The case study analyzes the acquisition of mercury footwear by the Active Gear Inc from the West Coast Fashions. The active Gear Inc had contemplated that the acquisition would double its revenue, expand its operations through opening of both distributors and retailer shops and increasing the company’s leverage with the manufacturers. But the firm faced a lot of threats than opportunities following the acquisition.
Problem Statement:
The Active has been faced with an increased competition from other large footwear manufacturers globally. This has resulted into competitive disadvantage especially from the Chinese contracted manufacturers. In the three years that followed the acquisition, Active Gear witnessed a slow annual growth rate of 2.2%.The frequent pressure resulting from the competitors and the suppliers increased the poor performance of the company in the industry. Since the acquisition of the Mercury footwear it failed to meet the needs of the consumers. Most of the consumers of the product are within the age bracket of 15 and 25 years that over time seemed to be uninterested with the brand or it could not meet their taste and preference.
Objectives:
The active Gear Inc has contemplated that the acquisition would double its revenue, expand its operations through opening of both distributors and retailer shops and increasing the company’s leverage with the manufacturers. Active Gear footwear focuses at remaining relevant in the market through reaction of appealing brands to its consumers. The main objectives of the firm includes penetration of the market with the new mercury footwear brand, restoring the customers trust on the Mercury footwear brand, effective and efficient market responsiveness and restoring the brand strength.
Alternative:
- Drop the entire Mercury Footwear brand.
- Maintain the brand as it is and continually improving on its quality.
- Contract a new manufacturer to produce the brand that would appeal to the consumers.
- Invest in the production of the Mercury brand by starting a production factory within the firm.
Consequences of the Alternatives:
Considering the above alternatives, the Active Gear Inc would be faced by several consequences by choosing one over the others. By dropping the entire Mercury Footwear line the company will lose its market share as well as the revenue earned from the brand. Maintaining the brand in its current performance would mean continues decrease in the company’s earnings. Considering that the threat on the brand comes from the large international companies, improving the brand quality would not achieve much. Contracting a new manufacturer could increase the operational costs of the company .Secondly; the alternative would take along period before full establishment. Hence, the alternative is not viable solution. Establishing a new plant within premises would result to a lot of expenses that includes construction, equipments and machinery and labor costs. Considering the current financial performance of the firm (2.2% annual growth), the alternative although viable but would be too costly for the firm.
