Shurgard Self-Storage - Expansion to Europe a. What is your assessment of Shurgard and the Self-Storage business? The assessment of Shurgard and the Self Storage business is a positive assessment. To start, focus on the founder is important. The founder of Shurgard has worked hard at getting Shurgard Self Storage to become successful. This success had made it through a 1980’s depression and many other changes. The founder’s knowledge of the real estate market has helped aid in finding the perfect location for the self storage units. Real estate is important in the self storage market.
The business itself is on target of where it needs to be. The self storage industry is different than many other industries. The industry has tenants that use the storage for one week to up to several months. There is little upkeep and the units do not take a large number of employees to be successful. A handyman and a manager can usually handle a self storage facility on their own. Shurgard has many different facilities that are at almost full occupancy. Full occupancy is important in order for a self storage business to be successful.
Having full occupancy means that the self storage unit has reached its maximum potential and the most amount of profit can be made. The Shurgard self storage units are also quite convenient towards tenants needs. A tenant can rent a unit for a certain amount. The tenant can then drive up and easily access the unit. The easy accessibility is important so that tenants want to use the storage again and are satisfied with the experience. Shares are also important for any firm.
The Shurgard Self Storage business has become large and able to aoffer shares in the New York Stock Exchange. Allowing shares allows investors see that they can have part of the business and that a self storage business can be successful. The founder did the right things by allowing shares. Expansion for Shurgard to another market is typical since Shurgard may have reached its full potential in the Unites States. IF there is no more market available in a certain area. It is important to expand. Expanding is the only way to increase profit once an area has reached full potential.
b. How has Shurgard performed in Europe to date? Will they be successful there? To date, and with information provided solely from the case, Shurgard in Europe has performed successful. This is proved by overseeing financial statements. The financial statements in the case show that Shurgard in Europe has grown and increased profit. Showing a steady growth along with a steady profit is an indicator that Shurgard has performed well. It is likely that with good performance, Shurgard will end up being successful in Europe.
If Shurgard keeps the same management and growth techniques it used in the United States, the firm has a good chance at success. c. What is your view of the firms’ expansion plans in Europe? Is it realistic to plan for 133 to 170 stores by 2003? What challenges and opportunities will Shurgards’ management face? The firms expansion plans are typical for a business that wishes to grow and achieve their expansion goals. What is important is that the firm remembers to use the growth tactics that worked in America.
Using the same growth strategy modified to a foreign need is exactly what the firm needs. I think it is a little unrealistic to plan for that large of an expansion right away. The expansion should be a little more limited and easier to take on without the need of too much outside sources. Having too much outside sources changes ownership and that can actually ruin the company. The challenges that management faces will bring opportunities. Being able to overcome challenges and properly deal with customers will make the company stronger.
A stronger company will allow Shurgard to expand on their own without needing investors. d. The consortium is proposing to invest 122 million Euros of equity by 2003 in return for 43% ownership. Is this fair or not? Why? Be specific. Wanting 43% of ownership for that amount of investment is fair. It is fair in the sense that without the investor, the company will likely not be able to expand. Investing that amount of money should allow the investor some type of ownership. Not allowing ownership on someone who is willing to invest that much would not be fair.
The numbers will need to be properly figured and determine where exactly 43% leaves the company according to what the company is worth. Once this is determined, the investor and Shurgard can further negotiate a fair business deal. However, it is important to make sure that the 43% ownership is only for Shurgard Europe.