Silver Ships Case Study

Topics: Profit margin, Revenue, Gross profit margin Pages: 9 (3043 words) Published: April 22, 2012
Silver Ships is not as well prepared for the future as it could be in terms of succession planning, diversification and capital structuring. The attached report recommends that Mike McCarty take immediate action to establish a strong plan for the future of the company. The company is currently funded entirely by equity, and the appropriate use of debt to grow the company would provide for opportunities to expand and diversify. McCarty must rely on his vision and innovative skills to expand and promote future Silver Ship models. As Silver Ships grows, McCarty must recognize that he can’t be there forever and for his dream to continue, he must shift his strategic focus towards a succession plan for his company. Mike McCarty, CEO of Silver Ships, is a tenacious business leader and innovator. He has a natural ability to transform his passion and understanding of the ship building business into a strategy that has helped evolve his company into an industry leader. Silver Ships’ strategic market positioning continues to capture new sales opportunities. This is a reflection of McCarty’s innate ability to predict and embrace the evolution of the boating industry. Since 1985, McCarty has led Silver Ships through countless changes and has positioned his company well for success through this next round of evolution. 1. What are the key elements of Silver Ship's strategy? Which of the five generic strategies is the company pursuing? Silver Ships is pursuing a focused differentiation strategy. The company, led by founder Mike McCarty, is focused on the highest possible quality and performance. The company's strategy is to appeal to a discerning buyer who is willing to pay a premium price for a custom made boat built with the very best materials using the newest innovative techniques. This strategy is evident in the use of aluminum rather than less expensive materials, the investment in facilities to protect the boats and materials at every stage of production, and the company's investment in experienced boat builders. 2. Explain the competitive pressures facing the aluminum military and workboat industry. What can a five-forces analysis tell us about the nature and strength of the competitive pressures facing Silver Ships? Which of the five forces is the strongest? A five-forces analysis of the military and workboat industry reveals three competitive forces that are significant threats to Silver Ships (Porter, 2008). The greatest threat to the company is that described by Porter as "Bargaining Power of Buyers". With the military being a major customer for Silver Ships, a major portion of the business for which it competes is awarded based on bids. These are large jobs to build many ships and can provide stable work and margins for the winning boat builder. The military is therefore in a position to bargain over the terms of the contract. The other extremely important competitive force that Silver Ships should be aware of is "Rivalry Among Existing Competitors". With the number of companies building boats of this nature, Silver Ships has found that a few major competitors have merged. These competitors have similar interests in earning the coveted military contracts. Silver Ships must also contend with the threat of the "Bargaining Power of Suppliers". Because the costs of the aluminum used in building the ships and the labor required are very high in proportion to the total operating costs, Silver Ships is at the risk of these costs rising. Finally, the case does not mention any threat of "New Entrants" in this industry. As described in the case, the cost of facilities and the level of expertise needed to successfully compete in this market would make it difficult for a newcomer to compete effectively. Likewise, the discerning customers who seek boats that are so highly appointed and customize are unlikely to find other ways to meet those needs in the short term. For that reason the "Threat of Substitute...
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