Brazos Partners and the Tri-Northern Exit Case Solution
It can be said that the substantial gains can be made if the Tri-Northern is sold in the year 2013, the industry will be at boom in the year and which can make the disposal justified. Furthermore, the IRR is expected to be minimal if the sale is proceeded after 2013 which can affect the gains management will get from the disposal, thus making the disposal in year 2013 would be more feasible and justified.
On the other hand, it can be argued that the management of Brazos can further improve the operations of the combine company which can allow Fojtasek to ensure higher gains in the future. In addition to this, the long association with the equity firm which have caliber like Brazos can further enhance the selling price of the company and can increase the bargaining power of Fojtasek as well.
Ways to create value:
It can be said that Fojtasek increased the value in the operation in business model of the combined company.Moreover, the senior management of Brazos ensures that they attract most experienced and expert management for the senior position in the Tri-Northern. They appoint Pat Comunale as the president of the company who is considered to be the most experienced executive in the distribution industry. After the appointment of Pat, the first duty and task of the Tri-Northern is to combine the non-core activities and head office of the combined companies. In addition to this, the sales team of the combined company is consolidated as well which can be said as one of the key reasons for the success of the company. The consolidation of these organizational departments are a source of great economies of scale and substantial savings weremade by the company in rental expenses by shifting the headquarters of two companies into one.
The second strategy he implemented was the cross selling of the products, so he decided to sell the Tri-Ed products to the customers of Northern Video and vice versa. This process of selling increased the level of earnings for both the companies and to compete against the market giants. The final strategy was to minimize the level of wages and non-core activities by reducing the level of management size and improve the operational efficiency. This could cut heavy amount of costs increasevalue of the shares.
Opportunities for improvement:
As the deal was successful in the post-acquisition but certain changeswere needed to improve the efficiency of operations as well as increase the demand of products. Firstly, the operations should not be located in the same region which means that the revenue stream of the combined company should not be confined to just one location rather the operations should have to be expanded to multiple location and the ideal location would be outside of the US. This is necessary because if the demand of Northern video was high in Canada so why operate in US. The advantage would be to deduct the price level if headquarters would be in the same region.
The other opportunities would be to increase the product diversification by allowing the acquired companies to connect with the local distributers in order to supply more goods within the region. While the management size should be reduced and divided into different teams of each department to improve the operational efficiency.Finally, Brazos should look for the alternative strategies in case of any loss in the upcoming period, this would secure the company’s internal operations and would satisfythe needs of the shareholders.
PORTER FIVE FORCES ANALYSIS
Bargaining power of customers:
The customers of Tri-Northern ranged from domestic electricians to large businesses and medium size regional companies, there are lots of other companies with small players also operating in the same industry. It can be said that when there are large number of players in the market, the competition is high as all the customers can switch to other supplier who aregiving more lucrative offer. The customers always enjoy high bargaining power as they are in a position to exert their influence and get their demands agreed from Tri-Northern.The high bargaining power of customers also implies the fact that manufacturers of electronic appliances deals directly when the order is received from any large customer or when the order is being received from any government contract.
Bargaining power of suppliers:
The bargaining power of suppliers appears to be low, it can be assumed that there are many factors which are depicting the low power of suppliers. Firstly, the suppliers depends excessively on the distributors to sell their goods. More than half of the sales of suppliers are made directly by the distributors which can give distributors enough platform to negotiate better with the suppliers, thus, reducing the bargaining power of suppliers. In addition to this, the manufacturers also provides authority to distributors to maintain the warehouses which can increase the dependency even more. For the manufacturers, the distributors are not only the order taker but they are responsible for providing after sales service to the wholesale or retail customers.They are also caretakers of the inventory of manufacturers which greatly boosts the negotiating power of customers and reduces the bargaining power of suppliers.
Threat of new entrants:
This threat has always remained present in almost all the sectors however, the intensity of this threat greatly depends on the nature of operations of the industry. If the nature of operations are complex or requires high level of expertise and capital, the threat may be lower if the situation is opposed to this, the threat of new entrant might be increased. It can be argued that the threat of new entrant appears to be moderate for Tri-Northern, although the new entrant doesn’t need any high capital investment and is not complex as well, but the new entrant might find it very difficult to obtain contracts. As the majority of the market share lies with the four key players, it would be very difficult for the new entrant to compete with the companies such as Tri-Northern, Honeywell and ADI. But with the help of effective strategies, good communication skills and efficient sales team, a new member could threaten the business of these established players…………………..
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