Question

You have been contacted by your friend, the president of Fun Foods USA, for some advice. Fun Foods USA, distributes and markets snack foods that are sold in grocery stores. The firm is organized into geographic subunits: West Coast, Southwest, Southeast, Midwest and Northeast. Each unit has its own production, distribution and marketing functions. The company originally started in the mid-west but grew over the years by acquiring local snack food companies that catered to the local market: for example, a company in Ashville North Carolina that makes Moon Pies was acquired and became Fun Foods Southeast. The process of creating Fun Foods USA has been a great ride: Fun Foods USA has been the darling of Wall Street which has allowed them to raise capital and invest in the previously privately held snack food companies with good management and solid brands.

Fun Foods USA’s problem is that they are not a particularly low cost producer. Further, Americans are more mobile than they were before and regional preferences are not as strong as they were a generation ago. How would you advise your friend to reorganize the firm and explain the logic behind the reorganization?  

Answer 1

Steps involved in reorganization of firm : -

1. Turnaround Management - Stabilize company, setting up winning strategies

• Reduce the cost - generate liquidity - utilisation of the assets - competitive positioning.

2. Reconstructing financially - Change debt equity structure

• Management of liquid - restructuring the balance sheet - refinancing the working capital

3. Performance improvement - Create essential functional capabilities

• Planning the action strategically - personal and organisational development - Sale's and Marketing

4. Re - capitalisation - attract new capital and owner

• Preparation of business plan - Valuation of the company

The reason behind reorganization of a company is to improve the efficiency of the company, cutting down the extra cost, repositioning the business. In the above given case study the company needs to do reorganizing because the cost of the product are high therefore people who are going to buy the product will belong to a higher income category. The product cost becomes high only when the material used in making the product are expensive. Fun Food's USA is running the company successfully and also has got high return, but the company can get more return if the cost of the product is reduced that can only happen if the company uses a material of minimum price for developing the product.

Re - organising will help in knowing the companies weakness and threat and the opportunity and the strength. This will help in reconstruction of the business by using strategies, financial planning, marketing ans sales plan etc.