CASE ANALYSIS REPORT
COURSE TITLE: BUSINESS STRATEGY (78-651-01)
SUBMITTED TO: DR. JONATHAN LEE
DATE SUBMITTED: MARCH 16TH, 2015
OLAYINKA OMOLE 104107362
Linzhe Li 104099362
Moeid Gul 104114720
Xi Yan 104120974
Should Charles River Laboratories (CRL), being a vaccine producer, invest up to $2 million in order to venture with ALPES S.A, the sole producer of SPF eggs in Mexico in order to expand their global profitability? Yes or No
The vice president at Charles River Laboratories must prepare a presentation to the Board requesting an investment of $ 2 million in a joint venture with a Mexican company of family animal health business. However, the Director-General considers that the joint venture as a potential distraction, while your business is growing rapidly in the United States. It is also concerned about the risks of investing in a country like Mexico and plan to join a family of small business. In addition, the Mexican partner is not able to invest money in the company, which must be fully funded by Charles River Laboratories.
PESTEL ANALYSIS: 1) Political: The government of Canada, U.S.A and Mexico signed the NAFTA trade agreement in 1994, which was meant to ease the flow of goods between member states. It created a sense of fear among existing competitors as they expected more companies to settle in Mexico and therefore, it led to the exit of some companies from Mexico which brought about the consideration of joint venture offered by APLES. This created more room for ALPES to increase its production capacity and meet increasing demand by having access to more resources. NAFTA created a positive effect on Mexico market, ALPES and CRL.
2) Economic: In this case, the Mexican economic environment was in a situation of endemic corruption, economic instability and unstable currency. All of these were a major concern for CRL investing in the joint venture with ALPES. However there was high growth in the demand for SPF eggs, CRL had to continuously plough back its profit into the business to meet up with this growing demand.
3) Sociocultural: Although, the Mexican villages and suburbs have a relatively high rate of poverty, the normal and the SPF eggs can be used in the production of vaccines. The normal eggs referred to as the dirty eggs can cause diseases for humans such as the salmonella which are not readily available for Central America and Mexico. This polluted the environment which caused more death from related infection. Therefore promotion of the use of SPF eggs was rampant because it would be beneficial to ALPES and CRL forever.
4) Technological: because of the involvement of CRL commercial production and supply of laboratory animal tool for R&D use and testing of new pharmaceuticals and ALPES, it is very important that CRL poultry be free from contamination and also ensure that the eggs are infected as manufacturers of the vaccines have high demands for SPF eggs use and testing of new pharmaceuticals and ALPES, a member of the IDISA group, is also a major producer of SPF eggs in Mexico. A joint venture would provide technical support advantage and acquire a larger market share in the industry.
5) Environmental: The department of US Agriculture gave an estimate of 3000 deaths and a total of 4 million illnesses due to the contamination in the poultry. There is need for the creation of a controlled/bio secure environment that is required for the production of SPF Eggs. This is very essential to the success of the production of poultry vaccine.
6) Legal: Due to the constant regulation changes in different countries, it could be more beneficial to ALPES as it would lead to increased demand in SPF egg, but it will be more challenging for ALPES to meet the high regulatory standard of exporting