| Unicord |
Memo
To: | The Board | From: | | Date: | October 12, 2015 | Re: | Plan to Resuscitate | | |

Executive Summary
Unicord is a company located in Thailand that acquired Bumble Bee, which is in the United States, to effectively increase global market share and reduce costs to secure its future. Due to many factors Unicord is in extreme debt and revenue is low. They need a feasible way to resuscitate the company.

Unicord was one of the largest exporters of tuna in Thailand before acquiring Bumble Bee. Unicord’s logic to acquiring Bumble Bee was sound. However there were factors that worked against Unicord. For example, a major problem with the acquisition is that Unicord, and the Thai government wanted the Bumble Bee acquisition rather than needing it. Bumble Bee was much larger than Unicord, and Unicord paid more for the company than its assets were worth. After the acquisition, the Unicord founder provided no autonomy to Bumble Bee managers causing an unstable relationship between them. External factors worked against them as well. Purse-seine fishing was popular at the time because it was fast and cheap, but due to the harm it caused to dolphins it came to NGOs attention immediately. This decreased tuna demand in the U.S market and increased the price of raw tuna for companies such as Unicord. Unicord founder, Dumri Konuntakiet, was under pressure to guide Unicord out of troubled waters. In 1995, he shot himself in his office and Unicord fell into receivership. Now, there are two alternatives. Sell off Bumble Bee, or choose to keep it with a strategic plan to become competitive in the U.S once again.

The most viable alternative, for many reasons, is to sell Bumble Bee. Managers can focus on Thai operations and become a regional leader once again.

Problem Statement
Unicord is a company located in Thailand that acquired Bumble Bee, which is in the United States, to effectively increase global market share and reduce costs to secure its future. Due to many factors Unicord is in extreme debt and revenue is low. They need a feasible way to resuscitate the company.

Analysis
To understand how Unicord should proceed, first we must know how the company got to be in the position it is currently in. A SWOT analysis will be presented. See Appendix A for a timeline of these events that eventually led to Unicord falling into receivership.

Strengths
Unicord was one of the largest exporters of tuna in Thailand before acquiring Bumble Bee. This was mainly due to three reasons: Thailand was home to prime tuna fishing, lower wages than other countries, and the Thai board of Investment supported the tuna industry so they offered many incentives. Unicord’s logic to acquiring Bumble Bee was sound. It would place them closer to the larger markets, secure a buyer for its tuna, and would also make them an American company. They would avoid tariffs, taxes, etc. on tuna going into the United Sates.
Weaknesses
The major problem with the acquisition is that Unicord, and the Thai government wanted the Bumble Bee acquisition rather than needing it. Bumble Bee was twice the size of Unicord, and very expensive. Bumble Bee’s assets were only 150 million, but Unicord paid 269 million in borrowed United States currency. This poses a problem if the exchange rate were to change. It can make it near impossible for Unicord to pay back the loan. It would be difficult to acquire a company of Bumble Bee’s size. Because of the “prestige” it would give Thailand, the Thai investment board and the government were determined to make the acquisition happen. After the acquisition, there were many factors that led to its ultimate downfall. The managers of Bumble Bee often did not obey the founder of Unicord, Dumri Konuntakiet. He did not give the managers autonomy despite their requests, even though they were experienced in the U.S tuna market. Dumri was not focused on breaking down the cultural barriers that existed between them because there is a strong sense of hierarchy in Thai culture. Dumri thought he was the only decision maker.
Opportunities
When Bumble Bee was for sale, American companies were not allowed to buy it due to the fact that it would violate anti-trust laws in the United States. That put Unicord in the perfect position to acquire the company. It would agree with their global objectives.
Threats
External economic factors played a major role in Unicord’s downfall. When people realized the link between dolphin and tuna, purse-seine fishing became popular. It made it faster and easier to catch tuna. Once environmental groups found out about it, companies in the tuna industry came under scrutiny. Tuna consumption in the United States dropped. The cost of tuna for companies such as Unicord increased. The tuna industry was already one of low profitability so the ability to sell high volumes was very important.

Alternatives
There are two alternatives that Unicord could choose to pursue at this point: 1) Decide to sell off Bumble Bee and focus on operations in Thailand 2) Decide to keep Bumble Bee with a strategic plan on how to become competitive once again

See Appendix B for a summary of pros and cons.

