Contents
Introduction 3
Industry analysis 4
Competitive Rivalry 4
Substitute Products 4
Threat of new Entrants 4
Strategy 5
Operations – Cost analysis 5
Administration – Cost Analysis 6
Proposed Complex Cards – Cost Analysis 6
Recommendations 7
Conclusion 8
Appendix 9
Table 1: Hammond Cards Production Cost 9
Table 2: Creative Designs Production Costs 10
Table 3: ABC of combined Administration Functions 10
Table 4: Complex cards sold to Hammond Customers 11
Table 5: Complex cards sold to Creative Customers 12
References 13
Introduction
Hammond Cards, Inc. is a small player of the greeting cards industry in the United States of America due to the fact that their annual revenues equate to less than 1% of the industry leaders as described in the case. In their effort to stimulate growth, however, Wendy Hammond has employed me to analyze the potential acquisition of another company, Creative Designs. My analysis will firstly look at the main issue behind this acquisition and then further break it down into sub-issues that I will address individually. Since both of these companies follow a different strategy I will evaluate the two different companies and discuss the implications of their strategies on the merger. I will then perform various cost analysis to determine the cost structures of the two firms which will help me identify whether Wendy’s intentions can be carried out. In my analysis I will aim to figure out the practical capacity of the firms and get an indication on whether their current operations are using the optimal level of capacity and minimizing waste. This data will help me with my strategic recommendation of acquiring Creative Designs and fitting it in with the current strategy of Hammond C...
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...26 25 $6.50
Total COGS $190.07
COGS per unit $0.38
Gross Profit $259.93
Sales and Admin Cost
Customer contact hours $34.90 1.92 $67.00
Orders 8.70 1 $8.70
Different card style shipments 0.75 10 $7.50
Boxes Packed 3.46 1 $3.46
Billing Transactions 14.78 1 $14.78
Total S&A cost per order $101.44
Margin $158.49
Margin per card $0.32
References
American Greetings Corporation SWOT Analysis. (2013). American Greetings Corporation SWOT Analysis, 1-7.
Hallmark Cards, Inc. SWOT Analysis. (2013). Hallmark Cards, Inc. SWOT Analysis, 1-7.
Mulligan, P., Hall, O., Nanni Jr, A. J., Hall, L., & Ansari, S. (2006). Hammond Cards, Inc: The Creative Acquisition. Inc: The Creative Acquisition (July 31, 2006).
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 86(1), 25-40.
In the year of 2005, the companies eventually found a way to make it easier for the companies to combine without having any major issues or problems. Unfortunately, around the year of 20010 the merging com...
Gaughan, P. A., 2002. Mergers, Acquisitions, and Corporate restructuring. 3rd ed.New York: John Wiley & Sons, Inc.
Senior Management of PepsiCo is evaluating the potential acquisition of two companies – Carts of Colorado and California Pizza Kitchen – in order to expand the company’s restaurant business. If indeed PepsiCo decides to pursue the acquisition of one or both, they must decide how to align each of these business units in its historically decentralized management approach and how to forge relationships between the acquired business units and existing business units. In their evaluation, Senior Management is faced with the question of whether the necessary capital investment in order to purchase one or both of the businesses can be profitable for each of the acquired business units, but must also take into consideration that the additional business units will not hinder the profitability of the existing business units.
Berry, A. W. (2010, May 31). Advantages and disadvantages of acquisitions and mergers. Retrieved from http://www.helium.com/items/1561489-mergers-and-acquisitions
Arthur, A., Thompson, Margaret, A., Peteraf, John, E. Gamble, A., J., Strickland III. (2014). Crafting & Executing Strategy: The Quest for Competitive Advantage 19e: Concepts & Cases. C6-C25.
Both Porter and Miles and Snow’s strategy typologies are based on the concept of strategic equifinality, or the ability for firms to be successful via differing managerial strategies (Hambrick, 2003, p. 116). Porter 's strategy is more generic while Miles and Snow’s is more specific in nature. Porter’s generic strategy typology is based on economic factors centering on the source of a firm’s competitive advantage and the scope of a firm’s target market (González-Benito & Suárez-González, 2010). Porter’s typology emphasizes a firm’s cost, product differentiation or non-differentiation and market focus. When utilizing Porter’s strategy typology, a firm must first decide to target its products toward the mass market versus a market niche or focus. Secondly, a firm will determine if it wishes to minimize costs or differentiate its products with differentiation meaning that firms will most likely forego lower costs (Parnell, 2014, p. 184). This can lead a firm to develop a myriad of strategies between these options. Strategies which may have or not have focus, may or not be differentiated, may or not be low cost or any combination of strategies. In contrast to Porter, Miles and Snow’s typology is more specific in nature.
During the last few years, Harry Davis Industries has been too constrained by the high cost of capital to make many capital investments. Recently, though, capital costs have been declining, and the company has decided to look seriously at a major expansion program that had been proposed by the marketing department. Assume that you are an assistant to Leigh Jones, the financial vice president. Your first task is to estimate Harry Davis’s cost of capital. Jones has provided you with the following data, which she believes may be relevant to your task.
Hendersern and Stern 2000, ‘Untangling the origins of competitive advantage’,Strategic Management Journal, Vol. 21, pp. 1123-1145.
2. Thompson and Strickland (2002), Strategic Management: Concepts and Cases, 13th Edition, Chicago Irwin Publications.
Porter, M. E. (2008). The five competitive forces that shape strategy. Harvard business review, 25-40.
Because the subject matter of strategic management is so inherently complex and because each one of us brings his own personal biases to the analysis, it was suggested early on that virtually all case material in the field be analyzed from the perspective of more than one methodology. Profit theory and industrial chains were selected as the first of a number of viable approaches to the analytical process. It would have been equally correct to select the Five Competitive Forces analysis refined by Michael Porter, one of the major figures in the field of strategic management. This methodology addresses the same issues but differs only in the language that they use to describe corporate behavior. The five forces are:
As a consultant for Toys, Inc., I have been called in for my advice by the company’s president, Marybeth Corbella; on which of the two proposed options would be best for the company and for the customers as well. Toys, Inc. is a 20-year-old company that produces toys and board games, our company has a reputation built on quality and innovation. Although we have been the market leader in our field, the sales have become stagnant in recent years, and sales have begun to decline when comparing them to the sales in the past. With the company’s managers attributing the decline of sales on the economy, the company was forced to reduce production costs and layoffs in the design and product development departments; this action will hopefully increase
Porter, M. E., 1999. The Five Forces that Shape Competitive Strategy. Harvard business review, p. 80.
When entrepreneurs plan their business future they will consider how they can increase their business size or profit in a short period. Entrepreneurs may consider growing their business or company by using a merger or an acquisition. These methods can be a speed up tool and a short cut to enlarge their business. (Burns, 2011) Also they can reduce competition, make it easier for entrepreneurs to think about the market and product development and risk reduction. Furthermore, some lesser – known companies can improve their firm’s image and market power by using merger and acquisition with larger firms. However, there may be risks associated with merger and acquisition related to lack of finance and time. (Burns, 2011) This essay will discuss more deeply the advantages and disadvantages of using mergers and acquisitions, showing how it can affect firms and market with the case study.
From "How Competitive Forces Shape Strategy" by Michael E. Porter, March 1979. Copyright © 1979 by the Harvard Business School Publishing Corporation; all rights reserved.