Scott Farmer ConsultingHow to stay afloat

AgendaExternal and Internal EnvironmentAlternativesAnalysis and RecommendationsImplementation PlanFinancial Forecasting

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

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

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

Industry Key Success FactorsInnovative Designs and TechnologyHigh Quality and PerformanceExperienced ShipbuildersEco-efficiencyMarketing

Sources of Competitive AdvantageQuality Wooden Boats/Good ReputationEnvironmentalismSkilled/Experienced WorkersBlue Water “Classics”

Key Risks

Declining MarketPoor cost control Retiring Employees

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

Alternatives Considered

Complete overhaul of labour force, yard and business strategy

Build new reputationNo guarantee of government bid

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

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

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

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

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

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

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

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

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

Sensitivity Analysis

-Can the expected 25 units actually be sold?

Number of Boats Sold

Exp

ecte

d P

rofi

t

Implementation PlanContinue producing wooden boats

Target Marketing

Niche market

Implementation PlanLicense production of the Sykes Sloop in FiberglassLow cost to implementGreater production capacity

Implementation PlanBuild a new shed increase indoor storage

capacity accommodate customers on the waiting list

Implementation PlanImplement an IT System

Need to acquire hardware Off the shelf softwareTraining for Roselle

Balanced Scorecard Sample

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

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

Future benefits from price increases, improved costing system, balance scorecard and marketing

Questions?