Prince Edward Island Preserve manufactures and produced high- quality, high priced specialty food products. P.E.I.P.C. experienced rapid growth in its short history. In the first few years of its existence, founder Bruce MacNaughton expanded his company from one manufacturing and retail outlet in 1989, following a second retail outlet in 1991. The company also diversified and opened two restaurants in 1989 and 1990 respectively. It is anticipated that P.E.I.P.C. will continue to grow, with projected sales for the year ending January 1992, to reach one million dollars. In August 1991, MacNaughton, contemplated on future expansion. The two cities under consideration were in Toronto and Tokyo. Options under consideration include adding retail outlets in the aforementioned regions.
Also under consideration is to increase wholesaling, and the use of distributors (hotel and airlines). Expanding the mail order business is also an alternative. Although MacNaughton has weighed some or all options to diversify P.E.I.P.C’s operations, it is unequivocally clear the company lacks clear vision, strategy goal and objective. MacNaughton’s business had been built on gut and emotion rather than analysis. However, this approach may prove to be insufficient for the future. It is difficult to execute a strategy if goals are not specific, can’t be described or understood. However, guided by the proper analysis of the external environment (SWOT), together with the firm-level analysis (VRINE Model), MacNaughton’s can improve P.E.I.P.C.’s long term competitive business position.
This case highlights various strategic challenges MacNaughton face while contemplating expansion, and how to complete this objective successfully. The difficulty is to know when to close the gap between the firm’s aspiration and its current capabilities, resources and market position. The core issues identified in this case are:
1. Future Expansion
2. Product imitation
3. Product promotion – reluctance to explore the use wholesale and distribution networks
4. Financial Constrains– unable to secure suitable financing, experienced period of cash flow shortages
5. Managerial constrains
6. Seasonal Staff – inability to attract and retain quality staff due to the seasonal nature of the business
Analysis and Evaluation:
P.E.I.P.C.’s key resource is its geographic location. Prince Edward Island is most notable known for its pastoral beauty, slower pace of life, North Shore beaches and global image of Anne of Green Naples. Prince Edward Island’s well known reputation for the high quality of strawberries is the basis of P.E.I.P.C.’s marketing strategy and product differentiation. As the company grew, P.E.I.P.C. developed and achieved a diverse product line. This resource helped the company to establish a competitive advantage. In addition, P.E.I.P.C’s higher prices did not compete with low end products charges by competitors. However, this marketing strategy to differentiate their brand, introduced P.E.I.P.C to a variety of competitors. Another key resource is financing. Although previously listed as a core issue, the company has the ability to raise $100,000 of addition capital to finance future expansion by issuing preferred stock. P.E.I.P.C.’s manufacturing plant is another key resource.
Currently, P.E.I.P.C.’s production capacity is underutilized. The manufacturing plant operates five month a year, on a single, five days per week. Productivity levels can increase from fifty per cent to one hundred per cent by extending the hours of operation. Automating the bottling process could increase productivity substantially. The final key resource is its customers. Prince Edward Island and P.E.I.P.C. attracts thousands of tourists from over the globe. In additional to local marketing efforts, the reliance on tourists could increase P.E.I.P.C.’s global presence and raise consumer awareness of its products. A strategy must be formulated for the purpose of gaining and sustaining competitive advantage. MacNaughton should critically evaluate P.E.I.P.C’s performance measure for resources and capabilities by utilizing the VRINE model.
The VRINE Model
Value – A resource is valuable if it enables P.E.I.P.C to exploit opportunities to establish competitive advantage or negate threats. Japanese tourist comprises a large number of visitors to Prince Edward Island and Prince Edward Island Preserve, Co. outlets. The popularity of P.E.I and P.E.I.P.C’s products are well known to Japan. Essentially, the high level of spending by the Japanese, their fascination with P.E.I., traditions of gift giving and the amount of disposal income available to them, indicates that opportunities in Japan might be successful. Rarity – P.E.I.P.C can enjoy temporary competitive advantage, so long as the content of ingredients used to make its specialty preserves remain rare and scarce relative to it competitors. Inimitability/Non-substitutability – Other firms in P.E.I. has begun to retail specialty preserves in hopes to profit from P.E.I.P.C.’s success. Competitors might be able to imitate or substitute the value and resources quickly, at a low cost.
Exploitability – With a solid vision, financial base, coupled clear strategy formulation and implementation of its objectives, P.E.I.P.C. can exploit their brand and products domestically and manufacture their products globally with the resources available. P.E.I.P.C can protect and increase competitive advantage by expanding its wholesaler and distribution network in Toronto. Initially, MacNaughton’s interest in Toronto was due to its size and local awareness of P.E.I. Successful expansion in Toronto can prove to be quite profitable for the company. Strategy planning for P.E.I.P.C. must also include a SWOT analysis in order to identify its internal and external factors that are favorable and/or unfavorable in achieving its objective. SWOT Analysis of Prince Edward Island Preserve Co.
Brand LoyaltySeasonal Business Structure
Product DifferentiationAttract and Retain Quality Staff
Local ReputationLimited Advertisement
Broad Product MixCash Flow Shortages
Ability to Raise Capital
Expansion in Japan and TorontoProduct Imitation
Extensive Distribution ChannelsVariety of Possible Substitutes Ability to meet
Competitive PricingSupplier Power to Competitors
P.E.I.P.C can also explore expanding its marketing reach in efforts to bring brand awareness through e-commerce and web based advertising. Additionally, plans should include hiring a sales and marketing team to assist in strengthening the company’s brand name and appeal. Emphasize on mail order sales by improving the quality of the catalogue and distribution reach. P.E.I.P.C. should consider automating the bottling process to increase production capacity and annual volume. The company should also analyze the profitability of large scale orders with wholesalers, hotels and airlines, and perhaps consider opportunities to expand in the U.S.
MacNaughton should take into consideration the use of additional key strategy formulation concepts such as, the strategy diamond, the five forces model off environment threats and the PESTEL model to help his firm establish and sustain competitive advantage.