Mel Mogi's Toronto$-$based company California Innovations was a successful manufacturer of coolers, freezer bags. diaper bags, and lunch bags, with sales in more than $25$ countries. However, the company was prevented from being the market leader because of stiff competition from the Chicago company Arctic Zone, which had the giant Target account in the United States tied up$.$ Repeated attempts to break into this market had failed. However, in $2004,$ Mogil learned that Arctic Zone might be up for sale, and even though he had never participated in a takeover, he immediately pursued the opportunity. Mogil states he was nervous about the acquisition but saw benefits, such as economics of scale, an expansion of product line and the addition of new customers. Mogil also notes a driving force of the acquisition was a fear that another competitor might buy the company and become a stronger force in the market: "I don't know how true that was $($a rival buying Arctic Zone$],$ but it was a motivating factor."

The acquisition took place along with the large contract with Target, and it has propelled the new company into a market leadership position. Yet the purchase wasn't seamless. Mogil notes that he had to manage a combined staff, that some customers took a while to warm up to purchasing different branded products from one company, and sales staff required additional training. Eventually Mogil opted to continue with the corporate name California Innovations but to use the Arct ic Zone website as the main site for product sales. Sales increased $22$ percent in the first year, and increased enthusiasm was evident with employees as they saw the company growing and progressing. Being the market leader has also led to more credibility with offshore manufacturers and new customers.

Discussion Questions

$1.$ What are some of the questions Mogil should have asked before buying the business?

$2.$ Given the complexity of integrating one business into another, would you have recommended Mogil pursue this strategy? Why or why not?

$3.$ What are some of the advantages of the acquisition?

$4.$ How would Mogil achieve additional economies of scale by purchasing Arctic Zone?