Cooper Industries

Topics: Manufacturing, Vice president, Cooper Industries Pages: 93 (12948 words) Published: April 19, 2012
Harvard Business School

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Rev. April 18, 1995

Cooper Industries’ Corporate Strategy (A)

The business of Cooper is value-added manufacturing.

– Cooper Industries’ management philosophy

Manufacturing may not be glamorous, but we know a lot about it.

– Robert Cizik, Chairman, President and CEO

Cooper Industries, a company more than 150 years old, spent most of its history as a small but reputable maker of engines and compressors to propel natural gas through pipelines. In the 1960s, the firm’s leaders decided to expand the company to lessen its dependence on the capital expenditures of the cyclical natural gas business. During the next 30 years, the company acquired more than 60 manufacturing companies that dramatically increased the size and scope of Cooper Industries (Exhibits 1 and 2). Through a process that both insiders and outsiders called “Cooperization,” the company welded a group of “independent, over-the-hill companies into a highly efficient, profitable, competitive business.”1

By 1988, the diversified industrial products company derived $4.3 billion in annual revenues from manufacturing 2 million items. Cooper’s products ranged from 10¢ fuses to $3 million turbine compressor sets marketed under an array of brand names, the most famous of which was Crescent wrenches. “We decided a long time ago,” said Robert Cizik, chairman, president, and CEO, “that if we could do an outstanding job at the unglamorous part by making necessary products of exceptional quality, then we could be successful indeed.”2

In early 1989, Cooper Industries tested this philosophy when it launched a $21-a-share, $825 million tender offer for Champion Spark Plug. The Cooper bid trumped a $17.50-a-share bid by Dana Corp., a $4.9 billion auto-parts manufacturer. Although Champion had a well-known brand name and worldwide manufacturing facilities, it faced a shrinking market for spark plugs as the auto industry shifted to smaller engines. In response to the declining market, Champion’s aggressive attempts to diversify into other automotive product lines had failed, and 1988 profits had fallen to $24 million. At 25 times 1988 EBIT, Cooper’s bid was highly risky.

1Wall Street Transcript, October 15, 1984, p. 75,590.
2Houston Post, August 6, 1989, p. D1.

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Research Associate Toby Stuart prepared this case under the supervision of Professor David Collis as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation.

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Cooper Industries' Corporate Strategy (A)

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Company History

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In 1833, Charles and Elias Cooper built an iron foundry in Mount Vernon, Ohio. C&E Cooper evolved in stride with the Industrial Revolution, making first a steam powered Corliss Engine that generated power for manufacturing plants and then switching by 1900 to produce natural gas compressors, which pumped gas through pipeline networks to customers. By 1920, Cooper was the recognized leader in pipeline compression equipment. However, another company, Bessemer, manufactured the engines that initially extracted the gas from underground wells. The compatibility of these two companies led to a merger that Cooper initiated in 1929. By the late...
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