Hampton Machine Tool
Hampton Machine Tool Company
1. Hampton Machine Tool Company was founded in 1915 and was based out of the St. Louis area. It was a manufacturing firm serving the automobile and aircraft industries. Due to the strong automobile market and defense spending for the Vietnam war, the company was seeing record production and profits through the 60’s and early 70’s. After that, the Arab oil embargo, the increase in the price of Gasoline and the then recession was taking its toll on the Company’s financials. By the late 70’s the market had stabilized and many of Hampton’s competitors were forced out of the industry and Hampton was expecting capacity sales once again.
Analysis using Porters elements:
a) Threat of new entrants were very low since the market for these products seems to have stabilized and considering the huge capital expenditure to set up shop.
b) Threat of substitute products also seems very low since Hampton seems to be a specialized manufacturing firm.
c) Rivalry among existing competitors seems to have gone down with most of the competition being taken out of business.
d) Bargaining power of buyers seems to be a valid threat. Coming out of a recession, buyers look for deals on pricing. With the declining sales of automobiles and defense expenditures, the bargaining power of buyers would be a valid threat to the business.
It is not a good industry to be in for the company because of the high levels of capital expenditures required and the declining sales of their buyers. From the banks perspective, it is a good industry to finance, because most of the customers revenues are from the government so cash inflow can be stable. Also, the business has customers prepaying a deposit amount for their product, which is good from the banks point of view to recover their financing investment.
2. In his letter to the Bank, Mr. Cowins, the President of Hamilton Machine Tool Company mentions that the Company currently has work-in-progress inventory
1. Hampton Machine Tool Company was founded in 1915 and was based out of the St. Louis area. It was a manufacturing firm serving the automobile and aircraft industries. Due to the strong automobile market and defense spending for the Vietnam war, the company was seeing record production and profits through the 60’s and early 70’s. After that, the Arab oil embargo, the increase in the price of Gasoline and the then recession was taking its toll on the Company’s financials. By the late 70’s the market had stabilized and many of Hampton’s competitors were forced out of the industry and Hampton was expecting capacity sales once again.
Analysis using Porters elements:
a) Threat of new entrants were very low since the market for these products seems to have stabilized and considering the huge capital expenditure to set up shop.
b) Threat of substitute products also seems very low since Hampton seems to be a specialized manufacturing firm.
c) Rivalry among existing competitors seems to have gone down with most of the competition being taken out of business.
d) Bargaining power of buyers seems to be a valid threat. Coming out of a recession, buyers look for deals on pricing. With the declining sales of automobiles and defense expenditures, the bargaining power of buyers would be a valid threat to the business.
It is not a good industry to be in for the company because of the high levels of capital expenditures required and the declining sales of their buyers. From the banks perspective, it is a good industry to finance, because most of the customers revenues are from the government so cash inflow can be stable. Also, the business has customers prepaying a deposit amount for their product, which is good from the banks point of view to recover their financing investment.
2. In his letter to the Bank, Mr. Cowins, the President of Hamilton Machine Tool Company mentions that the Company currently has work-in-progress inventory