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Microeconomics And Business Decision Making Gerber Products In Poland

3412 words - 14 pages

Gerber Products In Poland
Individual Case Analysis: Gerber Products in Poland792-D: Microeconomics and Business Decision MakingJuly 20, 2007Content1. Executive Summary 32. Background Information 32.1 Key Players 32.2 Chronology of Events 33. Key Issues in this case 53.1 Borek Stary facility 53.2 Property Rights 53.3 Taxation 53.4 Economical Country risks 63.5 Political Issues 64. Options 74.1 Withdraw and re-enter 74.2 Negotiate independently Borek Stary facility 74.3 Option for taxation 74.4 Option for Joint Venture 75. Recommendations 85.1 Strategy Under Uncertainty 85.2 5 Competitive forces model 96. Conclusion 107. Appendix 118. References 111. Executive SummaryGerber Products Company ...view middle of the document...

2 billion) and sales outside of the United States were only counting for 10%2. Given the fact that Gerber's home market for its baby food represented only for 3% of the world's baby population and showed flat birth rates over the last couple of years, Gerber's growth ambitions could be materialized only outside of the United States. After the break down of the iron curtain in 1989, Eastern Europe appeared to be an interesting growth market. In 1990, Gerber's CEO, Al Piergallini, decided to focus on Eastern- and Central Europe as future growth markets.In May of 1991, Gerber received a call from John Simpson, a director of the Wasserstein Perella investment firm. John Simpson informed Fred Schomer, Chief Financial Officer of Gerber, that the Polish Government intends to sell its food processing company Alima S.A, located in Rzeczow. At this point in time John Simpson did not know a lot of details about this plant, only that Alima S. A. has been considered as one of the best Polish food processing plants that also produced baby food. Fred Schomer quickly realized that this could be an interesting opportunity to enter into the East European market with an own plant. He met with Al Piergallini, Gerber's CEO, to discuss this opportunity. They agreed to bid for the company. Because Gerber had only two weeks left, until the bidding closes, technical staff immediately flew to Poland to investigate the plant conditions. Simultaneously, Martin Lasher, Gerber's Director of Corporate Planning, calculated future sales and cost scenarios for Alima products.Based on Martin Lasher's calculations and cost estimates from the technical inspection of the Alima plant, Gerber offered to purchase 60% of Alima stocks for USD 11 Million. Additionally they committed to spend another USD 14 Million in reengineering of the existing plant.The Gerber Products Company has been elected out of 19 competitors to enter into further negotiations about the acquisition. Gerber wanted to clarify mainly three topics: Exclusion of the Borek Stary Facility, property rights and taxation.During the negotiations Gerber's initial assumption about Poland got irritated by the governmental elections that took place in October 1991. The political landscape changed dramatically with the result that the relationship to the negotiating government representatives disappeared and a hostile climate towards foreign investments started to appear. Additionally Polish governmental officials did not meet their obligations as previously agreed between Gerber and them.Gerber officials got to the point of deciding whether they should pursue this investment or not.3. Key issues in this case3.1 The Borek Stary FacilityAlima was also producing alcoholic beverages in its Borek Stary Facility. Gerber's officials expressed clearly in the initial negotiations that they do not want to purchase this site and signed an agreement that the Polish officials would sell this part of Alima separately. It turned out that the...

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