Questions on Southern Comfort

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Why is Brown Forman considering buying Southern Comfort? In your answer consider the strategic motives of Brown and the arguments in favor of and against the acquisition (7 marks / total 20 marks). Brown-Forman Distillers Corporation is by analysis in a generally more favorable financial position relative to its major competitors. In the FY1978, the company held a relatively higher profit margin, higher anticipated return on investment as well as higher profit margin. The FY1978 financial report indicates that the company was in a positive position since the balance sheet indicated strong results in regard to asset management as wells relatively low level of debt to equity ratio. Even though the industry was facing a sluggish growth rate in terms of sales, the company defied the odds of the market and continued to experience growth. These allowed the company the opportunity to succeed in financing an expansion strategy via the acquisition of Southern Comfort. Southern Comfort as a company too was considered a liquor powerhouse due to its strategic ability to produce unique liquor made from a secret formula. This formula was exclusive to the company's owners and allowed them to produce liquor of distinctive flavor. Since Brown Forman's policy is to produce and sell only high quality products at high/premium prices, South Comfort's product offering blended into its philosophical view of producing a unique and high quality product with a very strong brand perception. The
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