Alpes: Case Analysis Essay

2705 Words Apr 20th, 2013 11 Pages
Key Issues
The ALPES S.A. case deals with Charles River Laboratories (CRL) and their consideration of a joint venture proposal with an animal vaccine company in Mexico. The senior V.P. is preparing to present the proposal of a $2 million investment for the firm. The CEO, Jim Foster, is concerned with the associated risks that CRL would be undertaking if they accept this venture. Key issues of concern are; the partnership with a relatively small, family run business; having operations in Mexico, which could pose difficulties; maintaining CRL’s focus on U.S. expansion; and the proposed partner’s lack of funds to invest, which will leave CRL to bear the entire cost of the venture.
Internal Analysis: Business Strategy Diamond 1.
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ALPES also established exclusivity contracts with potential competitors, customers, and suppliers a number of years prior. Finally, ALPES is the major supplier to Mexico’s two largest animal vaccine producers. With this connection and loyalty comes an assured revenue stream, which is very valuable in the Mexican market. 4. Staging and Pacing
InterVet, a major purchaser of ALPES’ SPF eggs, has projected a doubling of current demand within the next year, therefore forcing ALPES to construct a new facility to accommodate this increase. If CRL were to accept this joint venture proposal with ALPES, SPAFAS would need to invest $2 million in cash in exchange for 50% of its equity. This $2 million would be used to increase capacity, construct a pre-incubation facility, and compensate ALPES for management services and associated goodwill. In return, ALPES would contribute its existing assets for its 50% equity interest. 5. Economic Logic
If Charles River Laboratories were to decide to take part in the joint venture proposal, they would share profits equally with ALPES. The projected earnings for the next year are estimated at $3 million, and this amount is expected to double by the fourth year, while forecasted operating margins are expected in excess of 30%
Conclusion
According to the business strategy diamond analysis, both expansion and working with ALPES are feasible courses of action. Through continuing the existing

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