Audiovox 2004 Annual Report Download - page 9

Strategy
The Company's objective is to increase revenue and operating income by
leveraging and expanding through acquisitions the well−recognized Audiovox(R)
brand name and family of brand names. The key elements of the Company's strategy
are:
Capitalize on niche market opportunities in the electronics industry. The
Company intends to continue to use its extensive distribution and supply
networks to capitalize on niche market opportunities in the electronics
industry, such as satellite radio, navigation, mobile video, DVD's, flat
panel TVs and vehicle tracking systems.
Leverage its distribution network. The Company believes it has a
significant distribution network that includes all of the major
distribution outlets; power retailers, mass merchandisers, independents,
distributors, car dealers and OEM. The Company provides value added
services such as market intelligence, product design, engineering,
development and testing, sales support, customer service and product
service. The Company intends to continue to expand its value−added services
as the market evolves and customer needs change.
Increase market penetration by capitalizing on the Audiovox(R) family of
brands. The Company believes the "Audiovox(R)" family of brands, which
includes Prestige(R), Pursuit(R), Rampage(TM), Jensen(R), Magnate(R), Mac
Audio(R), Heco(R), Acoustic Research(R) , Advent(R) and Phase Linear, is
one of its greatest strengths. During the past 44 years, the Company has
invested to establish the brands for Consumer Electronics products. To
further benefit from the Audiovox(R) brands, the Company continues to
introduce new products using its brand names and licenses its brand name
for selected consumer products.
Pursue strategic and complementary acquisitions − Management consistently
monitors economic and industry conditions in order to evaluate potential
synergistic business acquisitions that would allow the Company to leverage
overhead, penetrate new markets or expand the Company's existing business
distribution.
Grow our international presence. During fiscal 2003, the Company expanded
its international presence with its acquisition of Recoton's European
assets, and the Company intends to expand this international business
through the introduction of Audiovox products to their marketing mix.
Continue to outsource manufacturing to increase operating leverage. A key
component of the Company's business strategy is outsourcing the
manufacturing of its products, which allows the Company to deliver the
latest technological advances without the fixed costs associated with
manufacturing.
Monitor operating expenses. The Company's total operating expenses have
increased at a slower rate than sales since 2000. In fiscal 2004, operating
expenses have increased 92.3% since 2000, compared to sales growth of
105.1% since 2000. The Company has invested in management information
systems and its operating facilities to increase its efficiency. The
operating structure of the Company for the year ended November 30, 2004 was
structured to facilitate the operations of a combined group through
November 1, 2004 of Cellular and Electronics. Due to the divestiture of
Cellular in the later part of fiscal 2004 and the internal costs necessary
to unwind the Cellular business, the Company was unable to change the
operating structure of the Company to impact the fiscal 2004 operating
results. During fiscal 2005, the Company will focus its efforts on
evaluating the current business structure of the Company in order to create
operating efficiencies with the primary goal of increasing operating
income.
6