'Shorefast Case Study B March 2013\r'

' hedge of desexualize Introduction………………………………………………………….. 1 Financial depth psychology……………………………. ….. …………………. 1 Strategy Diamond Model……………………………………………7 inherent outline……………………………. ………………………. 8 Value stove outline……………………………………………. …….. 8 VRINE Analysis……………………………………………. …………12 External Analysis……………………………………………………13 Porter’s five forces………………………………………………………13 PESTEL…………………………………………………………….. ….. 14 Alternative Evaluations…………………………………………. …15 Fit abstract……………………………………………………. ……. 18 death……………………………………………….. ……… …. 19 Recommendations……………………………………… ……………19Introduction Plant Nutrients Inc. (PNI) is an world(prenominal) comm social unity that supplied limit food ingredients consumptiond by its subsidiaries in 6 geographic argona which argon northeasterly break downow to happenher States, Eastern Canada, Europe, Australia, New Zealand, and South America. The widely distributed manager of PNI is Brian Dunwoodie and the marting manager is Dave Claussen. Mr. Dunwoodie and Mr. Claussen be the of import decisiveness makers indoors the administration. They were meeting with all(prenominal) different to de experimental conditionine the main issues of the go with, which how to improve federation’s performance next socio- frugal class (1999).They came up with tether authority alternatives, which argon strengthening the be business, add togethering a bug business and adding preciseness coarse re training to better PNI’s performance next family. For choosing the take up alternatives, this paper go out use different frameworks and models to break down each alternative, for example financial depth psychology, strategy baseb entirely field model, native epitome (Value Chain and VRINE), external analysis (Porter’s 5 forces and PESTEL). After analyzing all these parts, the satisfy between internal and external surroundings leave behind be break downd as well. Financial Analysis 1. Operating in bewilder statement (Exhibit 1)As Exihit 1 in the subject atomic bend 18a shows that the main crop PNI had sold was Fertilizer, the come in gross deals of PNI in 1998 is $4,621,097, which consist of the gross gross tax income of Fertilizer( $3,339,097), the gross gross gross sales of pesticides ($1,058,000) and the sale of work ($224,000). The sales of fertiliser identifyed for 72. 3% ($3,339,097/ $4,621,097) of broad(a) sales, the sales of pesticides accounted 22. 9% in the total sales, and the profit plainly accounted for 4. 8% in the total sales, so fertiliser reaping generate more than(prenominal) than sales than pesticides and function and this to a fault means the sales of pesticide and serve may excite large appendage say-so in the future(a).Hence, PNI should commission more on the sales of pesticide and service in the future. In addition, the gross leeway of fertilizer was 20. 07%, and the gross moulding of pesticides was 18%. Among these intersections, fertilizer was the major contributor of PNI’s profit. In term of the sales of each product, the analyst will use the fol milding t competent-bodieds to identify what the major grocery stores and guests of these products. 2. Fertilizer sales nary(prenominal) 1 The helping of PNI’s customers accounted in the Fertilizer market. (Formula: Number of Customers in PNI / Number of Cust omers in the total market)Market AreaPNI do work SizeSalesCustomersSalesCustomersMarket Shargon Small$1,128,000527$986,00040476. 7% mean(a)$10,635,0001578$1,259,00017110. 8% Large$3,631,00095$319,00099. 5% well be experienced$15,394,0002200$2,564,00058426. 5% nary(prenominal) 2 The pct of the fertilizer sales for the market and for PNI oer the total sales by customer section, 1998 Market AreaPNI Farm sizingSalesSales Small7. 33%38. 5% Medium69. 1%49. 1% Large23. 6%12. 44% Total degree centigrade%100% Market AreaPNI Farm sizeSalesSales Small100%87. 41% Medium100%11. 84% Large100%8. 79% Total100%16. 7% No. The percentage of PNI’s fertilizer sales contribute to the market sales by customer discussion section, 1998 3. Pesticide Sales No. 4 The percentage of PNI’s customers accounted in the Market. Market AreaPNI Farm SizeSalesCustomersSalesCustomersMarket Sh argon Small$797000527$35600020939. 6% Medium$63120001578$4580001066. 7% Large$3,300,00095$244,00077. 4% Tota l$10,409,0002200$2,564,00032214. 6% No. 5 The percentage of pesticide sales for the market and for PNI over the total sale by customer segment, 1998 Market AreaPNI Farm sizeSalesSales Small7. 66%33. 6% Medium60. 64%43. 3% Large31. %21. 2% Total100%100% No. 6 The percentage of PNI’s pesticide sales contribute to the market sales by customer segment, 1998 Market AreaPNI Farm sizeSalesSales Small100%44. 67% Medium100%7. 26% Large100%6. 79% Total100%10. 16% Interpretation of t adequates 1. display board No. 1 and No. 4 For twain fertilizer products and pesticide Products, PNI’s major customers are the elegant farm owner (Fertilizer: 76. 7%, Pesticide: 39. 6%), so the future trend for PNI is to take more inviolate point and giant farm size customers (Medium: Fertilizer: 10. 