A Business Case: Expansion of Murray’s Cheese Company

Cite this

Introduction

Expansion is a part of a firm’s development, usually indicating business success. Murray’s Cheese is a U.S. cheese manufacturer with an almost 60-year history based in New York City. It broadened its marketing to more than 800 locations and opened 600 restaurants in many different states across the United States (Murray’s Cheese, n.d.). Murray’s has long been considered an ideal firm with annual revenue of $250 million and incredible dedication to its craft (Morgan, 2017). However, it was merged with Ohio-based company Kroger, the second-largest retailer in the U.S., in 2017 (Morgan, 2017). Still, it continues to deliver high-quality cheese of various types to American stores. Although this company’s products can be purchased online and shipped worldwide, Murray’s wants to move to bigger premises in Mexico to bring this cheese brand and new production technology to this country. However, the question remains whether the firm needs to buy or rent a property for manufacturing. Therefore, this report aims to discuss the advantages and disadvantages of buying vs. leasing a building and propose the most practical solution for the news division of Murray’s Cheese in Mexico.

On-Time Delivery!
Get your customized and 100% plagiarism-free paper done in as little as 3 hours
Let’s start
322 specialists online

The primary reason for selecting this country as a target market for Murray’s was an increased cheese consumption among the local population and insufficient production. For example, according to Statista (2021), Mexicans purchased approximately 570 thousand metric tons of cheese in 2020 compared to 550 thousand metric tons in 2019, showing a rising trend. However, the manufacturing numbers lag behind the consumption by more than 100 thousand metric tons (Statista, 2021). Moreover, Mexico is one of the fifteen largest economies globally (The World Bank, 2021). Consequently, Mexico seems an ideal place for expanding Murray’s production and global distribution of cheese.

The Proposed Course of Action

Before purchasing a new property or renting a building for Murray’s cheese production in Mexico, exploring the market, comparing prices, and developing a plan is crucial. Indeed, strategic planning is the cornerstone of any successful organization. Scaling up cheese production to an international level is an essential step for Murray’s Cheese because currently, this company manufactures cheese only in New York City and distributes products to all other states. The 2017 merger with Kroger’s corporation, one of the largest supermarkets in the United States, demands an expansion of cheese manufacturing beyond the United States (Morgan, 2017). Establishing a production division in Mexico will lower the price for this country and its neighbors and allow Murray’s to deliver cheese to southern states from the new office.

The first foreign location is chosen to be Mexico due to the popularity of cheese here, cheaper labor, and lower prices for industrial buildings. Indeed, one can rent a facility in Mexico for about 40 cents per square foot, and buying this property would cost less than $5 per square foot (NAPS, 2020). In contrast, a company would have to pay for the same manufacturing place in the United States about $1 and $150 per square foot for leasing and purchasing, respectively (NAPS, 2020). It would probably be reasonable to rent a building for new production to probe this market and then purchase it. Leasing is beneficial for short-term goals, leaving no associations or responsibilities. However, Murray’s Cheese wants to establish its manufacturing for a long time in this country; thus, purchasing a building suitable for cheese fermentation, aging, and packaging is a preferred choice. Considering low prices and high product demand, Murray’s should consider buying a manufacturing property in Mexico that will be polished and equipped for cheese production.

The Proposed Outcomes

The expected end result of buying a manufacturing property for cheese production in Mexico is the increased product popularity among the local population and the rise in sales. The anticipation of Murray’s is that making cheese of the same quality as in New York City will allow to sell it for a lower price than the one ordered online and delivered from the U.S. Minimizing product cost will be enabled by local manufacturing with full participation of Mexican workers. Moreover, since the production building will be a one-time purchase of the firm, no leasing payments will be needed, lowering the final cost of cheese. The aftermath of establishing a new manufacturing place in Mexico should broaden the market for Murray’s that will be able to deliver fresh products to foreign stores and individual customers who purchase cheese on their website.

The Required Resources

Cheese production is a delicate and laborious process that requires special knowledge, materials, equipment, and aging facilities. The overall process starts with adding bacterial starter culture and then specific enzymes for milk coagulation (Kaylegian, 2021). The subsequent steps may vary with the type of cheese which determines the technique utilized for manufacturing. Every stage is critical; thus, Murray’s needs to bring equipment and materials from reliable suppliers. Furthermore, the company should ensure the supply of various milk types: cow, sheep, goat, and buffalo – because some consumers with intolerance to cow’s milk may prefer to buy cheese made from goat’s milk (Murray’s Cheese, n.d.). Moreover, the firm will also need to recruit the citizens of this country to work in the new facility. Since Murrey’s has its special cheese types, the new division in Mexico will need professionals from New York City’s office to teach local workers the craft of artesian cheesemaking. Overall, Murray’s training program is intended to preserve the best cheese production principles; hence teaching the best practices to new employees will benefit the company.

