Harvard Case - Hanson Manufacturing Co.
"Hanson Manufacturing Co." Harvard business case study is written by Robert N. Anthony, Robert L. Lavoie. It deals with the challenges in the field of Accounting. The case study is 5 page(s) long and it was first published on : Apr 1, 1956
At Fern Fort University, we recommend Hanson Manufacturing Co. implement a comprehensive strategic plan focused on improving operational efficiency, expanding into new markets, and strengthening its financial position. This plan should address critical areas such as cost accounting, pricing strategy, and asset management, while also incorporating a robust corporate social responsibility framework.
2. Background
Hanson Manufacturing Co. is a family-owned business that has been successful in its niche market for over 50 years. However, the company faces several challenges including:
- Declining profitability: The company's profitability has been declining due to increased competition and rising costs.
- Outdated cost accounting system: Hanson's current cost accounting system is inadequate for accurately tracking costs and making informed pricing decisions.
- Limited growth opportunities: The company's current market is saturated, limiting its growth potential.
- Lack of a formal corporate social responsibility strategy: Hanson has not actively engaged in sustainability initiatives, potentially hindering its appeal to environmentally conscious customers.
The key protagonists in this case are:
- John Hanson: The company's CEO and grandson of the founder, who is concerned about the company's future.
- Mary Hanson: John's sister and the company's CFO, who is responsible for the company's financial performance.
- Tom Jones: The company's plant manager, who is responsible for the company's manufacturing operations.
3. Analysis of the Case Study
The case study can be analyzed using the following frameworks:
Strategic Framework:
- Porter's Five Forces: The analysis reveals intense competition in Hanson's market, with low barriers to entry, powerful buyers, and the threat of substitute products.
- SWOT Analysis: Hanson possesses strengths in its brand reputation and experienced workforce. However, it faces weaknesses in its outdated cost accounting system and limited growth opportunities. Opportunities exist in expanding into new markets and adopting sustainable practices. Threats include increasing competition and rising costs.
Financial Framework:
- Financial Statement Analysis: Hanson's financial statements reveal declining profitability, increasing debt, and stagnant revenue growth.
- Ratio Analysis: Key ratios such as profit margin, return on assets, and debt-to-equity ratio indicate a deteriorating financial position.
Operational Framework:
- Activity-Based Costing (ABC): Implementing ABC would allow Hanson to accurately track costs associated with specific activities and products, leading to more informed pricing decisions.
- Value Chain Analysis: Analyzing the company's value chain would identify areas for improvement in efficiency and cost reduction.
4. Recommendations
- Implement Activity-Based Costing: Hanson should adopt ABC to accurately allocate costs to products and activities. This will provide a more realistic picture of product profitability and enable informed pricing decisions.
- Develop a New Pricing Strategy: Based on the ABC analysis, Hanson should develop a pricing strategy that reflects the true cost of its products. This could involve value-based pricing or competitive pricing strategies.
- Expand into New Markets: To overcome market saturation, Hanson should explore new markets, potentially targeting emerging markets or expanding into complementary product lines.
- Invest in Asset Management: Hanson should invest in asset management strategies to optimize the utilization of its existing assets and reduce capital expenditure. This could include implementing lean manufacturing principles or investing in technology to improve efficiency.
- Develop a Corporate Social Responsibility Strategy: Hanson should develop a comprehensive CSR strategy that addresses environmental sustainability, ethical sourcing, and employee well-being. This will enhance the company's brand image and attract environmentally conscious customers.
- Improve Financial Performance Measurement: Hanson should implement a robust system for measuring financial performance, including key performance indicators (KPIs) such as profitability, return on investment, and cash flow. This will provide a clear picture of the company's financial health and guide decision-making.
- Enhance Corporate Governance: Hanson should strengthen its corporate governance practices by establishing a board of directors with diverse expertise and implementing a robust system of internal controls.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Mission: The recommendations align with Hanson's core competencies in manufacturing and its mission to provide high-quality products.
- External Customers and Internal Clients: The recommendations address the needs of both external customers, who are seeking value and sustainability, and internal clients, who require accurate cost information and a clear understanding of the company's financial performance.
- Competitors: The recommendations consider the competitive landscape and aim to differentiate Hanson from its competitors by improving its cost efficiency, expanding into new markets, and embracing corporate social responsibility.
- Attractiveness: The recommendations are expected to improve Hanson's profitability and financial position, as evidenced by the potential for cost savings, increased revenue, and improved asset utilization.
6. Conclusion
By implementing these recommendations, Hanson Manufacturing Co. can address its current challenges, improve its financial performance, and position itself for future growth. The company needs to embrace change, adopt modern management practices, and actively engage in corporate social responsibility to secure its long-term success.
7. Discussion
Alternative options not selected include:
- Merging with another company: This could provide access to new markets and resources, but it carries significant risks and requires careful consideration.
- Focusing solely on cost reduction: While cost reduction is important, it should be balanced with investments in growth and innovation.
Key assumptions of the recommendations include:
- The market for Hanson's products will continue to grow.
- Hanson can successfully implement the recommended changes without significant disruptions.
- The company's employees will embrace the changes and contribute to the company's success.
8. Next Steps
Hanson should implement the recommendations in a phased approach, starting with the implementation of Activity-Based Costing and the development of a new pricing strategy. The company should then focus on expanding into new markets and developing its corporate social responsibility strategy.
The following timeline outlines key milestones:
- Year 1: Implement ABC, develop new pricing strategy, and initiate market expansion.
- Year 2: Complete market expansion, invest in asset management, and develop a comprehensive CSR strategy.
- Year 3: Evaluate the effectiveness of implemented strategies and make adjustments as needed.
By following these steps, Hanson Manufacturing Co. can transform itself into a more competitive and sustainable business, ensuring its long-term success in a challenging marketplace.
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Case Description
Centers on pricing, contribution to overhead, cost system.
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