HANSSON PVT. LABEL INC.Â Case Solution
Overview of the Company
Hansson Private Label Incorporation, a prominent personal care product manufacturing company headed by Tucker Hansson. In past Tucker Hansson strategy was to recognize the financially distressed potential companies and through investment in these type of companies Tucker used to improve the companyâ€™s performance and sold those companies at higher than the initial investment value of the company. Investment in Hansson Private Label was the largest single investment made by Tucker Hansson in his long career of investing in manufacturing businesses. Thus, managing the management of the company, operations and production cycle of the company, Tucker Hansson has managed to increase the revenue base and customer base of the company with and average capacity of all the plants running above 90 percent. Moreover, the relentless effort of Tucker Hansson in managing manufacturing efficiency, customer service and expense management enable the company to achieve success and became one of the imminent private label company. The success of the Hansson Private Label Incorporation was also destined because of the acceptance private label product due to their cheap pricing and competitive quality in comparison with the national brands on the shelves of the large retailers and drug store. It was also found out in the research that 99.9 percent of the Americaâ€™s population tend to purchase at least one private label product. Hence, the increased demand and the imminent quality at cheaper rates provided by the Hansson Private Label Incorporation enable the company to bag the success in its favor.
Expansion Project and the Risk
The private label industry was expanding and widely accepted by the consumers due to low priced and high quality product offered in comparison with the national brand prevailing at higher price. The plants of the company are running over 90 percent capacity and the manufacturing team proposed a plan of expanding manufacturing business to cope up with the increased demand of the private label personal care product. The expansion proposed by the manufacturing team will cost 50 million dollar to the company which is considered a huge investment by Tucker Hansson and it will be one of the biggest investment that will be ever made by Tucker. Moreover, apart from the manufacturing team proposed expansion plan, one of the Hansson Private Label Incorporationâ€™s large retail customer required a significant increase of Hansson Private label product which will compel the company to expand its current manufacturing process. Hence, the expansion of the manufacturing process will enable the company to establish strong relationship with its largest clients whose sales and stores were growing in United States and worldwide. The increase in demand of the private label personal care product could benefit the company over its expansion plans due to the high payoffs which will be generated with incline in customer base and revenue base.
The risk involved in undertaking the expansion project is that the Tucker Hansson has to finance the cost of the project with the debt which will increase the risk as well as fixed payment in the form of interest expense and debt covenants of the company. The other risk associated with the expansion project is the financing distress which could affect the increase in sales or increase in the cost of goods sold. Moreover, the contract with one of the largest retailer would increase the revenue of Hansson private label for the first three years but could affect the sales in the long run after the contract period after three years. Overall, apart from all the risk the increases in the private label product demand could enable the company to further accumulate more contracts with the retailers which will help the company to support its expansion plan……………
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