Delaware Worldwide Corp. is a multinational, non-operating holding company operating in a diverse industry ranging from aerospace to mining. This case study discusses the plan of the company to move for possible restructuring. It presents the company's background information and financial condition which must be considered and will affect its plans for restructuring.
Ronald W. Moore
Harvard Business Review (205047-PDF-ENG)
December 17, 2004
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Case answers for Delaware Worldwide Corp.
This case solution includes an Excel file with calculations.
Highlights of Delaware Worldwide Corp.
Delaware Worldwide Corp. is a multinational, non-operating holding company. The nature of its operations ranges from aerospace to mining.
- Subsidiary: Hudson River Products Company
- CEO: Jim Johnston
- Employed in a highly consolidated business environment
- Current situation of the company is pushing for a possible restructuring
Analysis of the American Economy in 2001
- The Gross Domestic Product of the country fell at a .4 percent rate after the terrorist attack on 9/11 & there are predictions of 1% further fall in GDP next year.
- According to the National Bureau of Economic Research (NBER), which is the private, nonprofit, nonpartisan organization charged with determining economic recessions, the U.S. economy was in recession from March 2001 to November 2001.
- Unemployment rose from 4.2% in February 2001 to 5.5% in November 2001. A net 1.735 million jobs were shed in 2001.
- The political environment of the USA is stable.
- The government’s tax policies, laws, and regulations help the technology companies to grow and get protection in financial distress.
- As DoE had put the importance of saving energy on home appliance products, companies must have to invest more in R&D activities.
- The GDP of the country fell in 2001 which might have a negative impact on the buyer’s purchasing ability.
- Consumer appliance companies are highly dependent on the buyers’ purchasing ability.
- An increase in the unemployment rate will decrease the operational efficiency of companies including Delaware Worldwide Corp..
- The social trend is changing rapidly. People are willing to spend more on products with better features and higher efficiency.
- Technology is getting advanced rapidly. Products are developed with the latest technologies.
- The information technology is leading the world into a new era of a knowledge economy.
- Environmental awareness has increased. The operations of companies like Delaware Worldwide Corp. should promote a sustainable environment.
- The legal obligations in the USA should be strictly followed by the companies.
Porter’s 5 Forces of Competitive Position Analysis
Strategy Analysis of Delaware Worldwide Corp.
- Offering products ranging from aerospace to mining,
- Cutting debt to a supportable level through divestitures, liquidations and overhead reductions,
- Reorganizing ongoing operations around Hudson River Products Company,
- Reducing debt service requirements to a level consistent with “worst-case” projections of internally generated cash flow,
- Affording appropriate equity incentives for management,
- Preserving meaningful upside potential for existing shareholders.