Briggs & Stratton Case Analysis

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Briggs & Stratton
Case Analysis

Introduction

History

Stephen F. Briggs and Harold M. Stratton founded Briggs and Stratton Corporation in Milwaukee in 1908. Briggs was an inventor and Stratton was a successful businessman. The first product developed by Briggs was too expensive to produce and the partners were out of money. In 1909, Briggs filed a patent for a gas engine igniter to replace the existing magneto system in automobiles. This product was the beginning of Briggs and Stratton becoming the largest US producer of switches and locks for automobiles. Briggs and Stratton tried other products in the 1920’s, but they were not competitive with the Model T. Eventually, Briggs and Stratton came up with a different version of their first motors that worked effectively for washing machines, lawn mowers and garden tractors; which they put into full production by 1936. In 1953, Briggs and Stratton recognized the potential in the lawn mower market and therefore developed a lighter weight, lower cost engine made of aluminum alloy targeted to this market. The company opened a new engine plant in Wauwatosa, Wisconsin to manufacture this engine. By 1995, Briggs and Stratton ranked 717th in sales on the Fortune 1000 list of largest U.S. industrial and service corporations. Briggs and Stratton’s revenues are 90% from the sale of small gas powered engines and the remainder in selling ignition switches and locks for the automobile industry. In Briggs and Stratton’s small engine market, they have an estimated 75% of the U.S. market and 50% of the worldwide market. A.Financial Ratios

BRIGGS AND STRATTON SAW A SALES INCREASE AT AN AVERAGE ANNUAL RATE OF 3.1% BETWEEN 1990-1994

AS CAN BE SEEN EACH YEAR THEIR SALES WERE CONSISTENTLY GETTING STRONGER. COST OF GOODS SOLD INCREASED DUE TO SALES INCREASING. THE MORE THEY SOLD THE MORE THEY HAD TO PRODUCE.

BRIGGS AND STRATTON HAS SEEN AN INCREASE IN THEIR GROSS PROFIT MARGIN OVER THE PAST 5 YEARS. 1994 - 21%
1993 - 19%
1992 - 17%
1991 - 14%
1990 - 13%
1992 SAW THE LARGEST INCREASE IN GROSS PROFIT MARGIN WITH EVERY YEAR FOLLOWING SHOWING A CONTINUED INCREASE. 1993-1994 SAW 450% INCREASE IN CASH, ASSETS INCREASED APPROX. 18% AND TOTAL LIABILITES INCREASED 30%. THEIR DEBT TO EQUITY RATIO WAS 2..3 TO 1.

THE NUMBER OF SHARES OUTSTANDING - 14,464.
B&S HAS NEVER INCREASED OR DECREASED THE NUMBER OF COMMON STOCK OUTSTANDING. THOUGH THE NUMBER OF SHAREHOLDERS HAS DECLINED SINCE 1989 WITH 1994 REPORTING THE LOWEST NUMBER OF SHAREHOLDERS AT YEAR END THAN ANY OF THE PREVIOUS YEARS.

B.Portfolio Analysis
Attractiveness Ranking

ProductAttractiveness
Cast Iron Air-cooled EnginesLow/Low
MAX Series EnginesHigh/High
Quantum Series EnginesLow/Low
Vanguard OHV EnginesHigh/High
Diamond Series EnginesHigh/High

Although no specific financial data is available for Briggs and Stratton’s products, it appears that they have few high growth-high profit products. The cast iron air-cooled engine still has a small niche market. The primary outlet for the cast iron air-cooled engine is the foreign market. This product is in the declining product life cycle stage.

The Max Series engines are in Briggs and Stratton’s segment that caters to lower cost, small engine sales. These products have become commodity priced, but Briggs and Stratton has approximately 75% of the United States small engine market and over 50% of the worldwide market. Since economic conditions are improved, housing starts will allow for future growth of this product; therefore, this engine is rated as a very attractive product in the maturity life cycle phase.

The Quantum Series engines are targeted to the premium market. Briggs and Stratton have much competition in this product segment with Tecumseh and Honda, who have most of the market share for Toro and John Deere. Briggs and Stratton have recently regained some of John Deere’s business, but it is not known how much has...
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