Monmouth Essay

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Case question 1 During the recent years, Robertson Tool has been underperforming. Poor profit and sales performance reflects potential profits to be achieved from an acquisition with Robertson. At Robertson, key line items such as sales income, cost of sales and administrative expenses are much likely to be improved. Despite the fact that Robertson’s distribution system has a great range with wholesalers selling to over 15,000 retailers in 137 countries, the company’s sales growth (2%) falls behind the industrial sales growth by 4 per cent (6%). Poor sales performance and relatively high cost of sales have contributed to the profit margins to slip to one third of other hand tool manufacturers. It also comes clear that Robertson’s effort to provide products to every market segment lowers the overall efficiency of the company. By cutting non-marginal products from the company’s range of products, cost of sales has a potential of being reduced from 69% to 65% of sales. Further on, in case of an acquisition with Robertson, Monmouth Inc. could reduce Robertson’s sales force by implementing all sales functions into the existing hand tool lines. Sales and administrative expenses are expected to be lowered by 3 per cent (from 22% to 19%) if any duplications were removed. Finally, Robertson’s greatest asset base is their well-established distributional system. By undertaking Robertson, Monmouth could receive high synergies as their established Dessex-Keane-Kroll product line could be supplied to entirely new market segments. The downside here is the potential of any product cannibalization on Robertson’s products. In the other hand, I would not expect any significant cannibalization effects as Robertson and Monmouth’s sales are portioned in the opposite direction (Robertson’s sales are portioned with 75% to the industrial market and 25% to the consumer market as

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