8%, Pesticide: 6. 7%; Large: Fertilizer: 9. 5%, Pesticide: 7. %). 2. Table No. 2 and No. 5 in the market area, the sales of fertilizers, the middling farm account the plumpingst portion of sales (69. 1%). For the sales of pesticides, the intermediate farm still accounts the large-mouthedst portion of sales (60. 64%). In the PNI’s area, whatever(prenominal) the sales of fertilizers and pesticides to the median(a) farm customers come the graduate(prenominal)est percentage (Fertilizer: 49. 1%, Pesticide 43. 3%); thitherfore, PNI should nidus on the sales of fertilizer and pesticide to the intermediate farms’ customers because it accounts the largest part of PNI’s total sales. 3. Table No. 3 and No. The sales of PNI’s fertilizers and pesticides to the smooth farms’ customers stir already gained the largest sales in the whole market (Fertilizer: 87. 41%, Pesticide: 44. 67%). However, for the sales of PNI’s fertilizers and pesticides to the fair and large farms customers account a actually small portion of the total sales in the whole market (Medium: Fertilizer: 11. 84%, Pesticide: 7. 26%; Large: Fertilizer: 8. 79%, Pestici de: 6. 79%). Hence, PNI should also fabricate more attention to make up the sales to the specialty and large farms’ customers due to its immense ploughth potentiality. . According to the Exhibit 5 in the case, the large farm size prefer Materials and Regular fertilizers and it contributes nearly 54. 3% of the material sales to total sales. on that pointfore, PNI should focus on selling Materials to large farm size customers. However, the sales percentage of the insurance premium and repair fertilizers, which in the medium farm size contributes the most to the total sales of the market, and the sale percentages are 53. 1% and 59. 7% respectively, and the Exhibit 4 showed that the Premium fertilizers and Regular fertilizers of PNI view as the highest ($89. 5) and second highest gross margin ($66. 11); hence, PNI should focus on selling premium and regular fertilizers to small and medium farm size customers. In addition, it is unnecessary for PNI to focus on the sale s to dealers because PNI force out non stop the trend that the sales volume to dealers is decreasing year after year. remark: 1. Medium and large husbandmans hold great grow potential. 2. Small and Medium farms prefer Premium blends fertilizers, which is the most utile fertilizer product in PNI (gross margin: $ 89. 95/ ton) Strategy Diamond ModelThe strategy diamond, which includes arenas, vehicles, differentiators, scaffolding and pacing, and economic logic, shows how well a bon ton do its business in a strategic level. Arenas: PNI’s current product and service lines consisted of fertilizers, pesticides, custom exertion function and oil testing. The PNI in Lancaster is one of the subsidiaries in the 6 geographical regions, which are Northeastern United States, Eastern Canada, Europe, Australia, New Zealand, and South America. In toll of diffusion channel, the play along outsource a hand truck club to cut down on their distribution be.Moreover, the caller-up deem modern equipment to let products and have the best trained operators to brook operate in the region. Vehicles: in that location is no information slightly vehicle in the current situation. However, if PNI select the second alternative, which is adding a seed business in the near future, the federation may alliance with Larson Seed, a regional seed producer, to pop the question expertise and sales training for PNI sales advisors. Differentiators: PNI bundles their expenditures so that when a farmer debases their product the services are also included in the price.The services provided are also customizable to the farmer’s needs. They have the most qualified operators in the region, and because of this, they are able to provide the highest feeling services. They have a strong long lasting family relationship with their customers as they have been in the business for 20 geezerhood. Furthermore, PNI is the only fertilizer provider in the area with proprietary, premium fertilizers, had invested hard over the years to develop and test their products. for each one customer needs different services that guess on that customers situation by creating value bundle.Staging and tempo: thither is urgency for PNI to do internal development because the company wanted to perform better in the next year (1999). So, the top management had come up with lead alternatives to either adding modernistic businesses or strengthening the current business. Economic logic: There is a great potential for PNI to generate more profits when the company minimize its exist. The case mentioned that PNI didn’t gain its upper limit capacity. For example, the capacity of PNI unify plant is 14,000 tons/ year; however, it honest immingle virtually 10,000 tons in 1998.By achieving the maximum capacity, the company keister utilize the economies of scale to assign the fixed cost of the production into each process, so that the company batch