Week 2 Hill Country Snack Foods
Week 2 Hill Country Snack Foods
Case Summary:
Hill Country Snack Food is a U.S. company involving business of manufacturing, marketing and distributing a variety of snacks. Having three components in its corporate culture, namely shareholder value-creation, cost efficiency and control and risk-avoidance, Hill Country’s growth was steady and debt was avoided.
However, the company’s cash position and conservative capital structure has a negative impact on its financial performance measure, which is indicated by a lower ROE and ROA rate. Also compared with other U.S companies in the industry, the zero-debt-capital structure is unusual. Therefore, Hill Country start to consider is it the time to change its capital structure, and if so, what is its optimal capital structure.
Current operating strategy VS business risks and financial strategy:
Providing a variety of high quality snacks, including both South-western and traditional flair, which diversify the risk of sales decline in the event of customer taste change.
Strong position in region and ability to expand its sales into cinema, school and sport event, reduce the risk of sales drop because of market share loss in some particular market place.
Quick response to customer requirements or preferences, and reinvent and expand its products as required to succeed in the rapidly changing marketplace.
Business risk drops. This strategy requires a lager investment in marketing department which is responsible for solicit, collect, analyse customer feedbacks. Therefore, Hill country needs some cash in hand for the necessary investment in the department when market signal change.
Three corporate culture components: shareholder value-creation, cost efficiency and control and risk-avoidance. With a significant cash balance, Hill Country’s growth was steady and debt was avoided.
No influence on business risk. But results in a zero-debt capital structure, which lower ROA and ROE, higher cost of equity finance.
Capital
Case Summary:
Hill Country Snack Food is a U.S. company involving business of manufacturing, marketing and distributing a variety of snacks. Having three components in its corporate culture, namely shareholder value-creation, cost efficiency and control and risk-avoidance, Hill Country’s growth was steady and debt was avoided.
However, the company’s cash position and conservative capital structure has a negative impact on its financial performance measure, which is indicated by a lower ROE and ROA rate. Also compared with other U.S companies in the industry, the zero-debt-capital structure is unusual. Therefore, Hill Country start to consider is it the time to change its capital structure, and if so, what is its optimal capital structure.
Current operating strategy VS business risks and financial strategy:
Providing a variety of high quality snacks, including both South-western and traditional flair, which diversify the risk of sales decline in the event of customer taste change.
Strong position in region and ability to expand its sales into cinema, school and sport event, reduce the risk of sales drop because of market share loss in some particular market place.
Quick response to customer requirements or preferences, and reinvent and expand its products as required to succeed in the rapidly changing marketplace.
Business risk drops. This strategy requires a lager investment in marketing department which is responsible for solicit, collect, analyse customer feedbacks. Therefore, Hill country needs some cash in hand for the necessary investment in the department when market signal change.
Three corporate culture components: shareholder value-creation, cost efficiency and control and risk-avoidance. With a significant cash balance, Hill Country’s growth was steady and debt was avoided.
No influence on business risk. But results in a zero-debt capital structure, which lower ROA and ROE, higher cost of equity finance.
Capital