Kudler Fine Foods: A Comparison

Kudler Fine Foods: A Comparison

Virtual Organization Strategy Paper

Strengths for Expansion Options

Kudler Fine Foods is a gourmet food shop that opened in 1998 and by 2003 the gourmet food store had opened two more stores bringing the total to three in just a few short years. The store has been popular with customers because unlike most gourmet food stores, Kudler not only stocks the food and ingredients to customers to prepare a complete gourmet meal, it also stocks all the utensils and cookware needed to prepare the meals. The fact that the company was able to expand so quickly and successfully in just a few short years is a testament to how successful the store is. Kudler would like to continue to expand and therefore must look at all of its options in order to make this happen. Kudler Fine Foods has three options to expand its operations. They can go public through an IPO, they can acquire another company in the same industry, or they can merge with another organization. All three of these options must be considered carefully.

IPO Strengths

By going public through an IPO, Kudler Fine Foods can make a public offering, in which it offers its shares for the sale to the general public. An IPO is typically made by small, rapidly growing companies that either require additional capital to continue expanding or have met a milestone for going public that was established in a contract signed earlier in order to obtain venture capital funding. Kudler Fine Foods needs anlarge amount of capital that the IPO would give them to expand operations.

IPO Weaknesses

When a company becomes public, so do all of its dealings. That means that financial records and other information will be made available for the public to see. The cost of going public can be very expensive and Kudler should be aware of this going into the IPO. When a company goes public, it is supported by those that buy stock in it. If the company is not doing well, shareholders have the option of selling their stock which could place the company in a bad situation. According to Cowan, stockholder expectations can hinder long-term plans, and options can quickly go underwater in a volatile market (2010).

Acquisition Strengths

By acquiring another company, Kudler Fine Foods could gain more employees and another location to serve and expand its customer base. By acquiring the proper company, Kudler Fine Foods could also gain assets such as the acquisition of a winery or cheese maker could give them an inside and exclusive source for their goods along with knowledgeable employees.

Acquisition Weaknesses

With any acquisition, it should not automatically be assumed that those employees whose company was taken over will be willing to freely share their expertise and knowledge with their new coworkers. They may feel animosity because of the acquisition and are just going along until they can find a job somewhere else. While acquisitions can be a good thing, companies must understand that there is a strong possibility that there might be a high employee turnover rate within the first year or so of the acquisition. It is extremely important that any sensitive issues that may arise are handled openly, honestly and in an efficient manner.

Merger Strengths

By merging with another company, Kudler Fine Foods could gain knowledgeable employees, and potential alternate locations/buildings in addition to an influx of capital necessary to quickly expand the business and the opportunity to re-invent itself into a new business. More potential advantages of mergers and acquisitions include achieving economies of scale, combining complementary resources, eliminating inefficiencies, and receiving tax advantages. Other reasons for consider this type of growth include obtaining property rights as stated above to products and services in addition to building and employees. By merging or acquiring another company Kudler Fine Foods has the potential to increase market power by purchasing competitors, shoring up weaknesses in key business areas, penetrating new geographic regions, or providing manager with a new opportunity for career growth and advancement.

Merger Weaknesses

Similar to the acquisition, the merger may have some pitfalls. It definitely has many strengths, but companies must know that not only are they in business to provide a service or services that the customer wants, but that it must also invest in its employees and place value on them. A merger can mean the duplication of several different positions within the new company and this can mean that some will be laid off because of the duplication. A merger can also be a setup for failure if the companies merging haven't ironed out how operations will be run in the short- and long-term.