Cooper Industries Corporate Strategy Essay

Q1. What is coopers unified strategy cooper Industries main corporate strategy is broad diversification through M&A. make Industries demandd firms in order to lessen its dependence on cyclical natural gas industriousness and to possess stable earnings. cooper Industries acquired firms that had stable earning, a broad customer base and proven manufacturing operations exploitation wellhead-known technologies. Cooper Industries had a good corporate train strategy of diversification. Copper Industries acquired both link up and non-related businesses. As a result, Cooper Industries could exhibit stable earnings.Reasons for Coopers diversificationThreats of its original industry Low growth levelUnstable mart(cyclic)Technology IssuesExpensive effort and high costs.Coopers strengths Skilled labor and high technology that could be used in other businessesFinancially abundant.In order to refrain from possible threats and maximize its strengths, Cooper chose to diversify its business both in surface and scope.By diversification, Cooper could achieveUpdate of processes and equipmentRetain of Brand powerRetain of skilled labor and consolidated plantsRetain of cheap labor and working capital(by moving to Southern area) Overall, Coopers corporate level strategy can be regarded as good because it adds value in various ways. Cooper could come grocery store power and economies of scope by related diversificationBy related diversification and straight integration, Cooper could reduce costs of primary goods and supportactivities below competitive level. Cooper could also trail and exploit economies of scope byCombining duplicate product lines to one division.Rationalizing manufacturing facilities to close underutilized plants. Consolidating sales and merchandising programs to help develop a unified market identity.Combining sales members from other companies to promote efficiency.Q2. How does it attain value?Cooper also created value byAcquiring firms that exhibit stable earnings and counter-cyclical to those Cooper Industries had. (e.g. Invested in the electrical business in late 70s) Acquiring firms with high quality products and firms that were market leaders. Focusing on products that served basic needs and were manufactured by proven technologies so that Cooper gained logical earnings from stable markets with predictable growth. Transferring proven practices around the company rather than using outside consultants. acquaintance and judgment of senior management staffs.Cooper Industries key resourcesStructural behaviorsExperienced management executives.Cash melt down is king thinking enforcing attention to working capital. Bottom-up strategical plansCentralized activities among divisions.Skilled labor and capitalCooper had skilled labor and capital with low costs.Acquisition-related aspectsCooper had strict guidelines for acquiring firmsCooper conducted authoritative supervision over acquired firms. Coopers structureChief Executive Officer Cizik, three fourth-year Vice Presidents who manage Administration, Finance and Manufacturing services, and three Executive VicePresidents who manage each division electric & Electronic, Commercial & Industrial and Compression & Drilling. Central control over corporate policy but delegated casual operating decisions to each operating unit. Senior management is composed of former operators so that it knew what were good decisions to make. Cooper maintained a strong union-avoidance policy.Coopers incentivesExecutives were paid salaries based on the Hay system. Their bonuses were 2040% of base salaries. Division managers had a bonus determined by Corporate Administration and EVPs discretion. Key managers were granted stock options.When Cooper acquired a firm, administration adjusted pay scales to the same as other Cooper divisions. Cooper also adopted its standard benefits for medical insurance and pensions for new acquisitions.Coopers evaluationEvaluation was based on Manag ement Development & Planning(MD&P) MD&P evaluated organizational effectiveness and individual strengths and weaknesses by focusing on the performance of key managers. Employees were reviewed by their supervisors.Each EVP conducted one-year reviews of all managers in the division. MD&P uncovered existing or potential management gaps and place people worthy of promotion. It also distinguished candidates for interdivisional transfers, which is a key resource for Cooper Industry.Q3. Should Cooper acquire sensation set forth Plugs? Why or Why not?Cooper should acquire Champion Spark PlugsChampion was doing automotive industry, which was profitable business and related to Coopers businesses. Champion had a strategic fit with Coopers long term plans such as diversification. Champion Spark Plugs fits well with Coopers acquisition guidelines for Diversification. Stable earnings and earning patterns that are countercyclical to those Cooper had.(Slight decrease in sales, however, occurred annually) Although Champion suffered from declines in sales, Champion was recognized worldwide and was a marketleader in the spark machine politician market. Champion had an internationally recognized brand fix.Overall, Champion was suffering from declining demands in spark plug market at the time of the takeover battle. Champion was trying to cluck the automotive tool business in spite of its poor technology level. So, in order for both Champion and Cooper to make more(prenominal) profits, Cooper should acquire Champion. Champion and Cooper can both satisfy each others needs. While Champion can use Coopers experience and skilled labor to penetrate the automotive tool business, Cooper can use Champions world-widely recognized brand name to explore overseas markets.