Hill Country Foods.Co

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Hill Country Snack Foods is a company which produce variety of snacks. Their operating strategy is a combination of good products, efficient and low-cost operation, and singular management. * Good products are not only about high quality, but also about to satisfy different type’s customers by producing many kinds of snacks. Customers are satisfied by companies’ quick react to their requirements or preferences and reinvent and expand its products. For example, the company has also tried to change the recipe to meet students’ nutrition requirements. * An efficient and low-cost operation is achieved by strong control of budgets and costs. Then, operating and capital budget can be lean and aggressive. * A singular management is as simple as all decisions were made to build shareholders’ value. For the business risk, market is shared by competitors like PepsiCo and Snyder’s-Lance. In this high rivalry industry, company could not succeed by price increase. And unfavourable cost due to both internal and external factors is not easy to control. For the financial risk, the more debt financed the higher financial risk it is. In this case, the company operating strategy allowed it to increase market share by good products and decrease the cost and sustain competitive price by efficient and low-cost operation. In order to have more control power of the company and decrease the risk, the company only extend existing products and acquire smaller specialty companies and all funds are equity financed with no debts. Hence, has no financial risk and interest cost. However, it is questionable that does this zero debt capital structure really maximize the shareholders’ value. Think about what benefits company can get from debts. The implications of Miller and Modigliani’s (1963) proposition 3 suggested that, in the world with tax, company could benefit from gearing-up. The higher the leverage the more tax relief it obtains and the smaller its tax liability becomes....
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