Problems

1) Hill country had significant focus on maximizing shareholder value. The philosophy was
applied at every level of the organization and in all operating decisions. Also, Company’s
CEO and other management insiders had held a significant proportion of the company’s
common stock, approximately 1/6th of total outstanding shares. Thus, focus on building
shareholder value was also personally beneficial to the members of management team.
However, this also lowered their risk appetite. As their own money was at stake, they
approached all business opportunities cautiously and often missing on early opportunities.
They only decided to pursue them when they seemed to be viable and profitable. This
ensured consistent but mediocre growth rates for sales and profit margins for a company.

2) Hill country’s culture and managerial philosophy was caution and risk aversion. The
company invested in new capacity and new products only when attractive opportunities
were identified and it did not make high-risks bets in its product markets. Growth was low
risk and incremental, driven by extensions of existing products and the acquisitions of
smaller specialty companies. This strategy produced sales growth rate that were steady if
unspectacular but also increased the likelihood that customers would favorably respond to
the company’s new products. Management avoided great leaps in its product markets,
instead believing a series of small but successful product launches, combined with the
company’s operating a cost efficiency, would quickly contribute positive operating profits.
However, this risk averse attitude didn’t allow company to take advantage of opportunities
at first and no first movers advantage.