Alpes Case

ALPES Case Analysis

Main Issues

Charles River Laboratories (CRL) is considering whether or not to invest in a joint venture with ALPES. However, there are several potential risks that need to be considered such as unstable currency and uncertain market in Mexico, partnering with a small company that is not making a new investment and never having successful business in Mexico.

External Analysis

Porter’s Five Forces

Competitive Rivalry: There are only two competitors that provide SPF eggs beside the ALPES, however ALPES supply a huge amount of SPF eggs to the Mexico’s largest animal vaccine producers. Therefore the degree of rivalry is low.

Threat of New Entrants: Since ALPES is the provider of the two Mexico’s largest animal vaccine producer; ALPES generates a large market share. However, it is quite difficult to get into this industry, because of trust and also building reputation. Therefore the threat of new entrants degree is medium.

Bargaining Power of Suppliers: Due to the rise in demand, the company has to double its production. Since there are only a few companies provide SPF eggs, so the bargaining power of suppliers is high.

Threat of Substitutes: The threat of substitutes in this industry is low, because ALPES has a large market share compared to their competitors.

Bargaining Power of Buyers: The supplier can increase the price of SPF eggs since the demand is so high. Therefore the bargaining power of buyer is low.

PESTEL Analysis

Political: NAFTA allowed free trades between the three countries: Canada, USA, and Mexico. Therefore, imports leads to high competition.

Economic: Mexico is a country plagued with endemic corruption, economic instability, and unstable currency. The real rates of return had been between negative 25 per cent and negative 28 per cent for each of the last consecutive years.

Sociocultural: There is isolation and poverty in the Mexican countryside. Poultry are easily contaminated without being vaccinated, and would be harmful to human health.

Technological: The new facility would have greater production capacity as well as superior sanitary standards, including sealed and quarantined animal housing, a laboratory and service buildings, where eggs could be pre-incubated prior to being shipped to customers.

Environmental: Contaminated poultry posed a serious risk to human health. The U.S. Department of Agriculture estimated that such bacteria caused more than four million illnesses and up to three thousand deaths each year.