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 the 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
Long shipping lead times
Lack of marketing the brand image
Over diversified in non-core activities
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 line 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 company’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
In the balance sheet of P.E.I. Preserve Co., inventory amounts to $197,610, 76.13% of 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 5.07:1 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 opportunities 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...
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