Acquisition of La Petite Boulangerie - Case Study Example

The Fields Case - Acquisition of La Petite Boulangerie - Number and Number Number of Words: 1,536 Introduction Established back in 1988, Mrs. Field Cookies started as a small company that sells freshly baked cookies. As a privately-owned specialty company, the company started expanding its business in both domestic and international markets. In response to the company’s growing business, Mr. and Mrs. Fields decided to leverage with the use of MIS resources. Given that the company has already employed as much as 8,000 employees around the world, the company-owners’ decision to invest on MIS made it simpler for the corporate personnel to communicate with one another aside from removing redundant activities (Ostrofsky and Cash 7). La Petite Boulangerie (LPB) has 119 store outlets that specialize in selling croissants, breads, and other baked products (Ostrofsky and Cash 9). In 1987, Mrs. Field Cookies acquired the LPB as part of its diversification strategy. Assuming that LPB is a traditional organization in terms of giving more independence to individual stores and managers, this report will carefully examine factors that made the company experience net losses in 1988. As part of going through the main discussion, direct impact of Mrs. Field Cookies’ existing organizational vision, structure, culture, management style, overall business systems will be criticize based on the available academic theories. Field’s Initial Action upon the Acquisition of LPB Right after acquiring LPB, Field’s initial action was to immediately reduce the subsidiary’s administrative staff from 53 down to 3 personnel (i.e. senior manager, operations, and R&D) (Ostrofsky and Cash 9). The main purpose of laying-off LPB’s existing employees was to absorb a list of overhead functions into Mrs. Field Cookies’ existing organization (i.e. accounting, finance, personnel, human resources, training and development). Instead of taking advantage of LPB’s existing employees, Fields were interested only in combining LPB’s existing products with Mrs. Field products aside from using LPB’s existing real estate (Ostrofsky and Cash 10). Considering the size of LPB, Mr. Field thought that owning LPB will help them create investment barrier to market competition. Since Mrs. Field Cookies were able to establish a strong brand in the market, Mr. Field thought that whatever product they add up to the company would easily sell (Ostrofsky and Cash 7, 10). Without taking into consideration of the current economic condition, Mr. Field thought that having a demographically driven growth is the key to their business success. Due to unsuccessful financing experiences in the past, Mr. and Mrs. Fields decided not to go through either bank financing or go public. Instead, the business owners decided that the company’s future growth would be funded by cash flow and debt (Ostrofsky and Cash 5). Randy’s Explanation of the Losses after the Acquisition Randy provided an explanation about the company losses after the acquisition. Because of the “significant expenditures inherent in the bakery store program and the sheer size of the market they intend to dominate” (Ostrofsky and Cash 10), Randy explained that the company’s strategy will take some time before the business could reach its maximum potential. Arguments on Fields’ Business Decisions based on the Point-of-Views of LPB Store Manager First, announcing immediate lay-off of its subsidiary’s administrative staff from 53 down to 3 personnel was already a wrong decision. Instead of allowing these people to have some time to transfer LPB’s technology and expertise, removing them from the workforce could only increase internal conflict and resistance-to-change on the part of its subsidiary’s administrative staff (Burke 92 – 94). Since its subsidiary’s administrative staff has already lost their trust on Mrs. Field management, it would be very difficult on the part of Mr. and Mrs. Field to win the trust and support of the remaining 3 LPB personnel. Operating LPB using the expertise of its existing senior manager, operations, and R&D personnel is not enough to immediately train Mrs. Field’s staff to run LPB’s existing 119 store outlets. Since LPB did not file bankruptcy at the time Mrs. Field bought the company, Mr. and Mrs. Field would definitely be needing the professional assistance of LPB’s accounting and finance manager. The case did not make it clear whether or not LPB had huge debt when Mrs. Field acquired the company. In case it does, Mrs. Field would automatically be held liable for LPB’s debt and accounts payables. Thus, increasing the chance wherein Mrs. Field Cookies will encounter net losses. There are also problems with regards to the different managerial style used in both companies. As mentioned earlier, the store managers of LPB were accustomed of having more independence as compared to the store managers of Mrs. Field. For this reason, the inability of Mr. and Mrs. Field to be more flexible when dealing with LPB’s senior manager, operations and R&D staff could only result to internal conflict. To avoid internal conflicts and misunderstanding, it is important on the part of Mr. and Mrs. Field to create a new organizational vision that could guide all employees towards a single goal (James and Lahti; Kantabutra). It is equally important for them to establish a strong organizational culture that easily accept organizational change, embrace the importance of open