make more prof it. expressions: Overall, PNI didn’t perform very well in 1998 because the operations within the transcription don’t function well. The major moderateness of it is that the production level didn’t meet the maximum capacity, which increases the cost of each product. When costs go up, the revenue will decrease (assume the volume sold is the same).Internal Analysis-Value Chain analysis The Value Chain is a barb to analyze the internal environment of a company and determine where the business concentrates their efforts. Inbound logistics: PNI’s retentivity store met the latest U. S. environment standards for fertilizer and pesticide storage; however, its storage is able to handle a substantially big volume than currently required. This means the company have high variable cost per item because it didn’t fully utilize its storage. Operations: The capacity of PNI blending plant is 14,000 tons/ year; however, it middling blended approximately 10,000 tons in 1998.This means PNI were not achieving the maximum capacity. The company has twain types of practise equipment, which are modern and in right-hand(a) working order. The prototypicly type is fertilizer equipment, which consist 25 bulk, full-typed broadcasters. The cost of the equipment is incorporated in the price of fertilizer, so it is relieve for customers. However, customers just used bulk spreaders on intimately 80, 000 estate in 1998, which is about 32000 terra firma per spreaders, which is little(prenominal)(prenominal) than a spreader’s capacity of about 4000 kingdom. So, the company shag reduce the number of spreader it gave to customers to reduce costs. oxygenize spreader is more draw inive to large and medium farmers. The capacity is 8000 acres per year under exemplar condition, however, only 4000 acres in 1998, which is only half(prenominal) of the actual capacity. Consumers can choose to pay for it by bundling price of equipment to fertilizers or scatter the price for spray equipment and fertilizers. The new(prenominal) type of constancy equipment is pesticide application equipment. There are two moving applicators under pesticide application equipment, which are small unit applicator and larger unit applicator.The capacity is 8,000 acres per year for smaller unit and 10,000 acres per year for larger unit. In the last two years, these two units are fully utilized, which sprays a total of 18, 000 acres of land each year. The problem is two application units were fully booked, whether lack of application capacity index be constraining pesticide sales. The mark testing testing ground can handle 14000 samples per year; however, it only handled 6000 samples in 1998. Outbound logistics: PNI deliver raw materials by using an excellent rail service and a local trucking firm handled all shipment to customers.Dunwoodie utter that the outsourcing of PNI’s trucking had reduced costs and investments subst antially. trade and sales: PNI is the only fertilizer supplier in the area with proprietary, premium fertilizers, had invested heavily over the years to develop and test their products, which are urea and ammonium, regular N-P-K, and premium N-P-K. The last product was a proprietary product that carried the Nutri-Plus brand, which provides significant economic benefits to farmers and the sales of it accounted for half of sales in 1988 and an change magnitude percent percentage of PNIs total sales over prison term.Most of customers didn’t command about price, so they are less price natural. Dunwoodie estimated that to be about 40% of the total acres case-hardened with chemical substances sold by PNI. The market segments are depending on the size of farm, which are sorted by small, medium and large. There are up to 100 acres of crops in small farms, 100-500 acres of crops in medium farms and over 500 acres of crops in large farms. PNI charge on the basis of the customers cleverness and willingness to pay and are sharing in the benefits it bring forth for the customers, which result in higher margin, premium products.However, PNI woolly-headed profit on the higher prices of these products due to high cost of service. The company had about $25,000 in its work out for marketing. PNI spent most of them on PNI-sponsored events where 25-50 local farmers were treated to a meal, some drop offtainment, and an information program. PNI also publicise in local newspaper and gave away hats, pens, and other premiums to customers and prospects. Moreover, $5000 was spent on a corporate cusp in 1998. Service: extensive agronomic services: soil analysis, crop scouting, nutrient consulting, micronutrients analysis, and pesticide and fertilizer application.Sales voice do delivery, application, consultation, consultation, and billing to customers. Also, they kept latest product knowledge and attempted to build strong in the flesh(predicate) relationships with e ach customer result in low customer turnover rate. Procurement: Supplied by its sire company. Technology development: PNI use modern equipment to produce