Advice to Earth Baby

In: Business and Management

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Advice to Earth Baby Inc.
Unit 4 Assignment
Lamar Jennings
Kaplan University

As a business consultant I would have to advise Earth Baby Inc. against the proposed venture of Great Deal Inc. EBI has differentiated itself from the competition for the quality of its product. That quality has allowed EBI to sell at a higher price than the competition and remain profitable. The numbers could favor EBI as some overhead cost are reduced and manufacturing cost would go down due to the modifications that would take place. However, I am against the joint venture because GDI would have the limited right to market the product “as manufactured by EBI.” This venture could possibly cause EBI to lose its exclusivity with the higher end market. The possible short term gain would not be worth the long term risk for EBI in this scenario. When it comes to the health of babies; parents are not always looking for the “low cost options.” GDI would be selling the baby food at a lower price than EBI. As we have learned, EBI would have to utilize inferior products and a manufacturing process for that to happen. There would need to be further research funded by one or both of these companies to determine if these inferior products provide the same health benefits the company’s products have been known for. If not, Earth Baby Inc. definitely does not want their name to be attached to the product. There are several reasons why companies form joint ventures. Some internal reasons include spreading cost, access to new markets, and help economies of scale. Some external reasons include, developing a stronger innovative product, hitting the marker faster and overcoming competition. Some strategic reasons for a joint venture are the creation of synergy, improved technology and diversification (chrisianfea.com). With this joint venture spreading cost could…...

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