Northboro Company: Case Analysis Harvard Case Solution & Analysis

Northboro Company: Case Analysis Case Solution

Northboro Machines tools corporation: Case Analysis

Introduction

Northboro Corporation was founded by two close friends and classmates who did their engineering and found the company in early 20thcentury. The company was founded in Concord West Hampshire in 1923 by James north and David Peterboro. The company initially started its business by manufacturing farm tools and then turned its business into machine tools manufacturing by entering the segment of manufacturing machinery spare parts including metal presses dies and molds.

In early 1940’s, the company entered in the business of manufacturing armored vehicles spare parts and other necessary spare parts for the war.Later on the company entered in the plastic metal spare parts segment as well. By 1975, the company earned the fame and goodwill and was known as the pioneer company in manufacturing industrial machinery and machine tools.
In early 70’s, the company also entered into a new business of manufacturing computer aided design (CAD) and computer aided manufacturing (CAM) where the company started to design software and artificial workforce.

Problem Statement

The company was working well and was also making profits but in late 80s it was seen that the company’s profitability was declining and then the company recovered from it.However, later on again the company suffered a sufficient loss and the company was unable to give dividends to its shareholders however, in order to gain the trust of the investors, the company took loan to give dividend. Moreover, the major problem of this case is that the company is earning revenues however, its profitability is declining because of several reasons and due to declining profitability the company is unable to give dividends. This paper will attempt to solve the question on why the profitability of the company is declining and whether the company is able to give dividends or not. We will discuss this issue in the light of the financial highlights.

Reasons for declining profitability

The company was the only largest company in manufacturing CAD/CAM while there was no competition in the market and if there was then it was not intense.However, the presence of small companies in the relevant field made Northboro as the market leader.
Moreover, the company enjoyed a lot of profits before the transformation of minor competition into vigorous competition.At the time of tough competition, many MNCs started the business in the same industry and were capable to compete with Northboro, however these companies made tough price competition in the industry and made it difficult for the existing players to earn a higher profit and that was the main reason behind the declining profitability of Northboro. In addition to this, these companies include General electric, Ford motors and General Motors etc.

Financial Analysis

As far as financial highlights of the company are concerned the company is suffering loss in the year 1989 because of the rapid competition and market saturation.Later on, the company used the turnaround strategies and did downsizing and sold some under performance division and earned a profit in 1990.Moreover, the economy experienced a recession and it became unable to make profits and again suffered loss in 1991......................

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