Alpes Alternatives Recommendation
Alternatives and recommendation:
Decision criteria:
1. Enables CRL to achieve its 20% annual growth goal.
2. Does not distract SPAFAS’s continual expansion in United States.
Alternatives:
1. CRL invests $2 million to build a joint-venture with Alpes.
Pros:
Cons:
It fills up CPL's "strategic growth gap"
It is a potential distraction for SPAFAS's development in U.S.
It facilitates SPAFAS's expansion into international market
There is "uncertain market and unstable currency" in Mexico
Alpes has a long history of working with SPAFAS
Alpes is a small, family-owned company, whose operating environment is not ideal.
It is relatively cheaper to invest in Mexico than in U.S.
CRL has no investment history in Mexico
The management team in Alpes is of high-quality
CRL may have limited effect on this joint-venture
2. CRL rejects the joint-venture proposal and concentrate on SPAFAS.
Pros:
Cons:
It eliminates the risk of investing in a new market
It is relatively expensive to invest in U.S.
Do not have to deal with the different decision-making system and avoid the potential conflict
Loss the business expansion opportunity in Mexico
CRL can guarantee the quality of the products which complies with the international standards
If CRL wants to expand internationally, it has to start all over again without the former franchisees, which may be more expensive and time-consuming
According to the external, internal and financial analysis as well as the assumption given in the case, it is wise that CRL invest $2 million to form the joint-venture with Alpes.
First of all, Alpes has a good financial performance and a promising future in Mexico. As is shown in the Exhibit 1, the liquidity ratio (current ratio and quick ratio) are high (8.9 and 7.9 respectively) and the debt to equity ratio as well as the debt ratio (12.78% and 10.23% respectively) are moderate. This demonstrates that Aples is operating healthily and the management is effective. Meanwhile, as its main customers –
Decision criteria:
1. Enables CRL to achieve its 20% annual growth goal.
2. Does not distract SPAFAS’s continual expansion in United States.
Alternatives:
1. CRL invests $2 million to build a joint-venture with Alpes.
Pros:
Cons:
It fills up CPL's "strategic growth gap"
It is a potential distraction for SPAFAS's development in U.S.
It facilitates SPAFAS's expansion into international market
There is "uncertain market and unstable currency" in Mexico
Alpes has a long history of working with SPAFAS
Alpes is a small, family-owned company, whose operating environment is not ideal.
It is relatively cheaper to invest in Mexico than in U.S.
CRL has no investment history in Mexico
The management team in Alpes is of high-quality
CRL may have limited effect on this joint-venture
2. CRL rejects the joint-venture proposal and concentrate on SPAFAS.
Pros:
Cons:
It eliminates the risk of investing in a new market
It is relatively expensive to invest in U.S.
Do not have to deal with the different decision-making system and avoid the potential conflict
Loss the business expansion opportunity in Mexico
CRL can guarantee the quality of the products which complies with the international standards
If CRL wants to expand internationally, it has to start all over again without the former franchisees, which may be more expensive and time-consuming
According to the external, internal and financial analysis as well as the assumption given in the case, it is wise that CRL invest $2 million to form the joint-venture with Alpes.
First of all, Alpes has a good financial performance and a promising future in Mexico. As is shown in the Exhibit 1, the liquidity ratio (current ratio and quick ratio) are high (8.9 and 7.9 respectively) and the debt to equity ratio as well as the debt ratio (12.78% and 10.23% respectively) are moderate. This demonstrates that Aples is operating healthily and the management is effective. Meanwhile, as its main customers –