Esprit Corporation is planning to remove its operations from the North American market and other European markets. The company plans to divest its operations in an effort to cut on costs and avoid making further losses.
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The given article reflects the implications of a company operating in an international market. A multinational company faces various challenges in its operations including increased competition. Esprit is hurting from operating internationally.
The company has been making continuous losses, and this year is the third in decreased profits. In addition, the company has been facing increased material costs, labor costs, and poor customer base. This trend is common in international markets where there is increased competition and constant technological changes. The company is hurting because it cannot handle the increased competition in its many branches. Precisely, competition is the cause of the company’s constant losses.
The company’s plan to divest its operations from the unprofitable markets is effective. The company is planning to analyze its North American holdings and either sell, license or close the unprofitable stores.
The company will then operate a partnership without selling its trademark. This way of doing business may sustain the company’s operations to the future. Through selling its unprofitable holdings, Esprit could use the funds to expand its other operations.
The company’s plan to close its unproductive stores is also sustainable to the future because it will be able to open better stores. The partnership is an excellent plan because the company will incur lower formation costs. The company will combine its business skills and expertise to develop sustainable strategies in the future. Besides, Esprit will retain its profits giving back the company’s glory.
Esprit Corporation is in a dilemma on whether to sell, close or license its unprofitable holdings. If the losses are enormous and the company does not foresee any future improvement, Esprit should close its unprofitable stores. Nevertheless, incase the company can fetch a substantial amount from business; the company can sell its unprofitable holdings.
Licensing its operations is effective if the company forecasts better operations. The company could withdraw its license on improved markets and begin making profits again. However, since Esprit does not forecast any profits, it is advisable to close its unprofitable stores.
Esprit is a clothing industry dealing with high quality feminine clothing. In the fashion industry, if there is marvelous news, the company can make supernormal profits. Esprit is developing a transformation plan that will focus on basic markets of the fashion industry. The company will open around 200 stores across its network to cater for the large dynamic fashion industry.
These stores will assist the company in responding immediately to customers’ needs. Given that news about new fashions spread fast, the company will be able to sustain demand through its several stores across the network. Through increased sales, Esprit will be back to making profits sustainable to the future.
However, the challenge is to deal with increased competitors joining the fashion industry. The CEO of the company could deal with the competition through operating a joint venture with a certain competitor.
The joint venture will enable the two companies to pool their resources and make super profits. In addition, the joint venture will involve wide expertise ensuring effective decisions on measures to avoid losses and maximize profits. As a joint venture, the two companies will share costs reducing the burden of a single company and avoiding closure in the future.