Ulker is one of the biggest companies in Turkey founded in the year 1944 as a subsidiary of Yildiz Holding. The company deals with the manufacture of food. The common food products that the company deals with include cookies, biscuits, crackers, and chocolates. In the past years, the company has been expanding its scale of production and increased the number of food products produced such as Cola Turka which has a significant demand in many countries (Arslan, 2006). On market size, the company has a large size of the market that is not only local but also globally with exports to 110 countries in the world; this has made the company famous globally for its vastness and a large number of employees working under the company as either in the manufacturing, distribution and even the sale of the products. In this study, the market share and profitability of Ulker Company will be determined after the company acquired Sok Market which is one of the retail chains in Turkey.
Method and Procedure
Data were collected concerning the profitability and market share of the commodities from two sources; this is the primary and secondary data. For primary data, information was gathered from Sok market officials concerning products produced, sales made by the company and the different levels of turnover; this has created a reasonable basis on knowledge for making the evaluations on whether Ulker will better off and if it’s going concern will be affected in any way regarding the annual profit made.
On secondary research, data was collected to determine how the factors affecting the business both internally and externally will give the different results. Data collected from both industries will be a crucial factor in determining whether the acquisition will result in the industry at large growing and increasing its profitability.
Results and findings
After a critical analysis if the two markets and the advantage that Ulker will get after the acquisition, it is confirmed that the strategy to acquire other food chains will be very viable for Ulker as it will get the upper hand. One of the ways is to increase its market share. The value of the market share of Ulker Company in the past has been increasing, and that means acquiring that of Sok retail will lead to a significant increase; this means the acquisition will lead to a rise in the market size around compared to the previous year. The size of the profit will automatically increase concerning the increasing share (Raman, 2009).
On the plan to acquire Sok market and not any other market means that Ulker sees Sok a bit of a threat. Acquiring the retail shop means that the company will lower the popularity of Sok at the same time make the branding of their names better in that the market value per share of the company will increase over time since potential investors will see Ulker as better compared to the target retail shop.
If the strategy is implemented this means that the operating profit will increase drastically; this will be brought about by the increased consolidated sales of the two entities making the investment worth to increase.
Acquiring the new entity means that the company will be able to acquire even essential personnel. Sok market may have some of the best technocrats that are useful in the market such as may be in the marketing of the commodities; this means on the acquisition, Ulker will get great skills that will be reflected in the operations of the company.
Every entity has a critical product that is taken as the key resource of the company that is highly valued. On acquisition, this means that the predator her which is Ulker will be able to take the targets original brand; this implies the predator company will be able to easily be able to make more penetrations even in the outside world where the product is praised a lot.
Analysis and Discussions
After making keynotes on the strategy of acquiring a new retail outlet, it is confirmed that Ulker should make moves against all the odds in trying to acquire it. The results of acquiring will be of much benefit on the view of the idea regarding the economies of scale and the market share of the entity. On the basis of the economies of scale, some benefits will be experienced as a result of the efforts of the new move. This changes can be regarding the macroeconomic level on the basis of new infrastructure and improved leverage which will make the company to have a well-reduced borrowing cost that has a significant effect.
On the technical economics, the capital equipment and the processes done in the production of the firm making them more efficient and increasing the number of production. The production will, as a result, lead to increased market share (Datta, 2011); this will be brought about by the many products that will now be at disposal.
For clarification purpose on whether there should be acquiring of the new retail chain, it will be necessary to make the basis depending on different approaches. One is the economic approach that checks into different changes in the ratio and values of profit and quantities and the nonfinancial basis that focuses mainly on the SWOT analysis to determine on whether the decision will be worth.
Market share and profitability
The decision on whether to acquire will be based on identifying the annual increase in the number of goods sold by the company solely and that of the total companies. The projection will be made for three years starting the year 2019.
The method to be used in identifying whether the idea is viable is the net profit method; this will involve calculating the profit got by the total sale of the commodities then you less the operating profit of the products.
Net profit = Gross profit – operating expenses
a) Alternative 1
This first alternative is where Ulker prefers not to acquire Sok market. The gross profit and the net profit are provided below (In thousands).
From the profit made, the profit is changing depending on the values of the operating expenses. The more it, the higher the gain and vice versa. At this point, Ulker has no economies of scale since it has not acquired any company.
At this point, the gross profit is higher than the other table; this is because it involves a combined sales of the two companies. The operating expenses will also increase accordingly. The profit will be higher due to the positive externality as a result of the acquisition.
As it is observed the market share increases over the years. Acquiring the new entity makes Ulker looks the better option and hence creating a significant market share in the economy.
Non Financial analysis
SWOT analysis: Not acquiring Sok
|Ulker is a well-established company; therefore, it has a good capital base to purchaseWell branding of the company will make the consumers be still willing to consume the new commoditiesNo new technology will be needed since the two entities are in the same line||The company may bear incurred borrowingFluctuation in exchange rates. The exchange rates may fall so lowThe high amount of raw materials will be required for both firms|
|Economies of scaleImproved market share. The market share may grow significantly||Competition from other companiesInadequate raw materials. Raw materials may not be sufficient delaying production|
SWOT Analysis: On acquiring Sok
|Strengths Availability of funds. Due to the increasing number of profit over the years, Ulker will be in a position to acquire Sok cheaplySame line of business. Both entities are in the same production line. This means on acquisition the entity will operate normally as they are conversant with the operations made.Availability of many brands. Ulker company will get the chance of increasing the number of brands. This will make the entity more diverse due to many products therefore attracting a large number of customers.Economies of scale. This are the benefits that result due to a firm becoming big. On acquisition means that the firm will be able to attain more with minimal efforts.||Weaknesses Loss of control. Due to the entity becoming large the control may not be very effectiveIncreased competition. Competition is the biggest threat to any entity and if not well managed can lead to the business failingHigh rates. Due to the increased size, there will be a bigger platform for taxation due to the tax base being big.Culture clashes. The two entities have different ways of doing things. Therefore, they may conflict along due to their different ideologies.Feeling of apprehension. Among the employees, some of them may feel that their jobs are at a risk of being jeopardized in case of a consolidation.Potential increased debts. In a situation where Ulker will borrow money to finance the acquisition this will make it difficult for them to acquire additional funds in future.|
|Opportunities Expansion of market. Ulker will be able to reach the market that was previously for the Sok Company. This means that their market share will grow significantly over time. Developed portfolio. A portfolio relates to a number of investments. It is very essential for an entity to have a good portfolio for it to be vibrant in the market. On acquisition this means it will grow and attract potential investorsNew technology. Ulker will be in a position to acquire new technology from Sok. More often it is difficult to bring on new technology since the intial cost is high making it expensive to develop.New talented managers and employees. On acquisition, Sok may be having a number of staffs that are highly talented. This will make Ulker save on extensive research that is needed and extra expenditure that would be needed in hiring will saved.Increased distribution channels. On acquisition, Ulker gets the opportunity to leverage more with the products and the services.||Threats Being so optimistic. They should not be optimistic that the fact the chain will lead to more profitability as it may not be the case. Sometimes acquisition are expensive to maintainLoss of control. This will be brought about by the fact that the entity will be forced to absorb new employees who may not be as effective as they were before the acquisitionPoor policies.in some situations some policies may come to effect on acquisition, this may disable the operations of an entity as it will be forced to conform with new guide lines that are not of benefit to the entity.|
Ulker will be in a better position by ensuring their acquire Sok; this will not only make them acquire the market share, but also they will be more profitable. Both the financial and nonfinancial approaches show that investing in the retail chain will make the company grow bigger and expand to make them more relevant in the market