Free Range Foods

Free Range Foods

                                                by

Christopher Borland, Tashaine Campbell, Thomas Collins, Taylor Doyle, Willam Slade

University of Maryland University College (UMUC)

------------------------------------------------------------------------Table of Contents

1. Introduction……………………………………………………………………………3

2. Summary of Free Range………………………………………………………………3

2.1 Advantages……………………………………………………………………4

2.2. Disadvantages………………………………………………………………..4

3. Forming Strategic Alliances.………………………………………………………….5

3.1 Advantages of Forming Strategic Alliances……………………………...…6

3.2 Disadvantages of Forming Strategic Alliances…………………………..…7

4. Factors to consider before going global……………………………………………...7

4.1 Examine Specific and general Environment………………………….……7

4.2 Examine Resources………………………………………………………..…8

4.3 Transaction Cost………………………………………………………..……9

5. Recommendation for Restructuring…………………………………………….……9

6. Free Range Foods and its eco-friendly operations………………………………..…10

6.1 Market Analysis……………………………………………………………...11

6.2 Marketing………………………………………………………………….....11

6.3 Developing relationships with eco-friendly companies……………….…...12

7.  Conclusion……………………………………………………………………….……12

8. References……………………………………………………………………….…….14

1. Introduction

Free Range Foods has been so successful with an eco-friendly approach to providing high-quality, organic dairy products to customers in the United States that the time has come to consider broadening its domain to include global markets. To that end, this presentation will consider the pros and cons of two globalization approaches (mergers/takeovers and strategic alliances), examine the factors Free Range will need to consider before entering the global market, make a recommendation for restructuring the company to accommodate the globalization strategy the company pursues, and finally, a plan for Free Range to retain its commitment to its eco-friendly approach as operations expand into new frontiers.

2. Summary on Free Range

As Free Range Foods explores global expansion strategies, with target markets in France, the United Kingdom, and eventually greater Europe, the most successfully used strategy it selects is that of mergers, acquisitions, and takeovers. Liu and Qiu (2013) state that mergers and acquisitions have played an active role in economic growth since the 1980s and in many cases have helped to shape industries (p. 474). Though the terms merger, acquisition, and takeover are often used interchangeably to describe the combination of two companies, they are not synonymous. The term merger describes the combination of two companies of similar size.  By contrast, the terms acquisition and takeover describe the purchase of a smaller company, with or without its permission, by a larger company. While the processes are different, however, their advantages and disadvantages are similar. Free Range Foods is contemplating acquiring a smaller company with the intent of producing, marketing, and selling Free Range products in combination with products from that company. We will discuss the advantages and disadvantages of this kind of acquisition.

2.1. Advantages

Speed to Market: Acquisitions are a quick method of entering a new market. If Free Range acquires an existing company, it would gain access to the trained employees, buildings, and physical resources of that company, accelerating migration into the new market, and setting conditions for more immediate success.

Revenue Enhancement: Free Range Food is currently growing its sales by 20% annually in the domestic market. Growing a product line in Europe may allow for an even greater return on profits by increasing its market audience.

Economies of Scale and Scope: Through acquisition, Free Range would combine the resources it plans to use in Europe. This will create a larger company with increased scale that it could leverage for improved agreements with suppliers, lowering costs for producing goods. Combining organizational resources (finance, marketing, and HR) to more efficiently support the combined company will enable Free Range to also improve its economies of scope and better compete in both markets.

Complementary Goods: The company targeted for acquisition, maintains an established business and customer base in Europe. The addition of the eco-friendly cottage cheese line to that company’s products will leverage that customer base to familiarize the new market with the Free Range brand and establish its reputation.

2.2. Disadvantages

Organizational Culture: An organization’s culture consists of the values, norms, and beliefs that it uses to operate efficiently (Vazirani & Mohapatra, 2012, p. 33). When two companies combine, the differences between the two respective cultures can eventually cause mergers and acquisitions to fail. If Free Range is to be successful, it will have to integrate the two cultures through clear communication, paying special attention to differences between European and American corporate norms.

Merger Requirements: Because Free Range is looking to acquire a European company, it must comply with the applicable rules on purchasing. Since the 1990s, acquiring companies in Europe have found that they need to use extensive financial and managerial resources simply to determine how to enter this market (Berger, 1992).

Costs: Mergers and acquisitions can require large financial resources on the part of the acquiring party. Free Range needs to make sure that these expenses do not injure its existing successful business.