Pei Preserve Essay
Introduction Prince Edward Island Preserve Company is a manufacturing and retail company founded by Bruce McNaughton in 1985. The company manufactures and sells specialty foods with over 80 items made primarily from island produce, including Preserve, sauces and syrups. P. E. I. Preserve products are available through retail, wholesale, mail order catalogues, restaurants and kiosks. Approximately three- quarters of retail sales come from the company’s products. Of these, three-quarters are Jam Preserve. The products produced by P. E. I.
These preserves are considered of he highest standard of quality with a price attractive to all segments of the marketplace. Vision – “To produce the best quality preserves in the world. ” Mission – “We, at PEI Preserve strive to enhance the value of life of our customers by providing top quality products as a healthier alternative for our consumers in a professional, effective and efficient way. ” Problem Statement P. E. I. Preserve Co. is suffering from financial loss due to over and unrelated diversification as well as geographic isolation from both the suppliers and consumers that would allow the company to grow.
Objectives Financial – Increase sales growth 20% by increasing our market share in North American in the next 2 years. Strategic – Strengthen the brand preference in Japan and US and add additional markets for its products. Symptoms P. E. I. Preserve is running inefficiently on a number of different levels 1 . Shortage of raw inputs 2. Long shipping lead times 3. Lack of marketing the brand image 4. Over diversified in non-core activities 5. Over diversified product line P. E. I. Preserve’s problem of over diversifying is causing management to be distracted from their core competency of Jam production.
With over 80 items in their product ine and more expected in the future, P. E. I. Preserve has been prevented from reaching economies of scale in Jam production. The abundance in efficient operations with the Gallery & Tea Room, New Glasgow Restaurant, the Country Garden land, manufacturing and retail, has put a bottleneck in MacNaughton’s financial resources and time. It prevented McNaughton from being able to meet a demand of three million bottles because he was unable to purchase $65,000 worth of bottling equipment. P. E. I.
Preserve Company had also experienced many severe cash shortages due to the seasonal nature of the manufacturing operation and the ompany’s failure in securing financing suitable to its needs. From the beginning of 2007, the company’s deficit grew from $313,000 to $365,000 by the end of March in the same year. This combined with an unsuccessful attempt in acquiring an unrelated store in Charlottetown caused the company to go into receivership on May 10, 2007, after the bank reduced the company’s credit to zero. Problem Analysis and Application of Theory Financial Analysis total current assets.
This indicates that there is too much unsold inventory. Cash on the other hand, only amounts to $7,108, 2. 7% of total current assets. Although the quick ratio 5. 7:1 shows that the company is fairly liquid, it is misleading because the company has little current liabilities of $12,215. Although Preserves are made five months a year, the company has produced more than it actually needs, causing funding to shrink. With little cash funds on hand and the abundance of unsold inventory, P. E. I. Preserve is restricted from investing in capital to reduce costs in the future.
PEST and SWOT Analysis (Refer to appendix A) After a thorough analysis of the SWOT, the key aspect is to emphasize on are the opportunities and threats of the company analyzed through PEST. There are several pportunities for P. E. I. Preserve. One major opportunity is to open a manufacturing and warehouse facility to bypass any shipping regulations and have access to year- long supply of strawberries. Other opportunities include marketing and producing organic products for the growing health conscious consumers in Japan. However, with opportunities, there are threats that the company needs to address.
One of the major threats for P. E. I. Preserve is competition because with little barriers to entry to the Jam industry, competitors can easily imitate what the company does driving P. E. I. Preserve out of business. Also, with the higher consumption tax in Canada and the current economic downturn, people can turn to cheaper alternatives for their food consumption which again can also put the company into bankruptcy. Porter Analysis (Refer to appendix D) The buyers have high power because they are able to switch companies at no cost. Suppliers, however, have low power because there are many fruit suppliers globally and locally.
Competition in the Jam Preserve industry is high because there are several firms in this industry such as Kraft and Smuckers. These companies have resources to provide low cost and high market shares. The threat of new entrants is high because of the low capital requirements and low learning curve. The threat of substitutes is also high because there are many substitutes for Jam such as peanut butter, Nutella, etc. These factors point towards opening a new facuility, The barriers of entry are low and with a new facitlity closer to year round production of raw inputs (ie.
Strawberries); this will strengthen their position with the bargaining power of suplliers. Moving closer to a major market for their product would further inprove their bargaining power compaired to buyers and enable them to leverage the quality f the product in a larger market while also leveraging economies of scale. Value Chain P. E. I. Preserve adds value by producing the Jam on site where it is visible from the retail floor. This shows tourists and local customers how the company makes the jam. Furthermore, sample products are available on site allowing customers to know how each product tastes.
Anne’s P. E. I. Farm has a Japanese website that educates potential or current customers on the content and health benefits of their products. The website also gives “stories” involved in the production including pictures of P. E. I. Value-Chain Analysis Value-chain analysis views the organization as a sequential process of value creating activities. Since value-adding is a strategy worth considering for extending the shelf profitability, and being unable to acquire year round raw inputs as well as reinvigorating the preserving business should be analyzed and restored to optimal profit.