Kudler Fine Foods - Case Study Example

Kudler Fine Foods Paper and Presentation As the company is presently successful in surviving by developing its business from the startup andhas proved itself to be capable enough to be a “success”, it is evident that it had performed perpetual research, taken advices and information from multiple sources and had gone through case studies and had put into money, time and manpower in it. Presently, it is now in a position to think on the next step in its business and prepare plans for the growth of the business considering its current status and its goal. There are three main possibilities, the company is facing. And choosing the proper one for the business is depending on the strength, weakness, opportunity and threat, of the choice that possesses in the available and the unavailable resources. The paper has worked on to address the issues regarding the choice of expansion being a private company and a projection of SWOT of the proposed expansion plans. The overall concept of any expansion plan is to raise fund that is needed to expand the company internally or externally. This is so, because the fund is the life line of any venture at the runway. The very first option that the company has projected is the floating of Initial Public Offer to raise fund from the public. This option of Initial Public Offering (IPO), also known as "public offering", is the concept of issuing common stock or shares to the public for the first time. This concept is pretty handy for smaller, younger companies seeking capital to expand. In an IPO, the Kudler may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue; that is common or preferred, best offering price and time to bring it to market. The SWOT Analysis of IPO will show the company’s acceptability towards it. Strength: It can tap a wide pool of stock market investors to provide a large volume of capital for future growth. Weakness: The cost of complying with regulatory requirements can be very high. Some of the additional costs include the generation of financial reporting documents, audit fees, investor relation departments and accounting oversight committees are unwanted by the public (INVESTOPEDIA, 2008). Opportunity: The regular ability to raise large amounts of capital from the general market, rather than seeking and negotiating with individual investors, is the key incentive for Kudler. Threat: The actions of Kudler’s management will become increasingly scrutinised as investors constantly look for rising bottom line. This may lead Kudler to perform questionable practices in order to boost earnings. After this brief insight of the IPO based expansion; the second expansion plan is the Acquisition. It is also known as a takeover or is the buying of one company by another (Spaeder, 2004). Here, the companies cooperate in negotiations of purchasing of a smaller firm by a larger one. There is another form of acquisition, known as “reverse takeover”, which is a short term process, mostly involves buying substantial majority of share of the target company and acquiring the “shell” – organizational structure of the target company. This policy is generally used as an easy and as the cost-effective way to go public for the buying company. The SWOT Analysis of Acquisition will show the company’s acceptability towards it. Strength: Increase in sales and revenues due to venturing into new businesses and markets in turn increases market share. Weakness: Cultural integration of the company may be questioned due to conflict with new management that might happen and finally a likelihood of job cuts may arise. Opportunity: Kudler can decide to purchase a company that is profitable and has good distribution capabilities in new areas, which Kudler can use for its own products as well. Threat: Hidden liabilities of target entity are like virus to Kudler which in turn raise the question of the monetary cost to the company. The third and final expansion plan of Kudler fine foods, is the Merger, which is a tool used by companies for the purpose of expanding their operations often aim to increase of their long term profitability. This is primarily the act of forming one large company from two comparably small existing companies. It is mainly a voluntary act and involves stock swap or cash payment to the target. In the real sense, merger is always associated with acquisition and is known as merger and acquisition. The SWOT of this expansion plan is needless as it holds the meaning almost same. Kudler Fine Foods has been stated as a private company, without measuring the size of its organization. But the most critical information provide along is the company’s wish to expand in terms of operations. Keeping in mind, operation as the key factor of the expansion, a merger is an appropriate tool to be used by the company for the purpose of its expansion in their operations aiming at an increase of their long term profitability. While deciding to move forward using M&A, a company has 15 different options to choose. Mergers are generally performed in a formal meeting where executives from the target company help those from the purchaser through a mutually accepted and acknowledged process to ensure that the deal is beneficial to both parties. Moreover, when both CEOs agree to join together in the best interest of both of their companies, that purchase deal is also referred as a merger. Whereas, an acquisition is typically referred as an unfriendly deal, in which the target company is forcibly purchased. Thus from the angle of business ethics merger is friendlier and will create a welcoming impact on Kudler’s expansion. Sometimes an acquisition is deliberately referred as a merger resulting in a new company name with a new branding for political or marketing reasons. But technically the concept is much wider than the other. It is built on the long term issues, for well structured decision to come together rather by any compulsion. In the hardship of reality will be hindrances for Kudler, as no marketplace currently exists in many states for the mergers and acquisitions of private small and mid-sized companies. Market participants generally maintain a level of secrecy in their acts of buying or selling to minimize the possible negative reactions of the companys employees, bankers, suppliers, customers and also to nullify the efforts or interests of others to seek such likely transactions. Apparently the process of buying or selling a company is quite difficult, slow and expensive. Typically, transactions involve multiple steps and take six to nine months of time to complete. Locating parties with whom to conduct the transaction fulfills one step in the overall process and perhaps the most difficult one. Multiple Listing Service like (i) Business Brokers of Florida (ii) International Business Brokers Association are the answer for these odds. Now the management of Kudler have the sketches of the parameters of what, how, when and where to do for their long term objective. Reference: 1. INVESTOPEDIA. (2008). what are the advantages and disadvantages for a company going public? Retrieved August 22, 2008, from http://www.investopedia.com/ask/answers/06/ipoadvantagedisadvantage.asp 2. Spaeder, K. E. (2004). Entrepreneur, 10 Ways to Grow Your Business. Retrieved August 22, 2008, from http://www.entrepreneur.com/management/growingyourbusiness/article70660.ht ml Read More