Case: Stone Container Corporation Harvard Case Solution & Analysis

Case: Stone Container Corporation Case Solution 

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            In early days of business, the core strategy of the Joseph to provide better services to its customer and product range at reasonable prices to attracts the customer base. The earlier strategy is close to the organic growth strategy where the organization focuses on the customer needs and expectations and improve its operating activities to provide best options for the customers and the key part of this strategy is the company depends on its own operation and increase their financing from its own value creation activities.

            After some years of operation, the company switch its strategy of organic growth to the acquisition strategy which mainly include acquire business which are in same line that mean either they are competitors and they are supplier. The acquisition strategy will lead to a rapid growth in customer base and increased volume of revenue which leads to sharp increase in profitability.

These acquisitions increase the manufacturing range of the products by the company which reduces the dependence on fewer products. The essential part of the acquisition strategy of the company is that the company raises debt finance to finance the acquisition and to facilitate the core strategy. The significance of the borrowing level increases the financial risk of the company but at the same time company has increased its products portfolio. (Birkler, 2009)

The acquisition in the paper industry reduces the competition level in the market place which leads to monopolistic benefits o the single entity. Moreover, the vertical integration in the paper industry maintains the supply chain of the manufactured goods and enhances the position of the company in its chain.

Whereas the new strategy after depression the company focuses on those companies which are facing difficulties in its operating activities so they have less negotiation power at time of selling the company or selling the major assets base. This provides the company great opportunity to increase their asset base which increases the manufacturing capacity efficiently. These enhancements in production leads to the organization the achievement of economies of scale where the higher production reduces per unit cost at the lowest level, thus increases profitability.

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                Restructuring of existing bank loan is a difficult thing as the bank resists doing so. The bank intends to provide loans for those companies which have good financial strength that means lower level of existing debt or higher earnings. Although the company has good earning levels but the current financial position is indicating less financial strength of the company. The bank would agree to extend the repayment term for the fee of 80 million. This provides good option for the lender but not for the shareholders of the company is this sharply reduces the income of the company as it is a one off expense. At the same time the creditors of the company also get nothing from this option...................

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