communication, and promote work diversity among others (Rose, Kumar and Abdullah; Hoover, Will and Milligan). It was definitely a wrong move on the part of Mr. Field to stay focus on benefiting from LPB’s existing real estate (119 store outlets) without considering the economic condition. ‘Economies of scale’ is referring to a business situation wherein a company could have the benefit of decreased cost of production through large-scale production or by ordering raw materials by bulk (Sivagnanam and Srinivasan 145). Even though the use of LPB’s existing 119 store outlets could make the company benefit from economies of scale, the fact that there is a problem with regards to the transfer of technology could only make the business worst. As a well-known French bakery, its existing and loyal customers were already accustomed of the quality and taste of LPB’s baked products. In the absence of proper transfer of technology, it would be difficult on the part of Mrs. Field to satisfy LPB’s existing and loyal customers. In the long-run, the inability of Mrs. Field to offer the quality of LPB’s baked products could only make them loss not only the interests of LPB’s loyal customers but also a huge portion of LPB’s market share. Mr. Field should not have suggested the closing down a number of store outlets that were either unable to complement the bakery store concept or were performing poorly. Implementing this strategy is definitely a waste of time, investment money, and loss of sales and new business opportunity. Aside from giving the market a wrong signal of having poor business performance, waiting for the company to come up with good profit to fund the renovation of the old store would really take a long time to accomplish. Also related to the use of LPB’s existing real-estate, Mr. Field should always consider the present economic condition. In case the company experiences sudden net losses, the company’s available cash flow will be depleted. This will make the business unable to sustain its fixed daily operational expenses. By not knowing the present economic condition, Mr. Field might have to immediately sell some of its exiting real-estate below the actual market price or end up making use of these real-estates to borrow money from the bank. Furthermore, over expansion in times of serious economic crisis could further hurt the profitability of the company. Field’s Information Systems Applied to LPB Back in 1980s, Mrs. Field Cookies was able to make use of information technology that could link its 500 store outlets to a computer based in Park City, Utah (Ostrofsky and Cash 2). Using the company’s existing information system, forecasted raw material requirements can easily projected based on the actual daily sales (Ostrofsky and Cash 8). Aside from being able to keep its daily production going, the use of such information enables the company enjoy the benefit of economies of scale. The problem with Field’s information systems applied to LPB lies behind the lack of central integration which is necessary to allow both companies to consolidate these two companies’ inventory needs, etc. When Mrs. Fields Cookies decided to acquire LPB, the most frequent applications that both Field and LPB were using includes: form mail, day planner, labor scheduler, skills tests, interview, and time clock (Ostrofsky and Cash 17). Although some of these applications can be use as a communication line between the two companies (i.e. form mail), it is sad to say that these applications are not even sufficient in terms of technically supporting the daily operations of a continuously expanding business. Conclusion and Recommendations Almost all of Mr. Field’s major business decision made after acquiring LPB significantly impedes Mrs. Field Cookies’ ability to maintain its financial standing. Because of Mr. Field’s wrong business decision, the company experienced net loss earnings of ($18,503) in 1988. To enable the company regain its financial strength, Mr. Field should consider centralizing the information technology applicable for both companies. Furthermore, there is a strong need for them to create new organizational vision and culture that easily accept organizational change and promote the importance of open communication and work diversity. By doing so, Mr. Field could effectively avoid incidents of internal conflicts amongst the two groups of employees. References Burke, W. Organizational Change: Theory and Practice. Sage Publication. 2002. Hoover, Kearney, Jeffry Will and Tracy A. Milligan. "The International Journal of Diversity in Organizations, Communities, & Nations." 2007. Understanding and Preparing for the Emerging Diversity in the Workplace. Vol. 6, No. 5, pp. 55-62. 11 September 2011 . James, Keith and Ken Lahti. "Organizational Vision and System Influences on Employee Inspiration and Organizational Performance." Creativity and Innovation Management (2011): 20(2), pp. 108-120. Kantabutra, Sooksan. "Toward a behavioral theory of vision in organizational settings." Leadership & Organization Development Journal (2009): Vol. 30 Iss. 4, pp.319 - 337. Ostrofsky, Keri and James I. Cash. Mrs. Fields Cookies. No. 9-189-056. Harvard Business School, 1993. Rose, Raduan Che, et al. "Organizational Culture as a Root of Performance Improvement: Research and Recommendations." Contemporary Management Research (2008): Vol. 4, No. 1, pp. 43-56. Sivagnanam, Jothi K. and R. Srinivasan. Business Economics. New Delhi: Tata McGraw-Hill, 2010. Read More