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TMH Assignment|
Spring 2010|
Bella SongYi Wang|

This memorandum is presented in order to assess the risk Triangle Manufactured Homes (TMH) is engaged in. To assess the risk, we have thoroughly gone through the Company’s annual report and selected analyses of its financial condition and results of operations. These analyses have become the base of the level of risks that we determine TMH is exposed of.

Business Analysis
According to the Company’s annual report, TMH is a business that engages in the retailing of manufactured homes. It is one of the leading players in the manufactured homes industry, representing about 45 percent of the total U.S. market. Operating a total of 114 retail sales outlets, TMH generated sales of record high by the end of 2007 with the amount of $267 million.

Industry and Competition
The retailing of manufactured homes is a highly competitive industry, where new players can constantly enter due to the low barriers of entry and forced to leave due to the fierce competition. Therefore, the merger of small companies has become a new trend in the industry so as to expand companies’ size to compete with the larger competitors. Companies involved in this industry not only compete with each other, but also compete with businesses that deal with other forms of low-cost housing, such as rental housing and conventionally built homes. The competition between businesses is mostly based on price, product features, reputation for quality and service, depth of inventory, merchandising, warranty repair service, terms of retailer promotional programs, and terms of retail customer financing.

Players of the industry are also at a high risk due to the cyclical and seasonal nature of the business. Changes in national economic conditions, housing supply and demand, availability of financing, availability of raw materials, and interest rates all affect the sales in some degree. The sales during March to October have always been higher than in the other months. Yet, TMH, even under the highly competitive and risky environment, has managed to become one of the key players of the industry with its realistic and effective business strategies and model that will be further discussed in the following sections.

Business Strategy
TMH has an overall business strategy that helps confront the problems ahead and sometimes even turn the problems into opportunities. As a retailer, the Company purchases most manufactured homes from independent manufacturers and then sells them through its own sales centers, outlets and independent dealer network. TMH also is not dependent upon any particular suppliers for its materials or components such as wood, sheetrock, and insulating materials. With no intention to vertically integrate, the Company mainly focuses on selling and marketing with manufacturing and retail financing on a limited basis to support its core business.

TMH has chosen to target a single segment of the market which contains lower and middle income individuals and families in the 21-40 year old age group. Based on a report released by MHI, manufactured homes are a major source of unsubsidized, low-cost housing for many owners and renters with few housing alternatives. This remark stands true for TMH as well. Retirees are the second largest category of buyers, and a small percentage of sales are for second or vacation homes. This is a good business strategy, because though the manufactured homes industry is quite mature, opportunities exist with young and older people who generally demand lower cost housings. Moreover, concentration on the lower end of the manufactured home market has helped TMH to maintain a strong sales record because sales of multi-section homes fluctuates more with the economic conditions.

Acknowledging the high competition of the industry, the Company planned an acquisition strategy through borrowing that is currently helping them to...
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