the local market and to meet the long term
project of export sales.

III. Statement of the problem

What should Mr. Lucio Amane do to accumulate Php2.625 000 for the
expansion project?

IV. Time Frame

July 1980
 V. Viewpoint
Mr. Lucio Amane, the president of Leatherworld Inc.

VI. SWOT Analysis

Facts of the Case S W O T

Mr. Lucio Amane was considering an expansion project  

which would increase production capacity from 20,000 pairs
to 60,000 pairs of shoes per year
Up to 1979, it had been a single proprietorship operated and 
owned by Mr. and Mrs. Lucio Amane with some 1.5 million
pesos in capital
In 1980, the company was incorporated with authorized 
capitalization of 5 million, divided into 500,000 shares at P10
par value
The company’s products were principally for domestic and to  
some extent, for foreign markets
Mr. Lucio Amane, its president, had been in the shoe business 
for 20 years.
An Accountant by profession, he had extensive training in 
shoe manufacturing technics at Romas, France.
Leatherworld had a marketing, tie – up with the , Group of  
Companies (HGC), The latter operated a chain of department
stores with 5 branches in Metro Manila, and Three provincial
branches in major cities outside of the Metropolis,
Leatherworld employees would attend training programs  
abroad, at the expense of HGC, to enable them to acquire the
necessary technological, know-how and skill
Mr. Istrael of Shoe Masters, New York, Ltd., who was a 
friend of Mr. Amane, indicated that the American market
found Leather World’s products attractive. He is interested
carrying the product of Leatherworld to America
In 1978, the ending figure for domestic per capita  
consumption was 0.21 pair which implied that in that year,
there was only an average of a pair of shoes purchased by
every five Filipinos.
In the export market, demand for Philippine leather shoes 
grew at the rate of 23 % during the period 1974 to 1979
Mr. Lucio Amane was faced with the problem of raising the 
2.625 million project cost.
He had very little personal cash savings left and he was not 
sure whether he wanted to let outsiders get into his company

VII. Areas of Consideration

Mr. Lucio Amane was evaluating 3 alternatives source of fund open
to LeatherWorld Inc. with regards to funding its proposed expansion.

VIII. Alternative Courses of Action

 Share of Stock
 Sale of company Real estate properties
 Negotiating a term loan with a financing institution which is the Molave
Investment Corporation.

IX. Evaluation of Alternatives

Advantage Disadvantage
Share of Stock
 The needed fund for expansion will be  Shareholders will take over the control in the
provided at the right time. company.
 There are still unissued shares.

Sale of Real Estate Properties

 The needed fund for expansion will be  The properties of the company will be
available at the right time. lessen.
Term Loan
 The needed fund for expansion will be  Increases the company’s liability.
available at the right time.  High interest rate.
 There is a grace period of 2 years for the long
term loan.
 Currency Fluctuation
 X. Courses of Action
 Mr. Lucio Amane will issue 262 500 shares to accumulate the
needed fund worth of 2.625 million.
 He will contact Mr. Juan Cruz-Amane, the vice president of
Makati Stock Exchange to publish the issuance of shares of the
company
 The expansion project will start.

XI. Recommendation
We recommend that Mr. Lucio Amane should issue the shares to attain the 2.625
million pesos needed in the expansion of the company to increase production capacity
from 20,000 pairs 60,000 pairs of shoes per year throught the construction of new plant
and the acquisition of equipment.

XII. Conclusion
In conclusion, the company hasn’t reached its full potential. These days’
companies generate more profit by being a jack of all trades instead of being a
master of one. Producing only one type of product is a short-short sighted
approach. If a worthy or even better competitor surfaces, the company may suffer
big losses due to the fact that their only money-making product is being
overthrown out of its place. Regardless, the company has great potential since it is
partnered with a distributor (HGC) which has establishments on both urban and
rural areas.