Industry Analysis: Charles Rivers Laboratories (CLR)

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Answer Question
Q#1. Alliance vs. acquisition for Charles Rivers Laboratories in Mexico using the CAGE Framework
Whereas the acquisition of ALPES by Charles Rivers Laboratories (CLR) in Mexico means that it will take control over the company by obtaining shares and properties, an alliance implies that the two companies will continue to cooperate and pursue common interests although remaining legally independent (Wesley 2006). However, the two companies, have notable cultural, administrative, geographic, and economic (CAGE) differences. While CLR operates on an American business model that is more institutional during decision-making processes, ALPES is largely family-oriented. The cultural and administrative distance is observed particularly when the cooperation between ALPES and SPAFAS was made through informal agreements and the manner of running ALPES by family members, including Alejandro Romero’s mother, aunt, and sister. Although Dennis Shaughnessy is convinced about Romero’s description of the business viewpoint of Romeros, the cultural and administrative differences between the two firms make an acquisition a better decision than that of an alliance to avoid collision of interests. With the implementation of NAFTA, the geographic difference does not have a significant impact on both the acquisition or alliance with ALPES since Mexican products can still enter the United States free of duties. The proposal of contributing ALPES to the joint venture and having SPAFAS investing $2 million in cash denotes an alliance of the two companies.
Q#2 Industry analysis (5 forces analysis) and implications of findings to Canadian Solar’s strategy
* Suppliers’bargaining power: The price fluctuation of silicon driven by supplies affects the ultimate prices of Canadian Solar products. In mid-2008, the price of silicon was $500/kg but in mid-2009 the price rose from $25/kg to $60/kg. the bargaining power of suppliers makes prices of PV modules to sell for less than $1 (Mitchell, 2010).
* Buyers’bargaining power. Since the market is highly competitive, buyers have a choice to buy from the manufacturers who offer better prices for the same products.
* Competitive rivalry: Canadian Solar has plenty of competitors such as FirstSolar with products using thin-film technology. SunPower is another competitor in the market that offers a high price premium and high efficiency. Suntech, a Chinese rival employs Chinese production and Australian Engineering while it combines Canadian engineering and Chinese production. Other threats are upstream silicon makers who may start making downstream modules.
* Substitution threat. The price of non-renewable energy in 2009 was 0.03 -0.15/kw compared to renewable energy as 0.15-0.35/kw (Mitchell, 2010). While the preference for green energy has been supported by governments, the low price of available substitutes will drive the prices of Canadian Solar down.
* The threat of new entry: The threat os new entrants could be high due to low capital requirements. However, smaller manufactures could not enter large projects such as banks requiring greater assurance. Consumers with large projects consider geogra...