Relax (Boston) Case Study Analysis
Alternative 5: International Expansion
The global extension is one of the best options for expansion. Francis believed that expansion in Canada, Europe, and other Latin markets will be highly profitable for the company. But the expansion in the international market will require huge capital and also the company has to decide for direct investment, license, or entering a joint venture.
Alternative 6: Retail or Restaurant
The team of Francis also thinks to invest in retailing or restaurants. Management saw that juice bars are also attractive optionsfor the expansion. But these products are different from the current offerings of the company, so the alternative has a risk of failure.
Alternative 7: Partnership with Hotels
Francis had the idea that boutique hotels can be a good option for growth. Relax-branded stores would be helpful for the expansion. Many hotels offer massage and spa services but they do not have expertise in managing those offers. This was also an attractive option.
Proposed Solution
The company has many options or alternatives for growth purposes. Each alternative has some pros and cons. Alternative 1 of a better organization has the problem of professional management for small-sized organizations. Alternative 2 says to acquire a similar company has huge initial capital investmentand limits. Alternative 3 says to add more services to its offerings but it will require more workforce. Alternative 4 is an exercise concept, it has low investment cost but also fewer growth chances. Alternative 5 is a better option of international growth as the global expansion is highly profitable but risky. Alternative 6 is different from the company’s services, as the restaurant under the name of Relax will not be a successful plan. Alternative 7 is also considered as providing massage services to the hotels that will be a good joint venture for the company because the company has resources to control those problems of hotels.
All these alternatives are advantageous to Relax but growing the company through acquiring a similar company will be the most suitable among all. There is an opportunity to introduce a broader product mix. In the short term, the company has to spend $45000. This will lead to big changes, as the acquisition will get double the size of the company.
Recommendation
The company should opt the alternative 2; however,the acquisition has a huge capital investment of $15 million, but the company can initially pay $11 million and the remaining $3 million can be paid from retained earnings. There are also expectations for both companies to grow their revenue by 5%. This acquisition also solves the problem of hiring new professionals. The company has more growth chances in working with massage Depot, because the annual revenue of the company is more than $10 million and it has 25 units in southern California. This acquisition will not grow the company in the short-run only, but the growth will not be applicable forlong run. Relax also has the option of acquiring the company, which is financially strong and also has a geographical extension....................................
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