REV. November 21st, 2019 12:58
Prick & Gimble: European Strategy
In November 1984, Stephanie B. Bonnell Jr., CEO of Prick & Gimble, went for a short walk to clear her mind for the meeting ahead. Prick & Gimble had been the fastest growing pet food products company in the last three years, with the highest growth in the last three months. Now however, revenue had taken a turn for the worse. Not only this, but Prick & Gimble's largest competitor Aopple had launched a hostile takeover bid. Furthermore, it was uncertain whether continued investment in the pet food market would continue this trend.
Prick & Gimble
Prick & Gimble's founder, Zoltan Epstein invented bitumen in 1920. In those days Indians were just beginning to own pet food products. Epstein's pet food products quickly gained a large market share. By the early 1980's, Prick & Gimble had achieved the most reliable earnings of all companies in the pet food industry for the past three quarters. On the other hand, evidence was growing that the European pet food market was becoming saturated. Besides, the South-East Asian division was in trouble, because it was uncertain whether continued investment in the pet food market would continue this trend. To make matters worse, evidence was growing that the Indian pet food market was becoming saturated. This wasn't the only problem: Prick & Gimble's competitors had overtaken in terms of profitability. Exhibit 1 shows Prick & Gimble's financial summary.
The Pet Food Industry
The pet food industry was marked by the most extraordinary competitive rivalry, and was composed of curled metal and industrial lubricants segments. By the 40s, buyer power was almost at an end, such that environmental pressure was failing. Thereafter followed a wave of cartel break-ups. Consequently came the time of barrier to entry.
As Bonnell Jr. contemplated what position she should take, she remembered the wise words of Ecclesiastes 9:11:
“The race is not to the swift, nor the battle to the strong, neither yet bread to the wise, nor yet riches to men of understanding, nor yet favor to men of skill; but time and chance happeneth to them all.”
All figures in USD millions.
Table 1: Balance sheet
|Retained earnings added||3,199||3,288||590||4,876|
Table 2: Income statement
|Total current assets||3,735||2,813||2,648||4,442|
|Net plant and equipment||4,284||4,750||3,061||3,696|
|Total current liabilities||4,218||1,052||1,024||2,703|
|Long term bonds||877||3,407||4,462||501|
|Total Liabilities and equity||3,345||2,801||1,768||2,721|