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Huffmn Trucking Company
Expanding the operations of the company entails raising additional capital in order to support the extra capacity envisioned in the objective. Apparently, outsourcing of funds is the main option and the mandate of the management is to determine the most appropriate channel that guarantees maximum returns from the expansion. The other challenge in expansion includes the choice of a suitable investment to increase operations. Three most commonly employed channels that the management at Huffmn Trucking Company has to consider are through an Initial Public Offer (IPO), acquisition of another company and merging with another company. The admissibility of the above options can be done from the following considerations.
The advantages of an IPO may attract the attention of the management with respect to the inherent opportunities and strengths. Firstly, the inclusion of the public to invest in the business spreads the ownership and risks among many hands thereby reducing the difficulty. This also enables future expansion using the same channel possible such as through rights issues. Additionally, an IPO achieves an advertising opportunity since the advertising has to be addressed to the public. Such publicity is likely to attract an opportunity to raise the market share in the competitive trucking business. Alternatively, if the current owners want to sell out the business, it is a vital exit strategy (Balasubramaniam, 2006).
Weaknesses of the IPO option include the requirement to make the books of accounts as open to the public as possible since ownership is transferred to the public. Apparently, there are several compliance requirements by the securities exchange authorities, which are expensive to implement. In addition, the close watch of the shareholders with a higher ambition pressures on the management makes the operations to continue under intense pressure than in a privately owned company. The IPO presents the best option for expansion strategy, if the company is appealing enough for the public to have a share of ownership in it.
Despite the fact that the challenge of obtaining capital proves to be a problem in expansion, the manner of implementing the expansion still stands. In making an acquisition of a company in a similar line of operations, Huffmn has the benefit of continuity when compared with starting a brand new company (Gilan, 2010). Additionally, integrating the successes of the acquired company into the new operations at Huffmn is beneficial for sustainability of the expansion. As an illustration, taking over resources such as experienced human resources also contributes to a better opportunity than staring a new branch. The disadvantage of an acquisition is the transfer of weaknesses of the acquired company including liabilities and inherent risks.
Merging with a successful company in the trucking business presents Huffmn with an.............
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