Cooper Industries

Profitability of oil companies declined due to low prices; and most of these firms responded with cost-cutting measures. Many top companies divested their marginal properties, seeking to consolidate and rationalize their productive assets- one of which was Amoco Corporation. Amoco Corporation conducted an extensive review of its cost structure and profitability (p.2), leading to major restructurings to better focus on its core businesses. The result of this was a divestment of the middle section of its assets along marginal curve. Morgan Stanley advised and assisted in the process, creating MW Petroleum Corporation – a new, free-standing exploration and production oil and gas company. MW was offered to a number of targeted international petroleum concerns, but the most attractive offer came from Apache Corporation. Apache Corporation was an independent oil and gas company based in Denver, Colorado engaged in exploration, development, and production of oil and natural gas. Their strategy, “rationalize and reconfigure” involves acquiring producing properties whose operations Apache could quickly control and make more efficient, producing significant cost-saving opportunities for the company. The sale of MW Petroleum provides such an opportunity for them. However, Apache must first carefully evaluate MW’s value to come up with a proposal that would be attractive for Amoco and profitable for Apache as well. CRITICAL ANALYSIS

turnover, which is made possible by low prices and limited product selection. This business model is appealing for them and has many benefits. Firstly, by setting up the business approach to rapidly

product and starting a price war with competitors that would damage margins. In addition, a low priced

audience. Companies know how to sell their products and make millions of dollars doing it.

Established and maintained more suppliers that would provide more options and huge discounts in large orders

innovative products but functional products because it offers great variety and low profit margins. In

Grommet Industries is facing some very tough business decisions to stabilize the company and restructure to stimulate growth. The HR issues that I am now asked to address in our meeting with Mr. Ramon include identifying the issues we are facing, the options we have to work with, and strategies to use for implementation.

1. Think about size, growth, locational aspects and segmentation 2. Market Structure 3. Performance metrics used 4. Trends

Moreover, Cooper’s corporate strategy is diversification through acquisitions and mergers. This diversification is in both related and non-related

Cartwright is a retail distributor of lumber products. It built its competitive edge based on pricing and having a careful control over its operations. The company reported an operating income of $86,000 and $111,000 in 2003 and 2004, respectively. This is a 29% increase in operating income in one year, which shows the firm’s strong ability to generate cash. The firm’s account receivables and inventory are increasing from year to year which is a good sign of a growing business. Cartwright is not an asset intensive company. It does not have to have huge fixed assets; most of its assets are cash, accounts receivable and inventory which all depend on future sales. Sourcing of materials is managed very well, purchased at discounts most of the time and contribute to having lower prices.

High level of commitment from the dominant coalition which trickled down the whole organization structure.

5. Create perception from customers to be as an excellent value for money and more reasonably priced than their competitors’ products.

Ans. Lincoln has not been very successful in making successful and profitable acquisitions outside of North America, especially when the company has tried to enter a market strictly through the acquisition route. Inexperience of Lincoln’s executives with trade-unions and lack of knowledge of labor practices and laws in other countries proved major stumbling blocks in the effort to integrate the new acquisitions into Lincoln’s distinctive management culture. Local managers and employees are not convinced that these practices are appropriate for their local environment. As a result the Lincoln has realized that it would rely more on joint ventures and strategic alliances rather than an acquisition. In consonance with its investment philosophy Lincoln would only go forward with an acquisition only if it is immediately accretive, the investment had a minimum internal rate of return of 10%, increasing it to over 18% in 3-4 years also the acquisition should be done at less than 8XEBITDA. Since India is a booming market, Lincoln would not be able to achieve its initial investment goals, any acquisition would require paying up a premium. One of the target companies is already owned by the competitor and other local target had a company of family ownership and dispersed ownership structure.

Cooper also divested many less profitable businesses over an eighteen year period from 1970 to 1988. The benefit added by the Cooper conglomerate to its business units justifies the costs associated with a corporate / centralized control. Furthermore, Cooper’s corporate management effectively managed and invested in the best opportunities for growth with little political bias.

2. Unique business model – expanding on the self-service trend with a unique twist and custom pricing options will be appealing to all consumers.