Nantucket Nectar Harvard Case Solution & Analysis

Nantucket Nectar Case Solution 

Introduction of the Company:

Nantucket Nectars was founded by two university friends; Tom Scott and Tom First in 1990.

The primary business of the Nantucket Nectars company is to sell the fresh fruit juices.The idea of the business came when Tom Scott recreated the peach juice which he had discovered during his journey to Spain.
They decided to bottle their creation and sell them off their all serve boat.
During their first year they sold8000 cases of their renamed juices Nantucket Nectars, and 20000 the following year.
Initially the company was financed by both friends with their collective life savings, about $17,000 to finance outsider bottler contract and inventory.
After two years $60,000 were invested by Mr. Mike Egan who was persuaded by both founders to invest so that the undercapitalization situation couldbe overcome.
The founders, Tom Scott and Tom First, are now deciding whether the Nantucket Nectars should be sold partly or completely, or should remain independent.
The reason behind the problem is constant losses of Nantucket Nectars during 1990-1995 due to thefailure to sell via supermarkets where 55% of all new age beverages are being sold, Nantucket Nectars is currently selling only 1% via these supermarkets, as a result there are unfavorable margins due to inefficient cost controlling technique which has created situation of disturbance among employees for non-payments of salaries.

Different Strategies:

If Nantucket Nectars remains independent then there may be following benefits and drawbacks:
Nantucket Nectars will not have to face heavy rules and regulations of the securities and Exchange Company as public companies face. The fulfillment of the regulations may result in additional cost to company, however this couldbe avoided if Nantucket Nectars remain independent.
The process of decision making will be quiet prompt and easy as Nantucket Nectars will not to have to meetof thousands of shareholders which a public company does as Nantucket Nectars has only few shareholders for consultation and approval.
This also minimizes the level of disagreements among shareholders.
Nantucket Nectars will not have to put costs on making annuals reports like public companies, as this may result in-house savings.
Nantucket Nectars will not have to follow strict regulation on the company’s audit and following of IAS framework.Nantucket Nectars cannot raise capital in public markets and hasto use the bank loans for financing; this may cause gearing issues and risk of bankruptcy.
Nantucket Nectars may remain away from instant and heavy amount of financing, which is received by becoming a public company; this finance may then be used for business expansions and diversification.Nantucket Nectars may face governance issues as an independent company has limited regulations on governance structure..............

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