Cenabal, Case Study Example

Jennifer MacDonald sold half of the stake in her company Cenabal to two investors for a combined capital investment of $200,000. Even though the investors have a significant stake in the company, they have given MacDonald complete autonomy in making strategic decisions and setting the future direction of the company. MacDonald has three options in mind either one of which could be a candidate for the invested capital though she is open to other possibilities as well. These three options are production expansion in order to enter the U.S. market, improving distribution channels in the company’s primary market Canada, or product line expansion.

The best possible course of action for Jennifer may be to improve distribution channels in Canada instead of expanding into the U.S. or expanding current product line. Even though Cenabal is enjoying a great start, the company is still in its infancy. MacDonald is optimistic regarding the future of the company but like everything else in life, success is never guaranteed. The ultimate future of the company will be determined by the effectiveness of strategies developed by MacDonald as well as the efficiency of capital allocation. The company should research distribution channels preferred by customers and also work towards finding suppliers with a history of reliability. The company could also outsource tasks that could be done better and at a lower cost by supply chain network partners.

Even though efficient use of capital allocation is important for every company, it is even more so for an organization in its early stages. This is because organizations with limited resources have a higher probability of going bankrupt due to illiquidity. In addition, they have access to limited funding sources and even when they do get funding, the terms are not as favorable as those obtained by older organizations with established credit history. Cenabal may be getting free promotion but the company should take a focused approach to expansion. Instead of losing focus and spreading its resources too thin, the management should build a strong brand by effectively meeting the needs of few market segments. Once the company has a differentiated image, it could leverage its brand to enter new markets including the U.S. or expand existing product line.