Assumptions

The economic situation of Mexico is unstable; therefore, creating a new cheese manufacturing facility should be done with particular assumptions and precautions. Although Mexico is the second-largest economy in Latin America and has solid macroeconomic institutions, the 2020 crisis caused a substantial drop in the development of this country (The World Bank, 2021). However, it should not mean that opening a new business need to be beholden until the pandemic ends. The broad introduction of vaccination and investments from American corporations should be sufficient to begin the formation of herd immunity. Thus, it is recommended to hire a small number of employees and start with the production of several most popular types of cheese. Later, when the economy recovers, Mexico’s Murray’s division may hire and train more workers, which will require additional investments. Lastly, the popularity of cheese in this country created a rich market with multiple competitors. Consequently, price negotiation may be needed in the future to make the high-quality product as affordable for the general population as cheese sold by the local rivals.

Yes, we can!
Our experts can deliver a custom A Business Case: Expansion of Murray’s Cheese Company paper for only $13.00 $11/page
Learn More
322 specialists online

Options

In this case, there are various possible options, including leasing a manufacturing property, buying a building, hiring a local company for producing Murray’s cheese, or doing nothing. The latter choice is eliminated from the company’s list because Murray’s is intended to grow and improve its marketing. Hiring one of the Mexican firms to produce cheese using Murray’s technology is a possibility but not the desired option to avoid implementing low-quality materials and damaging the brand name. Since Murray’s Cheese wants to establish long-term manufacturing on the territory of Mexico to deliver their products locally and to adjacent states, leasing is less preferred than purchasing a property here. Therefore, buying a new building for cheese production is the prioritized option.

Financials

The financial statement for this particular business case should include cash flow analysis, income statements, and balance sheets. Although cash flow and income statements are hard to predict, at this point, the balance sheets will include the company assets, liabilities, and equity. Specifically, Murray’s office will have the manufacturing building, equipment, materials, taxes, debts, and investments in its balance sheet in Mexico. The breakeven point is the ratio of fixed cost to contribution margin per unit. For example, if the contribution margin for Murray’s Irish cheddar cheese is $10 and the fixed monthly cost is $200 per month, then the breakeven point is 20 units to equalize income and expenses. Still, profit and loss statements should be prepared after deciding on the production scale and confirming that the manufacturing property will be bought.

Risk Analysis

The internal risk for Murray’s new division in Mexico can be contamination, while the external threat is a rivalry. Indeed, contamination is a critical problem in food manufacturing that involves using bacterial cultures. This issue can be resolved by proper quality assurance and control at every stage of production. External risk should be monitored to prevent unfair marketing methods from competitors and customer dissatisfaction by the quality and pricing strategy.

Other Relevant Factors

The suggested course of action is to buy a manufacturing property for Murray’s new division in Mexico. Not doing anything is not an option of Murray’s because sales within the U.S. may reach stagnation and start to decline as new competitors enter the market. Hence, it is crucial to open a new production facility to broaden the covered areas. The main advantages of purchasing industrial buildings are eliminating leasing expenses, reduced production costs due to low prices for properties and materials in Mexico, and raising the brand’s popularity.

Business Failures

Business can be viewed as a giant organism where all parts interact and are interdependent; hence, any failure of a small element leads to fatal consequences for the entire firm. Indeed, companies can go bankrupt after several decades of successful existence on the market. Possible reasons for such failure include the lack of adequate financing and skilled personnel, leakage of resources, insufficient product demand, and poor accounting. Many of these mistakes could be prevented with proper planning. However, some founders and CEOs either did not have adequate experience or were blinded by past success. As the example of Blockbuster, Kodak, Pets.com, and Toys “R” Us show that inattentiveness to internal or external issues can be fatal in business at any point of the company’s existence on the market.

Blockbuster

Blockbuster was a video-rental firm in the United States before its competitors Netflix, and Amazon Prime appeared. This company was founded in 1985 in Dallas, Texas, by David Cook, who viewed a potential in this business because renting videotapes was the only way to watch movies outside theaters at that time (Olito, 2020). Blockbuster was the leading firm in this sphere in the 1990s and early 2000s because it could offer customers thousands of VHS tapes due to modern check-out technology (Olito, 2020). The company was taken to a higher level in 1987 when it received investments of $18.5 million and started opening more stores across the United States and worldwide (Olito, 2020). It raised this firm’s stock price; thus, it was sold to Viacom for $8.4 billion in 1994 (Olito, 2020). However, Blockbuster could not compete with the emerging firms that offered more advanced products and services at lower prices.

