Future of McCowans - Case Study Report

Operations:

Due to the report by Mail on Sunday which said that the future of McCowans was not optimistic, the uncertainty and worry has been arose among the staff. Although the company has started with its internal restructuring , Management buyout could still result in some operational risks, for instance the board of directors can be easily controlled by specific managers, and the management could make interest conveyance by related-party transaction which may causing damage to the middle and stock holders. Meanwhile, In a MBO situation, the value of the company is decided by the buyer market (the management), that the real value of the corporate will be underestimated by the information asymmetry.

External factors:

Firstly, the steadily rising price of sugar (the main ingredients for confectionery) has increased the purchasing cost of McCowans. Secondly, as the healthy eating has becoming an unavoidable trend, the parents gradually have an awareness of unhealthy diet through the media, which restrict the consumption of the sweets .Some social organization such as Food Stand Agency has made plans to limit the marketing of sweets for children, which is another external factor that contribute to a tougher marketing situation.

Finance:

It is not easy to find appropriate source of finance for a small corporation, Although McCowans was granted a £125,000 of regional selective assistance in 2004. After made a large amount payment for purchasing an bonbon brand of a manufacture, the problem of a heavier financial burden may arise. Though it is available to lend enough money from Clydesdale Bank, the interest payment can be another expense .According to the current operation, it is risky to increase financial expenditure.

Marketing:

It is apparently that there are some potential problems existing in the marketing strategies of McCowans. To begin with, the target market of bars which appeals younger consumers is too narrow, and the price of "Five Bars" is only £2.49 that makes it impossible to realize profit by being sold on the internet. Therefore, a business opportunity will be missed. In addition, the strong competitors (e.g. Cadbury) usually expand the market by using sales promotion, such as promotional pricing, but it is difficult for small scale corporation to compete with the giant in this way of promotion. In addition, the advertising campaign of McCowans is weak because of the financial situation.

2. There are two suitable sources of finance for McCowans to raise money. One of the best ways to succeed in a small company is to encourage workforce become shareholders, that is, staff share-holding.

It is a way of financing from internal reserves that may enable to instill enthusiasm or bolster morale of the staff and increase the cash flow in the

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