Cooper Industries' Corporate Strategy
22-03-2012
Morena Xodo (matr. 639471)
COOPER INDUSTRIES’ CORPORATE STRATEGIES
Cooper industries’ is a broad company that strongly uses M&A strategy of diversification. But diversification for Cooper doesn’t mean just ‘adding, adding and more adding’. Division managers seek for ‘complementary acquisition’ defined as logical extensions of Cooper’s existing products or markets; furthermore they keep examining what they have, not being afraid to get rid of companies that have served their useful time; this process was defined as ‘cooperization’. Then, after each acquisition the interneal structure was modified, if necessary. But why diversify? Everything started from the cyclical downturn suffered from Cooper in 1958, this experience had a deep impact on the company, that at the time was still a small engines maker. They felt there was the need to diversify and not to limit their-self; several guidelines drive Coper’s acquisitions: they pursue only companies that exhibit stable earnings or with earnings countercycljcal to the oil and gas transmission industry; have proven manufacturing operations; use well- known technologies, serve a broad customer base and are market leaders. In addition they decided to concentrate on the hand tools market, that with its few fluctuation will help leveling Cooper’s cyclical revenues even more. Part of the company’s strategy is the fact that Cooper targeted 40% as a desirable debt- total capital ratio ,and preferred to finance expansion with cash or convertible preferred stock ‘cash flow is king’ was the motto. Strong cash flow will help Cooper to aggressively pursue its acquisition program. Cooper industries’ in my opinion is a very good company, creating value with a strong corporate policy and organization, difficult to find in other entities. Cooper exercise central control over corporate policy but delegate day to day operating decisions to the operating units; and gives each division manager the responsibility of its
Morena Xodo (matr. 639471)
COOPER INDUSTRIES’ CORPORATE STRATEGIES
Cooper industries’ is a broad company that strongly uses M&A strategy of diversification. But diversification for Cooper doesn’t mean just ‘adding, adding and more adding’. Division managers seek for ‘complementary acquisition’ defined as logical extensions of Cooper’s existing products or markets; furthermore they keep examining what they have, not being afraid to get rid of companies that have served their useful time; this process was defined as ‘cooperization’. Then, after each acquisition the interneal structure was modified, if necessary. But why diversify? Everything started from the cyclical downturn suffered from Cooper in 1958, this experience had a deep impact on the company, that at the time was still a small engines maker. They felt there was the need to diversify and not to limit their-self; several guidelines drive Coper’s acquisitions: they pursue only companies that exhibit stable earnings or with earnings countercycljcal to the oil and gas transmission industry; have proven manufacturing operations; use well- known technologies, serve a broad customer base and are market leaders. In addition they decided to concentrate on the hand tools market, that with its few fluctuation will help leveling Cooper’s cyclical revenues even more. Part of the company’s strategy is the fact that Cooper targeted 40% as a desirable debt- total capital ratio ,and preferred to finance expansion with cash or convertible preferred stock ‘cash flow is king’ was the motto. Strong cash flow will help Cooper to aggressively pursue its acquisition program. Cooper industries’ in my opinion is a very good company, creating value with a strong corporate policy and organization, difficult to find in other entities. Cooper exercise central control over corporate policy but delegate day to day operating decisions to the operating units; and gives each division manager the responsibility of its