Chestnut Foods Harvard Case Solution & Analysis

Chestnut Foods Case Study Solution


The Chestnut foods were incorporated by Mr. Otto Chestnut way back in 1877, the initial days of the company prove to be very beneficial, and the company grows very quickly. In the early days of the organization, the management offers a vast range of pre-packaged foods which remains quite profitable. The management was keen to expand the business rapidly, and for this purpose, they have acquired many companies operating in the same sector to increase the range of products.

Apart from the inorganic growth, the management also exploits the opportunities in organic growth as well. After the death of Mr. Otto, his sons took over the operations of the company; the new and young management also implement strategies that were fruitful for the enterprise. Under the leadership of the children of Otto, the company survives profitably in the great depression which occurred in 1935. In 1979, the company went public, and its share offered to the general public in order to further grow the business and to exploit the opportunities available to only public companies.

Currently, Chestnut Foodsoperate in two completely diversified sectors i.e. food division and instrument division. The food division of Chestnut is responsible for producing the frozen and pre-packaged foods which are sold in almost all parts of the world(CURFFL;, 2016). The food division appears to be quite competitive, although the market size is increasing day by day, the number of competitors is also increasing drastically, as a result of this intense competition, the profit margins of all the companies operating in the sector is decreasing. On the other hand, there are still considerable opportunities for Chestnut in the food division with a steady increase in the revenue margins.

The second division in which Chestnut is operating is the instrument category, the primary activity of instrument division is to manufacture the equipment used in the manufacturing of the foods; theinstrumentdivisionalso manufactures various kinds of another instrument as well which such as defense tools. The instrument division is growing at a rapid pace, the revenues of the division are growing at a rate of 20%, and the earnings are also growing at a rapid rate as well.

Soliciting control over Chestnut

As 10% of the voting rights are recently acquired by an experienced investor in the U.S. market Mr. Van, Mr. Van is exerting significant pressure on the management of Chestnut to divest from the instrument division and only operate in the food division. He is arguing that the core operation of Chestnut is to manufacture frozen foods so, it should have to focus on the division in which they have sufficient expertise. Furthermore, due to the high customer loyalty and positive image of the brand, focusing on this brand is might more favorable for Chestnut. Although the arguments of Mr. Van seems to be accurate, it might have anadverse impact on the performance of Chestnut group because they will just operate in the division which has minimal opportunities for growth................

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