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

this kind of a company is going through the maturity stage of its life cycle it does not have any scope for expansion through improvement in operations because it already have a lot of it market shares.

this type of company can only diversify through operating into new products or acquisition of new Company.So, idea given by genius is completely true,as it can diversify into some other product which is the future to explain itself. it can be a strategy which is projected at entering into some other market.

this idea can help in expanding the company into some other markets as well and it can also lead to expansion of its own project to the other Market by making the company digital through the technology.

Better use of cash reserve will be to acquire a company which is doing the same type of business but with a little more sophistication and operating in some other markets.