In the world today many companies are ganging up together to share many costs like manufacturing, marketing and advertising costs, opening up new market frontier and edging out competitors to consolidate their existence. This case study analyzes Frito-Lay which acquires the Cracker Jack from Borden that has been manufacturing it since 1964. After a quick but thorough study of Cracker Jack business potential, the Frito-Lay team recommended to the company to purchase Cracker Jack and its related assets. They came up with a quick solution due to various reasons and factors.
One of them is, “experts developed a variety of valuation techniques and established a fair market value” (Ross, Westerfield and Jordan 2002). Borden Foods Corporation accepted Frito-Lay’s bid due to the following reasons: Frito-Lay was the highest bidder because in the bidding exercise, the highest bidder takes it all. Frito-Lay being a food or snacks manufacturing firm was better positioned to keep and maintain the oldest and best known trademarks in the food manufacturing industry and that could be the pride of Borden Foods Corporation, the founders of the trademark.
Employees of Borden who were working in the manufacturing or production line of Cracker Jack were to be acquired by Frito-Lay and this could be a good gesture to retain Borden’s reputation of respecting employees. It could have been a negative score on Borden’s corporate responsibility if it dismissed these employees who were part of its sustainability for all these years. There were also some good compelling reasons why Frito-Lay was well placed to purchase Cracker Jack from Borden. First and foremost, it was a food company and it had acquired a rich experience in the food industry.
Frito-Lay had a long established reputation with ever improving quality of its snacks like the fat free venture. Secondly, it was cheaper for Frito-Lay to put the manufacturing facilities because many of them were in good working condition only with a few changes here and there. Thirdly, there was a well conducted research that was done by the selected business team and coincidently Cracker Jack already had a good reputation hence it could comfortably fit the Frito-Lay sales distribution infrastructure.
In the Strengths, Weaknesses, Opportunities and Threats (SWOT) analysis, strengths and opportunities overrun weaknesses and threats by a remarkable degree. Strengths include, Frito-lay is best and leading in advertising nationally and “sponsoring sports activities or events like Tostitos Fiesta Bowl post season collegiate football game” (Ck p 239). It has a self driving mission statement which clearly states the targeted or projected goals. It has managed door to door delivery customers and its brand name enjoys more that 95 percent awareness.
Its weaknesses include, it is only concentrated its domestic markets i. e. it has not ventured into the international market. They have deliberately spent less in advertisements hence they are not good risk takers. Regarding opportunities, Frito-Lay has expanded new eating occasions and they are committed to manufacture low fats or fats free snacks and other products. They have realized that store to door delivery can broaden the area covered in selling this product.
And finally in opportunities, “they have had opportunistic acquisition which made it possible to acquire many related companies” (Ck p 239). Lastly on threats, there is competition from other established food companies like the Lincoln Foods, International Home Food Inc. and other seasonal companies which emerge during festive seasons like December. There is also a threat from “new technological marketing strategies especially over the internet which should be embraced to have and maintain a competitive edge” (Hunter 2007).
In conclusion, Frito-Lay is the best placed food manufacturing company that has had a potential to acquire other food companies because of its reputation and marketing strategies. References: Hunter, M. G. (2007), Strategic use of information technology for global organization. New York: IGI publishing. Ross, S. , Westerfield, R. and Jordan, B. (2002). Fundamentals of Corporate Finance. Burr Ridge, Illinois: Irwin McGraw-Hill.
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