Reference no: EM13727315

Four years ago, E retired as Financial Director of an airport company to become an ethical entrepreneur. He now employs ten people producing natural spring water and selling it in both still and sparkling varieties in individually sized plastic bottles. There has been no staff turnover whatsoever. The company, called 99, uses 'green' electricity and all profits go to a charity that installs pumps to provide clean water to some of the poorest communities in the world. Thanks to E's business contacts, 99's water is sold in a few garages, on airplane flights and in airport shops. He has, however, found it impossible to get its water stocked by supermarkets because they want to charge a standard 'joining fee' for small suppliers, even though they know that 99 exists for charitable purposes. Despite this, and the fact that competition in the industry is intense, 99 has achieved rapid growth and significant profits (E receives no salary and the wages of employees are modest). Every time 99 sells enough bottles to build a new pump, it sends two employees abroad to help with the installation and pictures are published on the company website.

A recent national survey indicates that customers want products supplied and marketed responsibly and blame large retailers for not providing more environmentally and socially friendly products. Three quarters of respondents in the survey say that they 'completely agree' that they would choose a socially and environmentally responsible product over one that was not, and two thirds say that they would work for an ethical employer even if it meant being paid less. Last year E turned down a financially lucrative offer to sell 99 to a leading drinks company,

Believing that it did not really share his vision was merely attempting to buy credibility with the growing number of consumers with ethical concerns. Now Z, a large food and drinks company has made a similar offer. Z sees the acquisition of 99 as a way of complementing its product portfolio and furthering its marketing strategy of addressing consumers concerned about green and ethical issues. Z, which began as a workers' cooperative, makes charitable donations annually, has carbon labelling on all of its products and has plans to make all packaging biodegradable or recyclable. Z's distribution also involves the use of low-carbon vehicles.

Should the takeover go through, Z promises to operate at a distance, allowing 99 to run in a similar way and promises to increase the current level of water pumps financed incrementally every year to double the numbers within the next five years. Z is also reviewing its HR activities and feels it could learn from aspects of 99's operation which it believes exhibits best practice and societal trends.

E believes that, by agreeing a deal with Z, there would be a number of benefits for 99 which would include:

- financing more clean water pumps;

- an improved distribution network and environmentally cleaner transport;

- the opportunity to ensure bottles and packaging become 100% biodegradable or recyclable;

- expertise to develop the 99 brand still further;

- an ability to get 99's water onto supermarket shelves.

Explain the reasons why a strong brand is so important to companies such as 99