Submitted by: Submitted by JS38655
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Category: Business and Industry
Date Submitted: 04/05/2011 03:38 PM
Harvard Business School
9-286-130
June 12, 1986
Premier Furniture Company
It was mid-April, and Richard Zimmerman, credit analyst for the Premier Furniture Company, was completing his first round of credit reviews for 1984. Two of his accounts—Designers, Inc. of Pittsburgh, Pennsylvania, and Walcott Department Stores of Hartford, Connecticut—had moved well beyond the credit limits set by Premier. It was Zimmerman's job to determine the appropriate corrective steps. After his third look at the customer file for Designers, Inc., Zimmerman was still undecided. He had evaluated the account as "satisfactory'' in his annual review in early 1983, but his reservations at that time were not lessened by the performance in fiscal 1984. It was evident that the substantial sales to Designers in the last three months did not necessarily signal an improved relationship. Zimmerman was also troubled by the most recent numbers of Walcott Department Stores. Walcott had been a reliable account since 1951 but had posted a large operating loss in fiscal 1984. His review was further complicated by the fact that the owners had recently opened stores in Worcester and Springfield, Massachusetts. Although Walcott's future obviously depended on how the branch stores fared, Zimmerman had no reason to assume their success or failure.
Order Now, Pay Later ….. And Later
It was obvious to Zimmerman that the Designers and Walcott accounts invited a raised eyebrow, but given Premier's credit policy the numbers came as no surprise. The Premier Furniture Company of Newfield, North Carolina, manufactured high-quality home furniture for distribution to dealer cooperatives, independent home furnishing retailers, and regional furniture chains. The company advertised its lines nationally and attempted to maintain intensive coverage of trading areas by distributing through stores strategically located with a particular marketing area. Beginning in 1975, however, Premier found that product...