products and advanced information system to provide more accurate data and feedbacks to the company. Also, if it decides to tangle with into the clearcutness agricultural business, it needs to use GPS system and other AgriTechs, such(prenominal)(prenominal) as Yield Mapping and Remote espial Mapping.Human resources management: Brian Dunwoodie has 11 modules reporting to him that includes sales, marketing, accounting, production, administrative functions. Staffs are flexible and em parted, so that they could do what need to be done. Dave Claussen is responsible for developing PNIs marketing program. There are two services managers who work with sales consultant to determine the types of products and application rates for individual farmer clients. PNI is possible to use upper-level technical harbor because it use full time a nd better trained employees than competitors.Other company use part-time employees with little expertise with the equipment or procedures involved for applying fertilizers and pesticides. There are 4 sales consultants who is selling PNI products and services, working with existing customers, explaining soil test results, helping develop an annual fertilizer and pesticide program, providing general technical advice and attracting new customers. Average 30 days each year to sales and product training, compared to other competitors less than 15 days on training. Each consultant had a designated sales territory, which has approximately 140 customers. postings: 1.PNI have extra capacity of warehouse and machinery. 2. Outsourcing trucking service reduce the company’s cost. 3. Staffs are well-trained and be able to provide top-hole services to customers. VRINE analysis VRINE is a tool to analyze the internal resources and capabilities to determine if a company has a matched usef ulness over competitors. Value: There is no unique resource within the cheek because the applied science and resources the company use to produce the products is well to access by other competitors. However, the company provide customized services and products to customers, which provide benefits to farmers.Also, PNI has the best operators within the placement to serve its customers, which helps the company to build a soundly relationship with customers. It also used the â€Å"win-win” philosophy and dispatched sales representatives to keep a good long-term relationship with its customers Rarity: The resources the company use are not rare, because it can be access by competitors too. Inimitability: The applied science the company use to produce products is easy to model by competitors. Non-substitutability: The chemical fertilizer product can be substituted by Biofertilizers, which is made from microorganisms.Pesticide can be substituted if farmers buy pest-resistant seed to remove the need to by pesticides. Exploitability: PNI didn’t manage its resources well because they have worn a lot of resources in the process of operations. For example, the capacity of PNI blending plant is 14,000 tons/ year; however, it just blended approximately 10,000 tons in 1998. Air spreader is more attractive to large and medium farmers. The capacity is 8000 acres per year under ideal condition, however, only 4000 acres in 1998, which is only half of the actual capacity. Observation: 1.PNI has a non-sustainable competitive advantage. 2. The crusade of resource within the organization is poor. External analysis -Porter’s five forces Michael Porters five forces model, which determined industry profitability, included degree of rivalry, threat of new entrants, supplier force, buyer power and threat of substitutes. Rivalry (High) There were five companies sell fertilizers and chemicals to farmers around Lancaster. PNIs largest competitor is Lancaster C ounty Co-op. It supplied both crop and livestock inputs and procured grain through a separate division.It also offered application services-farmers were dissatisfied with the quality of these services and co-op didnt provide many value-added services, such as precision agriculture. some other competitor is metalworker Farm give, which is an independent dealer. It only sold chemicals and fertilizers and provide custom application services using less expensive, poorly trained, part-time operators. Smith Farm Supply offered the best prices in the area. The other three competitors are Archibald Farm Supply, Henderson Farm Supply, Wilmington Crop Services; they all focus on supplying chemicals rather than fertilizer. aff mightily of new entrant (Low) Since the arguing is so fierce, there is less chance that new entrant want to enter into the market. Supplier power (Low) PNI can directly get supplied from its mother company. Plant Nutrients International supplied fertilizer ingredient s to its subsidiaries. And their sales would not be influenced by the suppliers. Buyer power (High) The conquering cost for customers is very low, so no matter which company offer good service and lower price customers could switch forth and back. Threat of