Hilton Manufacturing Company

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Case Study Analysis

Hilton Manufacturing Company
9-192-063

Table of Content

1.1Executive Summary…………………………………………………………………3

1.2Problem Statement……………………………………………………………………3

1.3Data Analysis………………………………………………………………………….4

1.4Questions……………………………………………………………………………….5

1.4.1If the company had dropped product 103 as of January 1, 2004, what effect would that action have had on the $158,000 profit for the first six months of 2004? ( See exhibit 2)………………………………………………5

1.4.2In January 2005 should the company reduce the price of product 101 from 9.41 to 8.64?…………………6

1.4.3What is Hilton’s most profitable product?…………………………………………………………………………..7

1.4.4What appears to have caused the return to profitable operations in the first six months of 2004?…………..8

1.5Generating Activities……………………………………………………………………8

1.6Recommendations……………………………………………………………………….9

Exhibit 1.4.1.1
Should product 103 be dropped? (3 ways to see)……………………………………………….…………....10

Exhibit 1.4.2.1
Should price of 101 be dropped to $8.64?……………………………………….…………………………11

Exhibit 1.4.3.1
Which product is most profitable?…………………………………………………………………………..12

Executive Summary

Hilton Manufacturing commenced business in 1976 and now operates from a modern factory of 10,000 square meters, located in Dandenong, in the South East area of Melbourne. To meet increased business demands of our customers in Queensland, Hilton Manufacturing has recently established a second manufacturing plant of 4000 square meters in size, in the South West region of Brisbane. Hilton is now the preferred supplier fuel tanks and associated mounting component to companies including Volvo & Mack, Kenworth, Mercedes, Iveco and Western Star. Hilton Manufacturing also supplies all of the Australian truck companies with aftermarket products and is a major supplier to truck aftermarket of its own unique fuel tank products via its distributors located around Australia. Hilton has used the skills it has developed for the local truck industry to gain export orders to Tata/Daewoo in Korea, Hino, Nissan and Isuzu in Japan, Scania in Sweden and Westport in Canada. (www.hiltonmanufacturing.com)

Problem Statement

In February 2004, Paul Hilton, President of Hilton Manufacturing Company, hired a professional manager, George Weston, with wide executive experience in the manufacturing industry after he realized he made poor decisions due to lack of training and experience. His father, Richard Hilton, who was the president until early 2003, died prematurely before he could teach his son Paul the necessary tools needed to run the company. When Weston and Hilton reviewed the financials for 2003 (See Exhibit 1 in the case study) they noticed a loss during an otherwise good year. One product appears to be unprofitable (Product 103), whereas the product sold in highest volume was under competitive price pressure. A crude cost accounting system fails to reveal appropriate actions to correct the problems. Hilton Manufacturing made only three industrial products: 101,102,103. These products were sold throughout New England where, Hilton Manufacturing Company (HMC) was one of eight competitors in the market. The dominant company was Catalyst Company. Catalyst, taking the lead in the market, announced prices and typically other producers followed the leader due to the cartel characteristics of the market. The eight companies sustained themselves, while they shared profits with highly undistinguished products. The companies in the market kept around the same amount of market share, but when prices were reduced, contributed margin figures decreased and each company took less net profit with each price reduction. After reviewing the financials, Mr. Hilton stated that he thought product 103 should be dropped. In reviewing the statement for the period of January 1, 2004 to June 30, 2004, this idea is not supported. Even though product...
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