Sterling Household Product Company Case Study

Case Study Analysis

Sterling Household Products Company

Problem Statement:

The main problem that the Sterling Household Products Company is facing is weather the company should invest $265 million dollars to acquire Montagne Medical Instruments company and if it would generate value for the company and its investors.

Objective:

Sterling household products company has faced limited growth of 4.5% between years 2010 and 2012. Even though the company is selling products internationally, they face heavy competition and constant pressure from big retail companies to lower the price and profit of their products. Sterling needs to increase their profit by acquiring new retailors or go into healthcare infection control market of $2.5 billion by buying a unit from Montagne medical company for $265 million.

Alternatives:

1. Make no change, stay in the same business and ask the retailors to decrease their margins.
2. Buy the company and expand the business in healthcare infection control market with less competition.
3. Expand the Montagne medical company after acquiring as it has potential to grow at full capacity.
4. Renegotiate price for acquiring Montagne medical company since the operating income and annual sales growth is lower than past 3 years.

Analysis of Alternatives:

The first alternative determined for Sterling household products company is to make no change for their company and ask their suppliers and retailers to give them better deals. By doing this Sterling might lose some retailors and also would not be able to gain trust of their retailers later on since they are asking them to lower the requirements for price. Retailers could also stop doing business with Sterling altogether since the market is full of competitors and retailers could go to the other company to do business.