Analysis of Pan Europa Foods

Pan Europa foods is a producer of ice cream, yogurt, fruit juice and bottled water that serves the European market. With a decreased stock value and stagnant gross sales, pan Europa is required to increase the net income, increasing shareholders confidence which will assist in avoiding a takeover. As a result of the situation, The Company allocated 80 million euros from the asset base of 656 million euros. Pan Europa currently has 11 proposals which amount to 208 million which the management committee is required to choose from (Meredith, 2012). Pan Europa foods currently have two financial measures which will assist in determining whether the projects are sufficient economically, maximum payback years that are accepted and minimum acceptable IRR. The management committee is required to choose between 11 projects which are proposed by managers from the firm.

To prevent pan Europa from becoming the victim of a hostile takeover, the shareholder’s dividends should not be decreased so as not to devalue the company’s stock price. Capital spending is the one that should be decreased just as decided by the board of directors. The company needs to adopt strategies which will increase the stock price and not push it down which discourages buyout. The company needs to reduce their debt as the bank suggested since it has a high debt to equity ratio which was incurred in the price wars using their competitive market reach in attaining this. Humboldt and Morin are the ones who should lead the way for pan Europa since they are the ones who initiate innovative changes which have occurred in the organization.

The effluent project is a project that should be done. The conveyor systems and automation are required to be done since it is a health hazard to the company’s employees. Projects which involve small technological changes such as increasing the truck fleet have low risk. Increasing the technological sophistication levels such as the introduction of artificial sweeteners and automation of the products increases the implementation risk. Another risk area is trying to increase markets in new areas with new products. The targeted customers might choose not to buy the products. There will be synergies between the plant’s automation, expansion, geographic expansion projects and truck upgrades.

The projects which have nonquantitative costs or benefits include projects which impact the organization’s regulatory compliance such as warehouse automation and effluent treatment. Projects which can affect the image of the company include the snack food rollout which is positive and the schnapps brand acquisition which might be negative.

Screens which I would recommend to be applied are five through the use of the following factors. Whether the project is a must do for reasons which are beyond the control of the company (criteria Yes/No). Whether the project meets the policy of the company for minimum IRR? (Criteria Yes/No). Whether the projects meet the organization’s policy minimum payback period. (Criteria Yes/No). Whether the project incurs excessive risk (Criteria Yes/No) and whether the project meets the current corporate strategy (criteria Yes/ No).Using the criteria and the screens, projects which would be eliminated include truck fleet since it does not attain the minimum IRR, exceeding the maximum payback which the company dictates. The strategic acquisition will be removed due to the high cost and also since it is not in line with the required strategy. Projects which can be recommended based on the template include eastward expansion, snack foods, effluent treatment, inventory control and southward expansion.

References

Meredith, J. R. (2012). Project management: a managerial approach. John Wiley & Sons.