Table of Contents
Case Considerations and Actions3
Considerations for a Joint Venture5
Considerations for a Buy-out5
Appendix- The Case10
A Joint Venture or a Buy-out? The Case of Lilly and Lannie Corporations
It has been a strategy for businesses at different industry to look at integration as the solution to problems on increased marketability and profitability. In the case of Lilly and Lannie Corporations, the situation suggests a timely integration for both companies.
It is a known fact that Lilly Company is a multinational company that is in the verge of losing reliable suppliers for their food processing and distribution. As it is a threat for Lilly Company that their raw materials are at skyrocketing prices due to demands of the same material for fuel industry. In other words, Lilly’s operation is affected with all these competitions that they may face for raw materials. Suppliers of raw materials will be in control on the price of agricultural products. This is the reason why the company has to look at integration as the solution to this problem.
For Lannie Corporation, the company has proven their marketability in places like Far East, Middle East and part of Europe but not locally. Though this has their record for the longest time, the company has no control of the external changes that directly affects them- high oil price and labor issues. As this is a continuing problem, the company is looking at selling the company to interested organization.
Assessing the case, an integration maybe the simple solution to the problem but there are underlying issues that needs to be addressed before taking such action.
2 Case Considerations and Actions
At first glance, the merging of Lilly and Lannie corporations is somewhat perfect to both parties but as you can see there are lots of considerations that need to be understood and need appropriate actions. Table 1 shows the important attributes of Lilly and Lannie, which are crucial on the decision making process- whether a joint venture or a buy-out.
Table 1. Factors in Consideration
|Factors in Consideration |LILY (Mother Company) |LANNIE (Subsidiary Company) | |Type of Business |Food processing and distribution |Exports on agricultural products | |Problems |- stagnant expansion |- high distribution expenses (i.e. high oil price) | | |- unreliable suppliers for raw materials |- poor local markets | | | |- labor issues (i.e. demands for higher wages) | |Distribution |Retailers in the North America, Europe, and |Far East, Middle East and part of Europe | | |the Middle East | | |Strengths |Multinational |Healthy balance sheets for 50 years. |
Upon doing reviews on the case facts, Lilly and Lannie Corporation have been in the food processing industry but with different business. The former is on food processing and the latter is more on exporting raw materials. Lilly Corporation is directly in contact with customers as their...