Clarkson Lumber
Pre-work for Clarkson Lumber
Prof. Ben J. Sopranzetti
1. Do a Porter’s five forces analysis for Clarkson Lumber.
2. Do a SWOT analysis for Clarkson Lumber.
3. Think about how each of the factors in the Porter and SWOT analyses affects the expected cash flows, the risk of those cash flows, and the timing of the cash flows.
4. Why does the firm have to borrow so much money to support this profitable business? Where is its money going? Try your hand at doing a funds flow statement.
5. What is your assessment of the firm’s profitability and liquidity?
6. Do you agree with Mr. Mr. Clarkson’s estimate of the company’s loan requirements? How much will he need to borrow to finance his expected expansion in sales?
7. As the firm’s strategic adviser, would you urge them to go ahead with, or to reconsider, their anticipated expansion through the use of additional debt financing? As the banker, would you approve the firm’s loan request, and if so, what conditions would you put on the loan?
8. How do you fix Clarkson Lumber? 1. Porter’s
a. First, the threat of new entrants to Clarkson Lumber appears to be small for the reasons that Mr. Clarkson is a low cost leader in the market, which are made possible thanks to its low operating expenses. It would be difficult for a new entrant to establish this position and threaten Mr. Clarkson’s business, which has a solid reputation in the market.
b. Next, the threat of substitute products or services is also low. Lumber is a heavily favored material in construction and repairs, therefore a substitute product will be difficult to integrate into the market. With Clarkson Lumber being located in a growing suburb of a large city, lumber may be in high demand, further establishing its position and the position of the business.
c. The bargaining power of suppliers is at a medium level, considering that Mr. Clarkson is dependent on their trade discounts to keep his operating expenses low and also considering
Prof. Ben J. Sopranzetti
1. Do a Porter’s five forces analysis for Clarkson Lumber.
2. Do a SWOT analysis for Clarkson Lumber.
3. Think about how each of the factors in the Porter and SWOT analyses affects the expected cash flows, the risk of those cash flows, and the timing of the cash flows.
4. Why does the firm have to borrow so much money to support this profitable business? Where is its money going? Try your hand at doing a funds flow statement.
5. What is your assessment of the firm’s profitability and liquidity?
6. Do you agree with Mr. Mr. Clarkson’s estimate of the company’s loan requirements? How much will he need to borrow to finance his expected expansion in sales?
7. As the firm’s strategic adviser, would you urge them to go ahead with, or to reconsider, their anticipated expansion through the use of additional debt financing? As the banker, would you approve the firm’s loan request, and if so, what conditions would you put on the loan?
8. How do you fix Clarkson Lumber? 1. Porter’s
a. First, the threat of new entrants to Clarkson Lumber appears to be small for the reasons that Mr. Clarkson is a low cost leader in the market, which are made possible thanks to its low operating expenses. It would be difficult for a new entrant to establish this position and threaten Mr. Clarkson’s business, which has a solid reputation in the market.
b. Next, the threat of substitute products or services is also low. Lumber is a heavily favored material in construction and repairs, therefore a substitute product will be difficult to integrate into the market. With Clarkson Lumber being located in a growing suburb of a large city, lumber may be in high demand, further establishing its position and the position of the business.
c. The bargaining power of suppliers is at a medium level, considering that Mr. Clarkson is dependent on their trade discounts to keep his operating expenses low and also considering