The owner of Hansson Private Label (HPL) must determine whether or not to accept an aggressive expansion project that would preclude the company from pursuing any alternative investment opportunities for several years. The investment, if successful, would offer numerous benefits to the company, capturing greater market share, strengthening relationships with major customers, crowding out competition and increasing firm value. Nonetheless, the decision carries significant risks and could lead to a substantial decline in firm value, if not bankruptcy, should any number of variables prove unfavorable to HPL. Moreover, the project relies heavily on a contract with a single large…show more content…
The aggressive expansion strategy under consideration would effectively put all of HPL’s eggs in one basket: Should unforeseen conditions or risks materialize, or projections fall even slightly short, it could spell financial disaster for the company.
Of course, there are several potential—not to mention highly attractive—upsides to the pursuit of the project. In addition to adding value to the firm, the expansion could bolster HPL’s position in the private labels manufacturing sector, increasing market share, strengthening relationships with retail customers, and expanding production capacity. If HPL had unlimited investment capital at its disposal, my recommendation might be different; however, it is clear that acceptance of this project would cause the company to forgo all other investment opportunities for the foreseeable future. It is this fact that is most concerning to me, and which renders the investment too risky in my opinion.
A better alternative might be to pursue a series of smaller projects that do not rely on a contract with a single customer. In addition to mitigating risk, this more conservative approach could in fact result in a higher conglomerate NPV if the projects are chosen strategically. HPL should employ capital rationing using a profitability index in evaluating investment alternatives. One potential project worth analyzing would be the acceptance of the three-year contract under
Case Study Analysis for ABC, inc. Introduction During my reach into the hiring issues at ABC Inc., it was found necessary to research and read more in today’s hiring process with the current job market. The following is an introduction of one specific company that recently requested a case study of a current internal hiring process that took place or did not take place. In this situation, a new campus recruiter was expecting to bring on 15 new hires to complete for orientation to work in the Operations department. When the operations supervisor contacted the new recruiter and checked on the status of the recruiting process, they were assured that all requirements would be in place. The recruiter went to finalize the necessary paper work that would typically be in place for new hire orientation, only to discover that there was not a defined process or checklist. Background Because Carl (the recruiter) was new to ABC Inc., he was under the impression there should be a plan of action defined for how to complete a new hire. With this, Carl should have first noticed a lack of organization in which there should be a process flow to take him from requisition, to recruitment and the matching up a candidate with the job opening. When he pulled out the new trainee’s files, it was discovered that some of the files did not have completed applications or transcripts and none of the trainees had been sent for a standard drug screen. While brainstorming all the steps that Carl assured the operations supervisor would be in place, he realized that he needs a training schedule, orientation session, manual, policy booklets, physicals and drug screens. He then realized that it was all but to late to assure a smooth transition in the hiring process. Key Problems Before any scheduled orientation can take place, paperwork needs to be verified on all potential candidates. This should include verifying all transcripts as well as reviewing