ALPES S.A: Joint Venture Proposal Case Solution
KEY ISSUES:
The main issue is that the vice president, Dennis Shaughnessy, for Corporate Development and general counsel for Charles River Laboratories (CRL) is ready to give a proposal to the board of directors of CRL on the joint venture of CRL with firm ALPES S.A, a family owned company operating in the Mexican market, the purpose of this joint venture will be to create a state of art specific pathogen-free (SPF) egg farm and will require CRL to invest $2 million. This investment will help CRL to exploit the opportunities to improve its growth rare and increase its share in SPAFAS market of the USA.
The proposal of the joint venture in the Mexican market has raised concerns about, whether CRL should go for the venture or not. There are many issues which have developed this issue, some concerns pointed out that ALPES may solely depend upon the capital of CRL and was not making their own investment. Some people are concerned about investing in a country like Mexico, with an unstable currency, an uncertain market conditions, corruption issues, economic instability and law and order situation. Finally there is a concern that CRL had never conducted its business successfully in the Mexico and for this venture CRL may also become unsuccessful.
Analysis
Internal Analysis
VRINE Analysis:
Value (High)
CRL has long term growth opportunity in the joint venture with ALPES, as the demand of SPF eggs is increasing all over the world and in fact the demand is 5-10% higher than the supply of the eggs. It is valuable due to the high demand of SPF eggs from vaccination manufacturing companies all around the world. And finally, the value can also be observed by projected growth of sales in four years of time of the projected joint venture, the growth in sales is projected about $25 million and $5 million in operating net income.
Rarity (High)
Many companies are using old standard chicken eggs in making the vaccination and therefore using SPF eggs are rare in the market, although the large companies are transferring to the SPF eggs this may increase the growth of SPF eggs sales in future. Secondly, the rare USA and international companies have analyzed to make the joint ventures in Mexico, this may provide this venture a competitive advantage in the future and finally the support of SPAFS with CRL and that of IDISA with ALPES may increase the rarity of the venture.
Inimitable & Non-Substitutability (Medium)
SPAFAS and ALPES are not only companies considering the opportunity of SPF egg production growth but there are other many companies trying to enter Mexican market. However, currently ALPES is the only manufacturer of SPF eggs in Mexico, which will make it difficult for new entrants getting in the SPF egg producing market in Mexico.
Exploitability (High):
The resources and capabilities of this joint venture are certainly exploitable. Companies buying SPF eggs from ALPES have asked ALPES to increase production to match the increased demand for the SPF eggs. Thus, if the production capacity of SPF eggs were to be expanded, both CLR and ALPES will see high growth in the future sales.
Table of theVRINE Analysis Model:
Value Rarity Inimitable & Non-Sustainability Exploit ability
High High Medium High
Excellent financial results
No presence of foreign SPF egg manufacturers. New producers of SPF eggs in Mexican market. High demand.
Good expertise.
Better Market knowledge.
SWOT analysis:
Strengths:
The main strength of the company is the High level of market knowledge as well as the local expertise making the company to successfully compete with the competitors. In addition to this, the company has the ability to meet the demands of the customer from the available resources and capacity. The other strengths of the company include the high local market share and also the high level of technological infrastructure within the company as compared to its other local competitors.....................
This is just a sample partial case solution. Please place the order on the website to order your own originally done case solution.
