Unformatted text preview: Cong Hui A41753847 Cooper Industry Case Analysis Cooper Industry is an engines and compressors maker with a history more than 150 years. It had been a small company but with good reputation until 1960. In 1960, Cooper expanded its business by acquiring other manufacturing company. It had a famous process call “cooperization” which brought up with many highly efficient, profitable, and competitive businesses. In 1989, Cooper was considering more acquisitions. It first won the bidding with a $21-a-share tender offer and purchased the Champion. It also considered a $700 million bid for Cameron Iron Works. The strategic issue in this case would be whether or not Cooper should complete the purchasing even with a high financial risk and profound operational and organizational ramification. Fist let’s use Porter’s Five Forces to analyze Cooper Industry. Bargaining power of new entrants Level: Medium Cooper tried to fulfill their goals of growth and diversification through acquisitions, and they did success. Cooper tried to fulfill their goals of growth and diversification through acquisitions, and they did success....
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Analysis of Cooper Industries
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- Rating: Excellent
Analysis of Cooper Industries
Cooper Industries is a broadly diversified manufacturer of electrical
and general industrial products, and energy related machinery and equipment.
The company operates in three different business segments with 21 separate
profit centers. These segments include electrical and electronic, commercial
and industrial, compression, drilling and energy equipment. The product line is
consisted of cheap fuses to $3 million compressor tribune sets along with
products such as hand tools and light fixtures.
The company bid a $21-a-share tender offer to acquire Champion Spark
Plug, manufacturer of auto spark plugs, as a counter offer for the Dana Corp.'s
$17.50-a-share bid. Also, in the mean time, CooperIndustries was considering a
$700 million bid for Cameron Iron Works. Even though purchasing either or both
companies will give operational and organizational advantages, there were high
financial risks involved. Undertaking both acquisitions would result in a 55% to
60% debt to capitalization ratio.
Cooper Industries acquired more than 60 manufacturing companies over a
thirty year span in order to increase the size and the scope of the company.
Most of the acquired companies made it possible for Cooper to be independent of
the outside environment and giving full control of the manufacturing process
concerning their business while avoiding anti-trust allegations. Cooper
basically purchased every company that is vital to its energy industry and all
the side industries that effect it. From tools to fuses to cables to the
drilling equipment was manufactured and distributed by the corporation's
divisions. Each acquisition is decided from a wish list that was closely
examined and studied. At the time of the take over, the Management Development
& Planning division would implement the corporate strategy in a period of three
to five years. This involves diversification and elimination of the products
that are poor sellers. In some cases the production plant is relocated and the
staff is reorganized for the best efficient set up. In time all these companies
are turned into profit centers.
One of my first suggestions will be to consider Cameron Iron Works first
since all the valves and other natural gas and petroleum products will be more
beneficiary. Apparently there is more demand for Cameron's products than the
Champions. Little adjustments in the production process along with the
'Cooperization' adjustment will have make the company efficient in a short
period of time. In contrast, Champion is considered to have 1950's production
techniques and only one product line, spark plugs, which will require
tremendous changes within the company.
The other option may be to purchase both of the companies, regardless of
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Cooper Industries Manufacturer Spark Anti-trust Equipment Compression Machinery Offer Diversification
the financial risks involved. By allocating all the departments such as
Management Development & Planning in the process, Cooper may turn things around.
Since the beginning, Cooper's way of acquiring companies seem to create
success stories in the end. Champion still has brand name recognition in Europe
and Asia (personal knowledge) which maybe taken advantage of. Major changes for
the American market may take place while the revenues from the overseas sales
finance the process. And once the changes are made in here, according to the
demand the product line maybe readjusted for those markets.
One other option for the Champion acquisition maybe to consider other
possible options in the automotive parts industry. There may be other companies
requiring less adjustment, and maybe turned into profit centers in less time
If buying both the companies is not possible at the time, then Cameron
seems like a better option giving independence to Cooper in the valve dependence.
Utilization of this company seems more of a priority at the time. However Dana
may end up buying Champion if Cooper delay the acquisition.