The case is introduced in late 1998 with Ron McManisat a crossroads of sorts regarding his family owned business. Currently, McManisenjoys moderate success as a mid-sized, Central Valley grower of grapes who sells his product to valley based wineries. His particular plot of land affords the added benefit of being able to produce high quality grapes in an area that is largely thought to produce grapes found in cheaper wines. In an effort to rid himself of this stigma and strategically position his company for growth, McManishired consultants to present options for expanding his current operations. The case closes with a presentation of various options with accompanying pro-forma financial statements to help McManis make a decision.
Question 1: What is *McManis* attempting to achieve?
The wine industry for Central Valley farmers is extremely cyclical. Past generations of farmers and current competitors have had a major problem with depressed grape prices during times of surplus. During these times, wineries dictate pricing to a large degree and an individual farmer has very few options because grapes are considered by many to be a commodity in the region. McManis is grappling with the question of whether to continue conducting business as is during these ‘down’ times or to invest in additional operational capabilities, which would provide more flexibility to his company.
McManisis looking for additional growth in his customer base & overall improvement in a niche market. His ideal customer base is located in Northern California in an area that regularly dictates both supply amounts and grape prices to suppliers in Central Valley. One of the available options for farmers is to adopt new technologies to crush grapes on-site and selling this juice product direct to wineries. This sort of move is unprecedented for a Central Valley farmer and without an existing customer base for his... [continues]
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