Date: March 27, 2011
Subject: Inventory Levels
As many of you already know, Neptune’s current inventory is three times last year’s level. Capital investments in new fish processing vessels and equipment have resulted in supply increases that outstrip demand. Shrinking profit margins, rising costs, growing competition, and our reluctance to disrupt industry standards have made a price cuts an unattractive option. Furthermore, there is a growing body of scientific evidence to suggest that unless something is done to control overfishing, the industry as a whole faces imminent collapse. Supply Issues
* Market Overcapitalization - higher levels of consumer demand, government encouragement and assistance, and technological advances, has given fishermen continued incentive to further expand their capacity to fish. Capital invested in this expansion, however, has not yielded the anticipated returns (Buck, 1995). Margins down 10% from last year. * Competition from Substitutes - Competitors selling substitute products limit profit potential because their product prices create a ``ceiling'' on the producer's prices (MSU, 2004). * ASDP Seal of Approval – industry standards dictate what we are charging and offering for price * Depletion of Fish Stocks - the growth of commercial fishing has led to declines in fish stocks compounded by excesses in capital investments (Buck, 1995) Overfishing and resultant higher consumer prices, in response to supply shortages, have led to shifts in both production and diet (Buck, 1995) * Supply is inelastic due to high fixed costs. Reduction of fleet may help * BP Oil Spill in Gulf of Mexico – “The chemicals BP is using to contain the spill could damage the bluefin larvae produced by adults that spawned in the Gulf. The oil plus the dispersants are likely to have a huge effect” (Biggs, 2010) (Biggs, 2010) It will damage many other species too Demand Issues
* Cheap prices are stoking demand
* Lowering price...
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