scott farmer consulting how to stay afloat. agenda external and internal environment alternatives...
TRANSCRIPT
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Scott Farmer ConsultingHow to stay afloat
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AgendaExternal and Internal EnvironmentAlternativesAnalysis and RecommendationsImplementation PlanFinancial Forecasting
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Degree of Rivalry
Threat of Substitutes
Buyer Power
Supplier Power
Barrier to Entry
Low HighMedium
Moderate to Highly Competitive Environment
Low HighMedium
Low HighMedium
Low HighMedium
Low HighMedium
Porters’ Five Forces
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Mission, Vision, and Strategic DirectionConsistent in building boats that
customers will valuePerformance and appearance
Using expertise in wood and classic boats
Blue Waters does not have its strategy explicitly communicated
Mission, Vision and Strategic statements are not available
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Developing a StrategyA mission and vision statement helps to direct
the mentality and goal congruence of management and employees
Helps identify gap between performance and target and ways to close the gap
Overarching targets the firm wantsConsidering the internal and external
environment Long term goals are developed from the overarching
goals Short term goals are developed through long term goals
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Industry Key Success FactorsInnovative Designs and TechnologyHigh Quality and PerformanceExperienced ShipbuildersEco-efficiencyMarketing
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Sources of Competitive AdvantageQuality Wooden Boats/Good ReputationEnvironmentalismSkilled/Experienced WorkersBlue Water “Classics”
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Key Risks
Declining MarketPoor cost control Retiring Employees
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Alternatives ConsideredStrategic Alternatives:
1. Switch to Manufacturing Aluminum Boats and Place Government Bid
2. Maintain status quo of Manufacturing Wooden Boats3. License Manufacturing of Sykes Class Sloop using
fiberglass
Operational Alternatives4. Construct a New Storage Shed5. Increase Prices (Boats and Repair Charges)6. Install New Information Technology (IT) System7. Implementation of Balanced Score Card
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Alternatives Considered
Complete overhaul of labour force, yard and business strategy
Build new reputationNo guarantee of government bid
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Strategic Alternative: Maintain Status Quo of Manufacturing Wooden BoatsProsTarget niche marketEnvironmentally friendlyEstablished market
reputationSupplement other
departments
ConsDeclining wooden boat
marketSenior employees set to
retire soonLack of employee
training facilities
Leverage on competitive advantage of reputation
Focus on key success factor of environmental friendliness
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Strategic Alternative: Licence Manufacturing of Sykes Class SloopsProsBlue Water only yard with
mouldContinue to supplement
repairs and fittings divisions
Target emerging sloop market
ConsExpired Intellectual
Property on mouldBoston manufacturer
may not produce to Blue Water standards
Focus on competitive advantage of Blue Water Classics
Overcome unfair trade policies
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Operational Alternative: Construct New Storage ShedProsTarget larger market
and wait list customersGood reputation in
market
ConsAssuming labour and
materials availableRequire hiring new
employees
Leverage on competitive advantage of reputation
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Operational Alternative: Increase Prices – Boats and Repair ChargesImplement Balanced Score CardInstall New IT SystemProsEarn full potentialCreate benchmarks and
targets
ConsCustomers unwilling to
pay more if prices increased
No external experience of Balance Score Card and IT System
Focus on key success factors of marketing, innovation and technology
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Firm ValueCalculated using a discount rate of 6% (government loan rate available to the company) -> does not matter too much as both projects use the same discount rate
Aluminum + Government Bid Provide a higher firm value Have a greater uncertainty about the operating cash flow
that is sustainable (i.e. projects renewed every 2 years)
Stay with Wood, Construct the Shed, & License Manufacture the Syke Lower firm value when projected into the future Less risky as no major change
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Firm Value
400,000
450,000
500,000
550,000
600,000
650,000
700,000
750,000
800,000
2001 2002Do NothingStay with Wood & Implement Several ProjectsSwitch to Aluminum
16
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RECOMMENDATIONStrategic Alternatives:
1. Switch to Manufacturing Aluminum Boats and Place Government Bid
2. Maintain status quo of Manufacturing Wooden Boats
3. License Manufacturing of Sykes Class Sloop using fiberglass
Operational Alternatives4. Construct a New Storage Shed5. Increase Prices (Boats and Repair Charges)6. Install New Information Technology (IT)
System7. Implementation of Balanced Score Card
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Sensitivity Analysis
-Current charge out rate: $25-Industry average rate: $42-Raising the charge out rate by as little as $3 significant increases in NI
Charge-Out Rate Sensitivity
Charge-Out Rate
Additional Income
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Sensitivity Analysis
-Canoes and Sykes Sloop priced below competition-Can still price both much lower then the competition and still substantially increase revenue-Risk – customers may not appreciate price hike
Price
Additional Income
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Sensitivity Analysis
-Can the expected 25 units actually be sold?
Number of Boats Sold
Exp
ecte
d P
rofi
t
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Implementation PlanContinue producing wooden boats
Target Marketing
Niche market
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Implementation PlanLicense production of the Sykes Sloop in FiberglassLow cost to implementGreater production capacity
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Implementation PlanBuild a new shed increase indoor storage
capacity accommodate customers on the waiting list
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Implementation PlanImplement an IT System
Need to acquire hardware Off the shelf softwareTraining for Roselle
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Balanced Scorecard Sample
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Financial PerspectiveReturn on InvestmentNet IncomeProfit Per Unit Sales Growth
Learning and GrowthApprenticeship program% of employees trained
Hours of training
Customer PerspectiveCustomer Satisfaction# of complaints or concerns# of returns or “fixes” needed to correct orders# of jobs-New customer jobs-Returning customer jobs Wait time for custom jobs Positive Recognition in the media
Internal PerspectiveEmployee Satisfaction
Employee TurnoverUnit costs for jobs
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Timeline for ImplementationAction Responsib
ilityCost Start Date Finish Date
Strategic ImplementationsLicense Sloop Manufacture
John Sykes $ 2,000 March 1, 2002
Ongoing
Operational ImplementationsMarket Research
David Hamilton
$ 2,000 March 1, 2002
Ongoing
Marketing Campaign
Roselle Deveau
$ 8,000 April 1, 2002 Ongoing
Construct New Shed
John Sykes $15,500+
June 1, 2002 August 31, 2002
Install IT System
Roselle Deveau
$ 2,000 March 15, 2002
Ongoing
Balanced Scorecard
David Hamilton
$ 1,000 October 1, 2002
Implementation complete by fiscal year 2003
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Future benefits from price increases, improved costing system, balance scorecard and marketing
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Questions?