From: Executive Team (CMO, CFO, COO, and CHCO)
This memo addresses the pros and cons of the potential acquisition of hotels in Italy, along with our recommendations for whether we should moved forward with a purchase.
1. Chief Marketing Officer (CMO) - Larry G. Morris Jr
From a marketing perspective expanding into Italy will be a good opportunity for the organization, as a major player in the U.S. hotel industry already we have to look at global expansion if we want to continue to develop and grow our customer base. We can offer our current U.S. customers an international alternative and offer incentives to help promote the Italy locations; this can be part of our ...view middle of the document...
These decisions are usually hard to make especially taking into consideration that no decision can satisfy all the employees. Every decision made would always be accepted by some and rejected by others. However, these decisions must be made because it is in the best interest of the company. As the CFO, the paragraphs below explains the pros and the cons of purchasing the chain of hotels in Italy
Increase in Revenue: First, there would be an increase in revenue to our company if we purchase the chain of Italian hotels and this would make our company financially stable.
Faster growth: Our company will grow faster because companies that operate internationally tend to develop at a much quicker pace than those operating locally
Access to cheaper inputs: Because we would be Operating internationally, this will enable our company to source raw materials or labor at lower prices
We will also have the ability to attract and retain new customers. But eventhough we need new customers, we must be aware that reaching out to these new customers is one thing, but capturing them for long-term relationship building is primary. Growing a loyal customer base is the best way to achieve stable and growing profits over time.
There is also a chance for New market opportunities. These new markets provide more opportunities for expansion, growth, and income. A bigger market means more customers, increased revenue, a larger profit margin, and allows the business to realize economies of scale.
Economies of Scale
Because our company will be expanding, we will reduce the potential of one product or one poor decision damaging our company. Operating in multiple markets or in many product areas allows us to spread the costs of doing business across more markets or customers. This makes the costs of doing business less on a per-customer basis, which improves the potential to profit by adding new customers.
Diversification: As the firm diversifies its market, it becomes less vulnerable to changes in local demand. This reduces wild swings in a company's sales and profits.
Increased costs: We will face a problem of increased costs because the employees at the Italian chain of hotels are all unionized and are used to more benefits such as more time off, more pay and expensive health benefits. This therefore means that if we purchase the chains of hotels, we will be spending more on all those benefits.
Foreign regulations and standards: Our Company may need to conform to new standards. This may require changes such as in the production process, inputs and packaging, incurring additional costs.
Delays in payments: International trade may cause delays in payments, adversely affecting the firm's cash flow.
If we are to purchase the hotels and comply to their standards, then we wont make a profit. Because my role is profit margin, I will recommend cutting benefits in order to reduce labor cost. This is because...