Capital Corp Merchant Banking About

The analysis of Five Force depicts how competitive forces in the Component and Equipment Industry have allowed the company to be successful with a focus differentiation strategy; however, this strategic advantage is likely to suffer in coming years as reorganization efforts to cut costs and improve efficiency are implemented. Notable signs of change are the hiring of new COO and initiatives to reduce spending by millions annually.

The exact approach to cutting costs is unknown but reductions in company-wide staff and compensation benefits in the past to reduce spending signals what future actions may be taken. Continued spending cuts such as those will diminish the customer service and specialization group is built upon. Losing those competitive advantages will serve as an opportunity for rival firms to poach LL customers.

The declining economy was a major reason for the poor ROE performance. Further analysis finds that LLís asset turnover was actually better than its competitors, and the equity multiplier was along the lines of the industry average. The major difference was due to an 8% drop in the firmís profit margin from the previous year. As economic conditions began to worsen, many customers requested less expensive alternatives to the highly engineered more profitable products commonly built.