Blockbuster’s collapse started when one of its strongest rivals, Netflix, appeared on the market. Indeed, the strategies of Blockbuster that charged clients $40 for every late day frustrated consumers (Olito, 2020). Although this company initially obtained a tremendous profit from late fees, it started to lose customers who preferred Netflix with its unlimited access to DVDs for a monthly subscription. According to Olito (2020), the biggest mistake that Blockbuster’s CEOs made was not buying Netflix, which gained its popularity. Although it canceled late fees, continued opening new stores, and launched an online service, Blockbuster was behind the newly founded competitors that had a different strategy from the beginning. Consequently, the company announced its bankruptcy in 2010, massively closing all stores worldwide and dropping from 9000 to only one in Oregon (Olito, 2020). Overall, the series of mistakes that included not considering customer satisfaction and quick adaptation to changes caused Blockbuster’s failure.

Cut 15% OFF your first order
We’ll deliver a custom Business Analysis Case Study paper tailored to your requirements with a good discount
Use discount
322 specialists online

Kodak

Kodak was one of the U.S.’s most prominent technology corporations that underwent failures and resurrections over its more than century-long history before its final declaration of bankruptcy almost ten years ago. This company was founded in Rochester, New York, in 1880 by George Eastman, who invented the first camera for “amateur photography,” acquiring a monopoly in this business for the next several decades (Tiffany, 2021). It allowed the creation of thousands of new job positions in this area and gave customers the possibility to capture important moments of their lives. Moreover, Eastman established new hospitals, parks, colleges, and cultural institutions in Rochester (Tiffany, 2021). However, after multiple failures and shits in business strategy, Kodak announced its collapse.

The cause of this company’s downfall was not the inability to create a digital camera but unwise investments into old technology. Indeed, the first filmless photography was invented by Kodak, but the firm, blinded by its success on the market, missed the point when other companies surpassed it by investing in smartphones with high-quality installed cameras (Viki, 2017). Due to the substantial loss in total revenue, Kodak had to file for chapter 11 bankruptcy protection in 2012 (Viki, 2017). Although it still sells digital cameras, the company sold most of its patents, commercial scanners, and kiosks and shifted to pharmaceutical production (Tiffany, 2021). Unfortunately, one of the American technology giants could not compete with the rapid development of its rivals because it “had failed to imagine a new future” (Viki, 2017). Overall, the business collapse, in this case, was caused mainly by stagnation due to intoxication with past success.

Pets[dot]com

Pets.com was a firm that gained increased attention in American media but managed to survive on the market for only two years. This company was founded in 1998 by Greg McLemore to sell pet supplies online to individual retailers, receiving $300 million of investments from venture capitalists like Hummer Winblad and Jeff Bezos (Lamare, 2019). In fact, more than 50% of the company’s stock was owned by Amazon that was a good deal for this startup (Lamare, 2019). Moreover, the firm’s revenue was more than $600,000 and 300 employees in 1999 (Lamare, 2019). The start was incredible for the newly formed organization, but Pets.com’s strategies ultimately failed.

One of the biggest mistakes of Pets.com was overinvestment in an advertisement. Indeed, according to Lamare (2019), the company spent approximately $1.2 million to purchase a Super Bowl ad. The overall expenditures for promotion campaigns were more than $11 million (Lamare, 2019). Furthermore, Pets.com was trying to build a loyal cohort of clients, offering discounts and free shipping, which is a good strategy but not before the company reached its breakeven point (Lamare, 2019). The stock price for this firm fell from $11 to $0.19 per share in early 2000; thus, the owners had to close Pets.com’s “virtual doors” in November of the same year (Lamare, 2019). The income of this company was good for further growth, but inappropriate spending and resource distribution led to its collapse, job loss for 300 workers, and evaporation of invested resources.

Toys “R” Us

This company used to be one of the most famous children’s toys, clothing, and gaming stores in the United States. Toys “R” Us was founded by Charles Lazarus in Washington, DC, in 1948 and later expanded to other states acquiring its current name in 1957 (Biron and McDowell, 2021). Lazarus saw the potential in this business, considering the rise of a baby boom era after World War II. It quickly gained customers’ acclaim, especially after recruiting basketball stars for their marketing campaigns (Biron and McDowell, 2021). The company returned to the usual track after its parent company Interstate Sales collapsed in 1974 (Biron and McDowell, 2021). The firm continued its expansion by adding clothing for infants and toddlers to its repertoire. However, the competitors, like Walmart and Target, not primarily aimed at selling products for children, surpassed Toys “R” Us in the number of toys and apparel sold.