Substitutes (medium-high)Fertilizer’s potential substitute: Customers may switch to biofertilizer, which is made from organism is applied either by coating seeds with the fungus, because people’s awareness of luggage compartment health. Pesticide’s potential substitute: farmers may buy pest-resistant seed to remove the need to by pesticides Observation: Overall, the profitability of the market is not attractive because the competition is fierce, buyer power is high and there is some product can substitute the products the company currently sell. PESTEL AnalysisPESTEL analysis is used to analyze the external environment of a company; it stands for Political, sociocultural, Environmental, Economic, Technologi cal and Legal. Political: PNI’s warehouse met the latest U. S. environment standards for fertilizer and pesticide storage. Sociocultural: Many of the small and some of the medium farms in Lancaster were owned by Amish farmers, they were hard-working farmers whose religious beliefs called stewardship of the land. Most of them are willing to adopt technology that supported stewardship of the land.Environmental: The chemical fertilizers and pesticides PNI sell have a potential to dirty land, so the company should be careful about the environmental costs regarding ecological or environmental issues. Economic: Asian financial crisis happened in 1997-1998, so it is not a timing to enter market into Asia. However, the financial crisis has limited influence to the United States’ economic environment. Technological: The company use advanced training System to provide more accurate and particular data on customers.Moreover, PNI is possible to use high-level technical support because it use full time and better trained employees than competitors. Legal: Several national regulations cover fertilizer manufacturing and transportation safety and limit their potential impact on the environment and security. Observation: Overall, there are many factors outside of the company have the power to influence a company’s decision and strategic plan. Alternatives Evaluation 1. working the existing business harder Dunwoodie says that if they were to make no changes and just work their existing business harder they would be able to meet their objectives.They are lagging in the large farm segment and if they were to add 20 farms from that segment they would be able to meet their objectives. They could use their inordinateness capacity to spread out their fixed costs. Advantages: a. It has a great potential to increase the number of customers from medium and large farmers. b. It can help the company to reach out its maximum capacity, which will reduce the cost of each product because it assigns the total fixed cost into more numbers of products. (Economies of Scale) c.Could meet the financial financial promise within one year by attracting more medium farmers (the most profitable market segment) Disadvantages: a. It is hard to attract larger farmers because they prefer low-priced products. If PNI wants to attract larger customers, it should reduce product price, which means the profit will decrease as well. b. They should read and train more sales consultant to meet the increasing number of customers, which increase PNI’s cost too. 2. Adding Seed stemma Dunwoodie thought that adding a seed business to PNI would add value to the company.With the new genetic seed technology chemical sales would decline in the future thus creating more opportunities for seeds. Companies wish Larson Seeds were already fortunate seed suppliers. Larson was looking for a distributer in Lancaster, but Dunwoodie was worried about the already existing c ompetition in the seed market, the new module they would need to hire, and the training for the employees and the company alike to get into this business. Advantages: a. Its new genetic technology might increase seed sales. b. It can help PNI execute the product line. Disadvantages: a. he new genetic technology can also decrease chemical sales in future, which conflict with PNI’s current product line. b. Another challenge for PNI to access to the seed business was that it needed to partner with a good seed producer, so whether PNI can cooperating with a regional producer would became an of the essence(p) question for Dunwoodie to consider if he wanted to enter the seed business. c. This alternative is hard to meet the company’s one year financial obligation because it is a new business to add a seed business, PNI should take times to discover the right strategy to sell seeds. . the competitive market is fierce, for example, Monsanto is a giant in the seed business. It is hard to mistake market share from it. 3. Adding a Precision factory farm Services If PNI was to adapt the precision agriculture they would be the first ones to market with this service, thus creating a huge competitive advantage. There would be a huge start-up cost to start such a venture, expenses like; new staff, equipment, trucks, and training. With is new technology they would be able to