Reference no: EM131511960
Jose was relecting on the days, about 7 years ago when he started to supply cakes in his old neighbourhood. His firm, which now employed 55 people, was a long journey from those days when he and his wife, assisted by his aunt, bought some second-hand ovens and battr machines at a very low cost and started to supply the cakes on a regular basis. Before that, his wife used to supply cakes and pastries to people as and when they requested. Her reputation had spread and she was then making about 5kg of cake daily and also turning down alot of requests. Before buying the machines, he had approximately decided to brand his cake as "Molly's" which was his wife's name.
Molly's became a well-knwon cake brand all over KL. It was sold in a lof of supermarkets and demand was growing. Demand growth was steady and he would soon run out of capacity. It was a time for expansion. There was cash to buy new equipment and expand on the existing set up. However, 3 days ago, he was presented with another option.
About 2 kilometres from his home, where he was presently making their cakes, in an enclosed shed there was a small operation of a bakery. This bakery was making cakes for the small grocery shops. The owner Zac, was a businessman whi had tried several businesses and was quite successful in 3 of these businesses. In the lawn front of the baker, he has a unit that grows saplings from seeds in pots to supply to nurseries. He owned a go-down in a small town which employs 4 people. The go-down stores bulk quantities of flour and rice to supply to local provision shops.
Zac was 65 years old. He wanted to sell the businesses and retire as non of his children wanted to run the business. Thus Jose was pondering as to whether he should buy new equipment at his exisiting set-up or buy out the business from Zac. Buying the business from Zac would cost his 30% higher. However, Jose was not interested in the sapling and go-down businesses. Buying Zac's business would also mean that he gets some staff who are already trained and get the equipment. Jose however was not interested in carrying out in supplying cakes to the local shops as that was a very low margin business, Also, making cakes in 2 places involved greater co-ordination efforts.
a) How should Jose go about evaluating his options?
b) List down 5 advantages if he buys the machine vs buying the exisiting set up
c) What should he do with the sapling and go-down business and its staff?