Southern California is home to Kudler Fine Foods, a specialty store that provides gourmet food. Kudler food is located in the Metropolitan area of San Diego with three locations in Encinitas, Del Mar, La Jolla, CA each providing services from a European Style Bakery to a huge wine selection. As of today, Kudler Fine Foods is a privately held business, but the company is looking to expand operations because they want to become wealthy beyond their wildest dreams. Today Team B will explore the possibilities of Kudler Fine Foods expanding and the best way for the company to accomplish this goal. The strengths and weaknesses of Public trading, mergers and acquisitions will be discussed, the opportunities that are advantageous for the company and any possible threats to the corporation using any of the three approaches.
Strengths of an Initial Public Offering (IPO)
One of the first advantages of an IPO that a company will see is the increase in capital. Going public allows a company to raise capital that can be used for various reasons such as working capital, acquisitions, research and development, marketing and increasing equipment and supplies. Kudler Fine Foods already has three shops, but going public would allow the corporation to raise more capital to expand even further, opening additional stores. Additional capital would also allow the company to hire additional personnel and increase store hours.
A second advantage of an IPO is liquidity. Once a company is traded publically, the shares have a market value and can be resold. One of the biggest benefits is the ability to offer stock incentives to employees. Employees that are invested in the company they work for tend to work more honestly and harder. An IPO also lends a bit of prestige. Public companies are usually better known and more visible than privately owned and reaches a larger consumer market.
Strengths of Mergers and Acquisitions
Merging or acquiring another like company is an option that should be considered as well. Mergers and acquisitions can often lead to an increased value generation for the organization. A shareholder value after a merger or acquisition would be greater than the sum of shareholder values of the parent corporation. This succeeds in generating cost efficiency by implementing economies of scale. As the parent organization increases the scale of operations of the newly formed company increases. As output productions increases the chance that the cost per unit of productions will decrease is are greater within the scope of the new company. Mergers and acquisitions can also lead to tax gains and revenue improvement through market share gain. The idea here is the joint company will generate more value than as separate entities.
Strengths of effects of globalization
Globalization of Kudler Fine Foods should not have any effect on the business being that their services have strong emphasis on high quality items and services. Kudler wants their customers to have a personal relationship with the store that will keep them coming back. It is obvious that Kudler keeps their customers through personalized service and that is hard to accomplish on a global scale.