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Dawson Lumber Company Limited Essay

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Objective National Bank of Canada ("NBC" or "the Bank") is tasked with the decision to review Dawson Lumber Company Limited's ("Dawson") request for an increase in its line of credit up to the amount of $10.8mm. Dawson intends to finance inventory and receivables with the line of credit. NBC must remain cognizant of the competitive landscape of the lumber industry and assess whether a focus on the retail segment is beneficial to Dawson's strategic plan. Given that Dawson is one of the region's largest borrowers, NBC must be careful in how it manages this relationship. The Bank cannot afford to turn away NBC's business. However, extending Dawson additional credit may increase Dawson's default risk and jeopardize the potential for NBC …show more content…

Canadian Retail Hardware and Home Improvement Industry Analysis This industry, although more attractive than the lumber industry, has its own inherent flaws . The Canadian retail hardware and home improvement industry can be characterized by high degree of rivalry, mainly due to a large number of players competing over products of low differentiation and incurring high fixed costs. Furthermore, due to low switching costs, high information, and price sensitivity, buyers are not loyal and have high bargaining power relative to retailers. Additionally, the medium threat and power of large new entrants and suppliers adds to the industry's unattractiveness.

Company Overview Dawson was founded in the 1870's and has remained a private business since inception. Located in Ontario, Canada, its operations have been focused on three regions: Ottawa, primarily an urban market, Cornwall, a rural market, and Kingston, partially a resort and partially an urban market. During the last 3 years Dawson's net sales have increased considerably (21% in 1997; and 38% in 1998) putting great pressure on the way the company finances its working capital ("WK"). This situation is intensified by seasonal sales, typical of the construction industry. In September of 1998, Dawson pursued a strategy of forward integrating into the

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