1. What is Cooper’s corporate strategy? How is Cooper Industries adding corporate value to its portfolio of businesses? Would you recommend any changes in corporate strategy?
Cooper’s corporate strategy is diversification through acquisitions and mergers. This diversification is in both related and non-related businesses to lessen its dependence on the capital expenditures of the natural gas industry. Cooper’s started acquiring low-technology manufacturing companies. The companies were premium-quality products with strong brands names mainly still own by the original family owners that have seen better days. Once Cooper’s acquired the companies they would update the processes and equipment and consolidate the plants.
In a few cases, moved entire manufacturing plants to new plants in the southern part of the country to break away from practices of 20 years ago. They called this the “Cooperization” process which is one where they create lean independent business. The “Cooperization,” process included plans for divisional managers to seek out complementary acquisitions for further expansion of the Cooper Empire. Let’s now look at ways they add this value to the Cooper Portfolio.
Cooper empire added value to the corporation in a variety of ways:
Manage Cooper’s over all corporate portfolios
•Pursuing companies have stable earning or earning counter cyclical to oil and natural gas
• 30 years acquired more than 60 manufacturing companies
•Retain only best top leadership from the acquired business
•Centralized activities including managing inventories, sales, shipping, billing and headquarters.
•Over 30 divestitures in under 20 years in efforts to only keep business that would continue to add value
•Half of growth depends upon internal growth and other half from acquisitions
•Reviewed about 100 potential acquisitions annually.
•Division had a global responsibility for its operations.
•Close examination of business parts in order to place different products into a more well suited area of the corporation.
•Corporate management teams participate in every policy decision made in the organizations
•Internal audit staff and four person team of manufacturing cost systems experts available
•Labor relation, shareholders and public relations, environmental matters, legal affairs, administering personnel policy and benefits programs handle by one person.
•Strong union-avoidance policy
•Precisely focused upon complying with strategy rather than upon assigning blame for poor performance.
•Knowledgeable, understanding, and supportive division managers.
Managing each individual business owned by Coopers
•Focus on products that served basic needs and suspending manufacturing on unprofitable products. •Vertical integration of other business to lower supply and dealer cost. • Gain leverage with distributors because of greater sales volume and wider product offering. •Decentralized operation philosophy.
•Bottom-up strategic planning.
Managed linkages among different divisions of Coopers businesses •Combining sales member from other companies to promote all products creating a small yet efficient sales team. •Strong brand name for superior quality.
•“Cash flow is king,” implemented thinking in divisions to keep money on hand to be able to acquire businesses fast and efficiently if needed or opportunity presents itself. •Production improvements based upon broader perspective of manufacturing plants they one plant can have. •Established purchasing council negotiated advantageous prices •New building and/or major construction products would be expected to purchases Cooper’s supplies.
Manage change in the businesses owned by Coopers
•Combining duplicate product lines to one division •“Lean and mean,” cost structures while limited power of spending habits to lower level managers. •Rationalized manufacturing facilities to close underutilized plants •Consolidating sales and marketing programs to help develop a unified market identity and then construct showroom to display all of its products, train architects, designers, and to show off product lines. •Enhanced management of distribution-oriented businesses because of experience at Cooper’s.
Recommendations for changes in future acquisitions and mergers: It is my belief that Coopers has a first-class corporate strategy that is very effective at making money. They have great portfolio management skills with obtaining and releasing companies that is best for the stockholders. This means there is little agency problem that occurs in the corporation. Coopers is also great at creating productive manufacturing companies with little worries about foreign competitors due to high-quality products, technologies and management teams in place to direct uncharted directions. The only recommendation of change I have is for the company to have a greater appreciation of people currently running the acquired businesses. Yes, Coopers obtained them in a rundown condition, but the companies are still in business.
That means the few people holding the company together could be lost with the “my way or the highway” philosophy of Coopers. This only need to be a small change, Coopers is good at identifying profitable parts of a business except mid and low level human based resources. Cooper should start an evaluation process of current workers and the ones that are a superior fit should be sent to a different part of the corporation to be trained in the Cooperization process in hopes they will one day become a greater asset to the company.
2. How is Cooper Industries structured? Is this structure appropriate for its strategy? Would you recommend any structural adjustments? Divisional Structure
The diversification structure is very appropriate for Cooper Industries. Cooper has operations in manufacturing, administration and finance across many different products creating synergy throughout entire corporation. These operations across many different products, areas, and customers gives enhanced flexibility to the corporation as a whole in responding to change. This flexibility creates enhanced coordination across the functional departments due to expertise focus. The diversification structure combined with an expertise focus allows Coopers to evaluate internally to give clear responsibility with a mature sense of correction. As if the diversification structure with the expertise focus wasn’t enough, Coopers added a system of control on top of all this to ensure success. This control required all division to propose a standard 150 line item monthly financial report, guidelines to help direct potential acquisitions, and strong brand name awareness for quality creating a well-built company.
Cooper recommended structural adjustments
In the case of Cooper’s structure I believe it is prestige and shouldn’t be touched. The fact that the company gives up control of day-to-day activities with monitoring and guidance available creates trust in throughout the entire organization. Secondly, because the Cooper’s breaks up newly acquired companies and transfers resources among the different business units or even to relocates a full line to different divisions show that this is a forward thinking company. Thirdly, it would be unachievable for another corporation to compete on the same level as Cooper because it has co-leader in every divisional segment. Lastly, even if a company does become available to purchase you better be ready to compete with Coopers which is a force you don’t want to come against.