Essay on John M. Case Analysis

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Overview History/Growth This case concerns the John M. Case Company, which at one time was the leading producer of business calendars in the United States. The company was founded by the grandfather of John M. Case in 1920 and was inherited in 1951. The company had experienced profitable operations every year since 1932, and held approximately a 60-65% market share by 1984. Sales had been increasing annually at about a 7% compound rate, and the return on average invested capital was about 20%. The cost structure of the company was 100% equity, owned solely by Mr. Case. The capital budget was the leftover earnings generated from internal operations minus the amount Mr. Case wished to withdrawal as income (dividends) for the…show more content…
Since the only reasonable basis to compete in this market is price, and Case held economies of scale largely reducing its costs and expenses, it was inconceivable that new entrants were a significant business threat. Unexploited Opportunities There was a significant investment opportunity that the top level executives had proposed that Mr. Case rejected due to his satisfaction with his current income and also lack of desire to enter what could possibly be a riskier product market in order to create a more competitive but less profitable business. The project was projected to cost $1.1 million, with $900,000 spread between the first two years. The expected yield in the first year was $1 million, with a 40% growth rate in years 2-4 and a 12% growth rate thereafter. It was projected to have a before-tax profit margin of 6%. With Mr. Case out of the picture it will be possible to pursue this opportunity and increase growth rates through reinvestment of earnings in related businesses instead of disbursement of dividends. This could mean bigger profits for management if the faster growth rate allowed them to take the company public at a high price-earnings ratio. Analysis The outlook for the company is strong; it holds a majority of the market share for the entire country as well as the economies of scale to keep it. There is room
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