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Essay / Research Paper Abstract
An 8 page paper based on Harvard Case 9-298-006: The Acquisition of Consolidated Rail Corporation (A). The paper discusses the differences in the two companies in terms of financial results; the influence of the merger on Eastern railroads; and the benefits that the new entity can expect after merging. The paper concludes with a discussion of the excessive price that CSX offered for acquisition shares of Conrail stock. Bibliography lists 3 sources.
Page Count:
8 pages (~225 words per page)
File: CC6_KSfinCSXconrail.rtf
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Unformatted sample text from the term paper:
used the American rail industry as an example of what not to do in 1960. The article, "Marketing Myopia," was published again in 1986. Even a generation later,
Levitts (1986) observations still held true. The message of that original article ultimately was that which spawned the "what business are we in"
question. Levitt (1986) explained that the railroads declined because they failed to understand the nature of their business. Much of that had changed by the time the Staggers
Rail Act was enacted in 1980 (Millett and Esty, 1998), but by that time the railroads already had suffered years of government regulation. Consolidated Rail Corporation (Conrail) took full
advantage of being able to blame government regulation for its problems, though competitors had been able to produce much more favorable business results. The purpose here is to assess
the value of the merger of Conrail and CSX. Conditions at Conrail Though Conrail was not as profitable as its competitors, neither was
it in particularly bad shape at the time of the merger. The effect of deregulation was to allow railroads to eliminate unprofitable lines and to charge market prices for
their services. Across the industry, operating ratio "(defined as the ratio of operating expenses to operating revenues...)" (Millett and Esty, 1998; p. 2) fell from 93.3 percent in 1980
to 80.0 percent in 1995. This was attributable to the lower prices that railroads were able to charge after deregulation, allowing them to directly compete with the trucking industry
for the first time in literally decades (Millett and Esty, 1998). Railroads carried only 36 percent of the nations freight in 1985, but had gained 41 percent of it
...