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A virtual organization is a dynamic collection of individuals and institutions who are joined with the aim of sharing resources in order to achieve a particular goal. They pool resources, capabilities as well as information to achieve their desired goal (Cartwright, 2006) . This paper will analyze a virtual organization called Kudler which specializes in fine foods. Kudler was founded by Kathy Kudler in the year 1988 (Gomez, 2002). This organization is an high quality gourmet which basically offers in - store parties. This paper will carry out a SWOT analysis which Kudler can look up to expand her business. The paper will contrast the strengths, weaknesses, opportunities and treats of each expansion strategy and justify merging as the best strategy.
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The three expansion strategies which the company can consider are: the release of an initial public offerings, the acquisition of another firm and a merger with another company. Strengths associated with going public through an IPO include the fact that this gives the stock of the firm a market value. Weaknesses associated with going public for the firm through an IPO include the fact that the process is quite time consuming and expensive. It requires the firm to apply to the securities and exchange commission for permission to sell stock to the public. Opportunities include the fact that an IPO gives the shareholders and firm directors of the firm a chance to retain their stock which they can then use for activities such as currency for mergers and acquisitions, as well as for buying shares in the open market (Cartwright, 2006). Additionally, IPO gives the firm an opportunity to create a bigger access to the capital markets for future capital gain. The treats associated with going public through an IPO include loss of confidentiality since the registration requires the company to share secrete information with the public. The loss of control and flexibility by the management is also a great threat. The management of the firm is no longer in control of the firm since it is now answerable to the share holder. (Cartwright, 2006).
An acquisition refers to the purchase of one company by another. There are several strengths attached to this undertaking. For instance, when the company takes over, the target company ownership is transferred to it and hence it inherits the customers (Depamphilis, 2008). Acquisition however is not without weaknesses. For instance, the, the buyer inherits all the liabilities the target company had accrued over its operation period. These include: cases of unpaid employee salaries, and environmental damage. In many countries also, the government imposes a tax on the transfer of assets (Depamphilis, 2008). Opportunities associated with acquisition include creation of a competitive advantages which can be upheld for years through the valuable, unique and inimitable synergy as a result of the integration of complementary resources. Threats associated with acquisition include the destruction of leadership continuity in the target company's management for a number of years after the deal. When a company carries out the acquisition process poorly, then it puts its financial and strategic situations under great threat. The firm incurs various expenses during the acquisition process. For instance, the firm pays investment brokers, lawyers, consultants etc. The firm can decide to finance these costs via increasing its amount of debt. The resulting interests attached to such loans/debts can strain the financial capabilities of the firm hence placing it in an auction threat.
A merger happens when companies agree to combine and move together as a new entity. Strengths associated with mergers include the fact that they don't involve many legal processes like acquisitions and they are also simple to procure. This is because it doesn't involve the transfer of assets and titles (Depamphilis, 2008). Another strength is that, a merger would reduce the number of competitors for the company hence it acquires additional economic scales of the market. Additionally, the involved companies share strategies and therefore do away with their weaknesses. The merger would also enable the firm gain more market share and this enables it win the confidence of customers (Cartwright, 2006). The firm would also get surplus cash to execute many other growth strategies. Since the companies are geographically separated, the merger would facilitate the exploitation of new market.
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Mergers also help do away with redundant facilities and personnel hence ending up with a more efficient institution (Cartwright, 2006). Weaknesses associated with mergers include the high cost involved in merging the two firms which were initially independent. There's also the need to win the approval of shareholders from each firm through voting. About two thirds of the members of each firm should approve the merger for it to be formed. This process may be quite difficult and time consuming (Cartwright, 2006). Opportunities associated with mergers include creation of a competitive advantages which can be upheld for years through the valuable, unique and inimitable synergy as a result of the integration of complementary resources. Threats associated with mergers include the possibility of destroying the management of the target company for many years after the deal. Many managers procure unwise mergers simply because of the high degree of the trend. Management problems result due to the large resulting enterprise and this can lead to failure of the merger (Cartwright, 2006).
The merger clearly has more strengths and less weaknesses and threats than the other two strategies. The barrier involved in coming up with a merger also does not pose any treat to the firm. I would therefore greatly recommend the use of a merger as a strategy to enable Kudler to expand her business.