Question

Brown Cow Co. are famous for its chocolate milk production facilities. They already have a major share of the chocolate milk market and they cannot expand their business in chocolate milk anymore. One of their geniuses believes that tech market is the future and proposed expansion in tech market using their excess money. Do you agree with the genius? Explain your reason for agreement, or disagreement. Can you come up with a better use of the excess free cash flow?

Answer 1

No, i don't agree with the genius in expanding in tech industry because given the high market share in chocolate industry, going in different industry would require huge capital expenditures and work force. The company will need new management and workforce in tech industry. This will lead to increased cost.

ompany should use excess money in the same industry which may include dairy products or variations of cocoa or chocolates rather than going in different industry. Given the industry has already setup it will give synergy to the new product and the same management can manage the new product or process.