better serve their customers allowing them to put together blue-ribbon(prenominal) agronomic packages.A lot of farmers were skeptical of the new technology but after reading the postdate, I get under ones skin that not many of the farmers are educated in the benefits of the new technology. It would be the sales force’s job to educate the customer on the benefits to be able to make the sale. Advantages: a. Many farmers were aware of precision agriculture and precision agriculture was a plan of attack trend, so adding precision agriculture would improve the customer service and increase total sales. b. It can complete the company’s services by providing more precise and accurate method to application service. . It will be a competitive advantage for the company, because no competitor enters into this service. Disadvantages: a. High cost: it would cost $10,000 to fix up up one pull-type spreader and $225,000 to purchase the truck with six separate tanks. Moreover, PNI still needed people, computers, software, and monitors and so on; the investment would be extremely large. b. The survey found that many farmers had skepticism regarding the real benefits of the precision agriculture. c. It cannot meet the company’s financial obligation in one year. FIT AnalysisInternal: Internally PNI hires the best operators and most experienced sales consultants so that they are able to provide the best services and informal employees. By meet the company’s goal, which is better financial performance in the next year, PNI should hire more sales consul tant to meet the increasing number of customers. Moreover, the company should try to achieve its maximum capacity in the next year, because it will significantly reduce the COGS. External: PNI has 5 competitors in Lancaster, which created a fierce competitive environment.However, PNI has its competitive advantage over other competitors, which is the customized and pukka service it provided and also the relationship it built with customers are both the assets of the company Moreover, there are many factors externally have the power to influence a company’s decision and strategic plan. Observation: Overall there is a good fit between PNI’s internal and external environment. It recruited full-time and well trained staff to provide sea captain services to customers, which is a competitive advantage of the company.Externally, customers and even competitors perceived PNI as superior services providers with knowledgeable sales reps in the region. Conclusion In conclusion w e think that PNI has the resource and faculty to either entering new business or strengthening the current business, because they haven’t achieve the maximum capacity of machinery and warehouse. Moreover, medium and large farmers have great growth potential and they prefer premium blends fertilizers, which is the most profitable fertilizer product in PNI.In addition, outsourcing trucking service reduces the company’s cost. Furthermore, PNI staffs are well-trained and be able to provide superior services to customers. PNI has a non-sustainable competitive advantage, which means its competitive advantage can be imitate by competitors. In addition, there are many factors outside of the company have the power to influence a company’s decision and strategic plan, such as government’s regulation and sociocultural factors. RecommendationAfter analyzing the organization’s internal and external environment, and all three alternatives, we recommend PNI choo se the first alternative, which is working on the existing business harder. We also suggest that PNI focus on targeting medium farmer because of the following reasons: 1. PNI have a competitive advantage over their competitors because of their superior quality and customer relations. At the same time, medium farmers value good services when buying products, which is what PNI good at to do. 2.They are less price sensitive than larger customers, which can help PNI increase sales. 3. Medium farmers prefer premium blending fertilizer, which is the most profitable products in PNI. 4. There are only 6. 7% of medium farmers buy fertilizers of PNI and 10. 6% medium farmers purchase PNI pesticides. This means there is a great potential for PNI to get more customers from medium farmer segment because the customer base is big. 5. It has a greater potential than other alternatives to help PNI achieve its one year financial goal.Other two alternatives need longer term than the alternative 1 to b reakeven, because PNI needs cost more money to implementing the seed business and precision business. However, it costs the company less to implement the first strategy, because the company already have all capabilities and resources to implement the first alternative. However, it is not to say PNI should only target on medium customers. Instead, PNI should keep targeting small and large customers, because it is good to diversify the risk of targeting only one market segment. However, the medium farmers should be the priority of PNI.\r\n'