Virtual Organization Strategy Paper

1457 words - 6 pages

Huffman Trucking was established in 1936 and developed its business throughout the eastern United States. They have recently expressed a desire to expand the business and they are reviewing several options. This paper will provide a SWOT analysis on three expansion strategies including the release of initial public offerings, the acquisition of another firm, and a merger with another firm. Each strategy will offer advantages and disadvantages, by contrasting the strengths, weaknesses, opportunities, and threats of each of the three strategies, this paper will highlight why Huffman Trucking should choose to merge with another firm in order to expand its business.Initial Public offering (IPO)An IPO occurs when a company releases stock to the public for the first time in the primary market. Those shares are then made available for trade in the secondary markets. Several advantages and disadvantages exist when a company releases an IPO (Keown, Martin, Petty, & Scott, 2005, p. 11). Huffman Trucking is privately held company till now. The SWOT analysis of going public through IPO is as follows:StrengthsThe offering of stocks to the public raises new capital for the company. The new capital can be used to invest in the business for future growth and the owners of the firm can easily convert their shares to cash. Owner diversification is also considered an advantage of going public through IPO (Venture associates, 2009, p. 1).WeaknessesOne of the major weaknesses of going public is loss of the personal benefits for the owners of the firm. The initial cost of IPO is high and is ongoing. For about 15% to 25% of capital raised through IPO is spent on expenses related to the public offerings (Keown, Martin, Petty, & Scott, 2005, p. 413). After the firm has gone public, the firm is required to report periodically to SEC (Securities Exchange Commission). The cost of the reporting to SEC is onerous, and may be very time consuming once the time and effort has been invested in to the project. Private investors may lose a certain degree of control over the firm, while the stock holders may gain some control depending upon the number of shares they hold.OpportunitiesBeing publicly traded, a firm gets higher profile in the market. The firm is able to attract more customers and better suppliers for the goods and services.ThreatsThe current economic state is the biggest threat to the IPO's. The current state of the economy clearly indicates Huffman Trucking is a risky investment. In addition, going public requires some disclosure of confidential information to public. This disclosure of information is easily accessible to its competitors which can become the biggest threat to Huffman Trucking.Acquiring another company in the same industryAcquisition occurs when one firm overtakes another through an exchange or the purchase of stocks. "Acquiring control of a corporation, called a target, by stock purchase or exchange, either hostile or friendly, also called...

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