Sell off Bumble Bee
Unicord can decide to sell off Bumble Bee. The advantages to this are apparent. It would be the simplest option to get Unicord out of extreme debt. Now, the company would not be in the same position as it was before acquiring Bumble Bee still, but it would allow management to focus on Thai operations to become a regional market leader once again. In the future, it would allow the company to expand into major markets once again with a more favourable outcome. The price of labour is much cheaper in Thailand than in the United States. It is more budget friendly to operate strictly in Thailand.

The disadvantages to this option are that it goes against Unicord’s previous global objectives. It will once again place them farther away from major markets. This leads to the same problems experienced before acquiring Bumble Bee, such as tariffs and taxes. It will also revert to the previous problems of acquiring the raw tuna. Furthermore, it may be more difficult to sell with decreased consumption, as well as the other major companies in the industry also having financial difficulties. Bumble Bee’s asset sales still may not be enough to cover the current debt, which means Unicord will still have to pay the remaining amount.

Keep Bumble Bee
Unicord can decide to keep Bumble Bee with a strategic plan to become competitive in the market again. The advantages here are clearly that it would allow them to stay in the U.S market and avoid high import duties and such. With a well thought out plan, Bumble Bee could take market share in the United States with one of the large competitors already in receivership also.

There are also some major disadvantages as well. First is clearly the major debt that is acquired. It would be extremely difficult to continue regular operations while there is decreased consumption in the market, as well as pay off debt. Since there is low profit margins already, it would mean little to no profit for some time. Second, the U.S market has decreased. As mentioned earlier, low profit margins means being able to sell a high volume. That may not be viable now. Finally, as Dumri proved, cross cultural business is very difficult. Different customs and attitudes can make the relationship between Unicord and Bumble Bee’s management unstable.

Recommendation
Considering the possible alternatives, the most viable one is to sell Bumble Bee. As mentioned earlier, this would allow Unicord managers to focus on the Thai division of the company. It could become a regional leader once again. With the decreased U.S market, I see no viable strategic plan to get the company out of the financial situation, especially in time to make creditors happy. There will be lots of pressure to pay in a short amount of time. Looking for new creditors is not feasible. With the company’s history and high volatility is likely that anybody that would take on the debt would provide an extremely high interest rate. This would make any profit margins non-existent and lead Unicord down the same road. Also, The reputation that the company likely gained in the United States, due to marketing dolphin-free but not actually being dolphin free, is likely irreversible.

Although this will place Unicord farther from large markets again, with all of the problems that came with it, it is likely that the company will strive and do very well. Unicord was one of the largest exporters of tuna in Thailand and can be once again.

Appendix A
Detailed Unicord Timeline of Events

1978

1989

1984

1990

1991

1992

1993

1994

1995
1978

1989

1984

1990

1991

1992

1993

1994

1995 Unicord is founded

Bumble Bee acquisition & Thailand opened its economy to investors

U.S banned tuna imports with high dolphin kill rates

Bumble Bee began labelling “tuna safe” when it currently was not

Price cutting strategy proved effective

U.S tuna consumption continue to fall,
Unicord exports to U.S fall

Unicord creditors demand end to price wars & VP of finance resigns

Unicord negotiating with creditors to restructure its debt

Bangkok Bank insists Unicord pay
Its $113 million debt by the end of
1995 & Dumri shoots himself in his
Office, Unicord falls into receivership

Appendix B
Pros and Cons of Alternatives Sell off Bumble Bee | Keep Bumble Bee | Pros * Simplest option to get out of debt * Allow management to focus on Thai operations * Become regional leader once again * Can expand in the future with better conditions and more favourable outcome * Labour cheaper in Thailand than U.S | Pros * Stay in major markets – avoid tariffs, etc. * Could take market share in the U.S | Cons * Goes against Unicord’s global objectives * Farther from major markets * Difficult to sell – decreased U.S market and no buyers * Bumble Bee assets may not cover the debt | Cons * Paying off debt would be difficult – low profit margins means little to no profit for some time * Decreased U.S market * Difficulty in cross culture business |