Thus, in 1993, both Tim and Brad Larson had the advantages of experience in managing businesses, making investments and securing bank loans using the seller’s assets as collateral. However, as the case study suggests, all their potential target companies are small in size (valued at less than $5-$6 million each). Besides, each candidate business was involved in a specific business segment and was affected by either limited or unseasonal sales. Thus, the Larsons are expected to flourish the most through the focus niche strategy.
This strategy is the most applicable as all target firms currently do not enjoy a wide scope in terms of cost leadership or differentiation. By adopting a focus strategy, the Larsons can focus their experience and limited resources on a defined business or market segment. Besides, the focus strategy works best for smaller companies and can be implemented with a focus on either differentiation or cost. Most suitable company for purchase The profile of each of the four companies shall be evaluated to identify the most suitable company for purchase (all discussions are with respect to the year 1993).
Landscape Products manufactures a number of products and is operating at full capacity. While the labour costs are cheap, the demand is rather seasonal in nature. The company had been in operation for over 12 years and was managed by experienced owners. However, the company depended on supplies from certain lumber mills and there is no reason given for the unusual closure of some of these mills, which had a direct impact on the production output at Landscape. Hence, there is some uncertainty over when production levels would pick up and whether Landscape would be in a position to reduce its dependence on these mills and seek alternatives.
Fairway Outfitters has a huge client list and shows a strong potential for growth in the future. Information from customers also indicated that they are satisfied with the services provided by Fairway. However, the small size of its workforce when compared to its long client list indicates that a strong reason for the company’s growth could be the experience and skill of its founder, who is now interested in managing some private golf courses. The fact that the founder does not have confidence in handing over the management to one of his staff members adds to this doubt.
Richmond’s Snacks has performed considerably well within the snacks industry over a long period. These figures were achieved even though the company’s market was limited to the mid west. The company is however affected by a high level of seasonal sales. While there is a huge potential for growth (expansion into new regions, improving production capacity etc) at low investments, the company was being sold due to a struggle between the owner and his sons. It may therefore be advisable to evaluate any litigation that may exist before considering this company for purchase.
Although Teletech’s product and operational procedure sound simple and interesting, it is a concept currently in development. The product is yet to be introduced into the market and there is no information or certainty if the product will succeed in evoking any interest among consumers. In fact, the company is in the process of testing the product and the actual product is to be introduced only after 8 months. Besides, the owner of Teletech was asking a steep price although the components involved in producing the product and related components are not very expensive.
Based on the above considerations, Richmond’s Snacks is recommended for purchase among the four candidate firms as it produces a
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