Cesa Deserticas Essay

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September 28, 2011 Case #29 - Ceras Desérticas and Mitsuba Trading Company 1) Of the three options presented at the beginning of the case, what should Ceras Desérticas do? The Desérticas CEO considered implementing one of the following: 1) Vertical forward integration 2) Selling to a Japanese customer interested in vertical backward integration 3) Establishing a joint venture with a Japanese company According to Investopedia.com, vertical integration happens when “a company expands its business into areas that are at different points of the same production path,” and forward integration is “a business strategy that involves a form of vertical integration whereby activities are expanded to include control of the direct distribution of its products.” Vertical forward integration would not be advised as it can be very hard to develop the right contacts and conduct business in a foreign country. Barriers like foreign language, customs, and laws would have to be overcome before becoming successful. Selling the company does not seem wise because Ceras Desérticas is so profitable, has a lot of potential and an established worldwide market. Japan only accounts for 15% of the candelilla wax market. A Japanese owner might make drastic reductions in the production quantity, downsize or streamline the company, and lay off workers so production is lowered meet the needs of the Japanese company. Establishing a Japanese joint venture is probably the best option. A partnership with the Mitsuba Corporation would be the most beneficial because Mitsuba is Japan’s biggest importer of candelilla wax and has massive plans for worldwide expansion which could lead to more business for Ceras Desérticas. While Japan only accounts for 15% of the candelilla wax market, if Ceras Desérticas could lock the market with Mitsuba, Ceras Desérticas could focus on business interest in

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