BUSINESS POLICY :

ASSIGNMENT 1
COOPER CASE
ANALYSIS
Q3: How related are the new
businesses Cooper enters into?

MADE BY: GROUP 5

183_Achyutam Shandilya
184_Aditi Mathur
191_Ayush Mehrotra
207_Mahip Vijayvergia
204_Manali Kale
219_Keyur Pitroda
225_Ruchi Gupta
228_Sambarta Dutta
Cooper Industries Businesses
● Cooper Industries was founded in 1833

● By the time the 20th century arrived, Cooper Industries had become the American leader in
pipeline compression engines, products that enabled the development of the growing oil and
gas industry.

● In the late 1940s Cooper expanded its offering into electrical products, electrical power
equipment, automotive products, tools and hardware.

● In the 1960s it focussed on diversifying into the hand tool industry which would help
Cooper level its cyclical revenues, which were so closely attached to the natural gas industry. It
invested in both ‘complementary’ acquisitions and “diversification” acquisitions heavily.

● In early 1970s it established the aircraft service division. It concentrated its resources on
compression equipment for oil and gas, where it was the industry leader.

● Towards 1980s-90s, Cooper underwent a period of portfolio rationalization, reducing its

exposure to more cyclical industries such as automotive and petroleum.

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Cooper Industries Businesses
● In 1981, as Cooper was in the process of absorbing Gardner-Denver, the company engineered
its third diversification (following its move into tools and aircraft service) by capitalizing on an
unexpected opportunity to acquire Crouse-Hinds, an electrical products company

● Electricity became Cooper’s next target for complementary business-unit development as

energy prices slid in the mid-1980s.

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Cooper
Industries
Businesses
: Late 1980s

In 1988, Cooper was a broadly diversified

manufacturer of electrical and general industrial
products, and energy-related machinery and
equipment.
The company operated in 3 distinct business
segments with 21 separate profit centers.
1. Electrical and Electronic
The E&E segment was Cooper’s largest in 1988, generating one-half of
corporate sales and 57% of operating profits. By 1988, E&E had four sub-
segments:
● Power transmission and distribution systems division
● Lighting division
● lighting fixture division
● distribution and control division

2. Commercial and Industrial

In the commercial and industrial segment Cooper participated

in the non-powered hand-tool and window treatment
businesses, and in the automotive aftermarket.

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3. Compression, Drilling, and Energy Equipment

The compression and drilling segment had been Cooper’s largest in

1981, generating over 50% of revenues and over 60% of operating
profit. However, the collapse of the energy industry in the early and
mid-1980s caused sales of oil and natural gas equipment to fall
precipitously. By 1988, this segment accounted for 21% of Cooper sales
and less than 10% of operating income.
In the market for natural gas compression equipment, Cooper retained
its number one position with the Cooper-Bessemer, Ajax, and Superior
product lines.

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Composition of
each business line

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Financial Data
Electrical and Commercial and Compression,
Parameters Electronic Industrial
Drilling, and Energy
Equipment

Return on Asset 15.5% 18.3% 4.0%

Return on Sales 14.8% 14.6% 5.2%

Revenues as % of
total Revenue 49% 30% 20%

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● Both electrical and electronic as well as Commercial and Industrial
business lines were leading and upcoming segments through
which the company expanded and made successful acquisitions in.
● These two segments had high return on assets and return on sales.
● The distribution model for electrical and electronic, Commercial
and Industrial , and Compression, Drilling, and Energy Equipment
was majorly distributor based model, being direct sales for only
power systems and energy equipment.
● Compression, Drilling, and Energy Equipment was the business
segment where growth was declining and Cooper attempted to
diversify more here to reduce exposure.
● In each of the business lines, Cooper has managed to attain a
leading position in the market.

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How related are new businesses

UNRELATED RELATED
New businesses are New businesses are
less dependant on less diversified and
cyclical nature of relatively more end
industries. user centric
They are more Electric and
focussed on end electrical was
users and less high focussed on early as
capital intensive well as energy,
indust. drilling equipment.
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How related are new businesses
RELATED
Ajax Iron Works Pennsylvania
Pump & Compressor Co.
Airmotive Co
Nordberg Engine & Parts
Services
Howard Industries’ Micro
Grinder line Nicholson File Co
*Gardner-Denver Co
Crouse-Hinds
Sullair Mining Equipment Corp
Escadril Pump Product Line
Westinghouse’s Lighting
Products
G.E.’s One-Piece Terminal
Board Line Risdon Corporation
Turner Industries, Inc. Phalo’s
Computer Cable Line
*McGraw-Edison Co
McGraw-Edison Co.
UNRELATED
Lufkin Rule Co
Ken-Tool Manufacturing Co.
Crescent Niagara Corp. Weller
Southwest Airmotive Co
Dallas Airmotive, Inc
Electric Corp
Xcelite Inc.
Pinking Shears Corp. Product
Line Cannon Manufacturing
Corp. McDonough’s Plumb
tool line
*Kirsch Co. Pfaff & Kendall,
and Hilldale Co
Lufkin Dial Indicators Line
Atkins Saw Product Line
.
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THANK
YOU
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