Once a beloved brand for children and their parents, Toys “R” Us, could no longer compete with the online retailers and became bankrupt. Indeed, the company had to file for chapter 11 bankruptcy protection in 2017 (Biron and McDowell, 2021). Although the firm tried to keep up with such rivals as Amazon, Walmart, and Target by opening online purchasing on Toys “R” Us’s official website, it was too late. Therefore, the company eventually closed all of the stores across the country, with the last ones being shut down soon after the lockdown due to the ongoing COVID-19 pandemic.

Suggestions for Preventing Business Failures

As the above examples show, various reasons can lead to business failure; hence, many different areas should be considered to prevent this unfortunate event for an organization. The case of Blockbuster demonstrated that inattention to the customers’ satisfaction and resistance to quickly adopt methods utilized by competitors resulted in an unfavorable outcome. The first possible recommendation for this company to prevent failure would be to allow customers to keep rented products for some period past the deadline without late fines. Secondly, opening an online service soon after the appearance of a similar option in Netflix could also prevent the firm’s demise.

Get a custom-written paper
For only $13.00 $11/page you can get a custom-written academic paper according to your instructions
Let us help you
322 specialists online

In the case of Kodak, a legendary brand, the failure could also be prevented if one of the two specific suggestions were followed. The first recommendation is to change leadership and invest in the research and development of new devices. The second suggestion would be to merge with one of the technology companies, like GoPro, that started to develop rapidly. Still, Kodak’s situation is more complex because they made incredible inventions in this field but failed to change its direction on time.

The business failure of Pets.com could have been prevented if the company had a business plan instead of excitement and enthusiasm that blinded even large investors. This online store was promising, but the firm started offering significant discounts and free shipping to all customers before reaching the breakeven point. They should have beheld this campaign until their sales reached the point when income exceeded or at least was equal to expenses. Moreover, it was not a good strategy to spend millions of dollars on marketing for an online store.

The collapse of Toys “R” Us could be avoided by incorporating technological advancements into its model. Indeed, customers found online shopping offered by Amazon or Target more convenient and cheaper; however, Toys “R” Us was too slow to provide this option for its clients. Overall, if the company started to adopt the tools of the Internet era earlier than its rivals, this business failure would not happen.

Reference List

Biron, B. and McDowell, E. (2021) ‘Inside the wild and tumultuous history of Toys R Us, a once-beloved children’s brand that just closed its last 2 stores in the U.S.’, Business Insider.

Kaylegian, K.E. (2021) ‘Introduction to making cheese’, Penn State Extension.

Lamare, A. (2019) From IPO to complete liquidation in 268 days. How Pets.com became the biggest disaster of the dotcom bubble. Web.

Morgan, R. (2017) ‘How Murray’s Cheese ended up being sold to a grocery chain from Ohio’. Grub Street.

Murray’s Cheese. (n.d.) About Murray’s. Web.

NAPS. (2020) Cost of industrial buildings in Mexico vs., U.S. Web.

Olito, F. (2020) ‘The rise and fall of Blockbuster’, Business Insider.

Statista. (2021) Consumption of cheese in Mexico from 2010 to 2020. Web.

The World Bank. (2021) Mexico overview. Web.

Tiffany, K. (2021) ‘The rise and fall of an American tech giant’, The Atlantic.

Viki, T. (2017) ‘On the fifth anniversary of Kodak’s bankruptcy, how can large companies sustain innovation?’ Forbes.

Cite this paper

Select style

Reference

BusinessEssay. (2022, September 23). A Business Case: Expansion of Murray’s Cheese Company. Retrieved from https://business-essay.com/a-business-case-expansion-of-murrays-cheese-company/

Reference

BusinessEssay. (2022, September 23). A Business Case: Expansion of Murray’s Cheese Company. https://business-essay.com/a-business-case-expansion-of-murrays-cheese-company/

Work Cited

"A Business Case: Expansion of Murray’s Cheese Company." BusinessEssay, 23 Sept. 2022, business-essay.com/a-business-case-expansion-of-murrays-cheese-company/.

References

BusinessEssay. (2022) 'A Business Case: Expansion of Murray’s Cheese Company'. 23 September.

References

BusinessEssay. 2022. "A Business Case: Expansion of Murray’s Cheese Company." September 23, 2022. https://business-essay.com/a-business-case-expansion-of-murrays-cheese-company/.

1. BusinessEssay. "A Business Case: Expansion of Murray’s Cheese Company." September 23, 2022. https://business-essay.com/a-business-case-expansion-of-murrays-cheese-company/.


Bibliography


BusinessEssay. "A Business Case: Expansion of Murray’s Cheese Company." September 23, 2022. https://business-essay.com/a-business-case-expansion-of-murrays-cheese-company/.