Natureview Farm is a company that manufactures organic yoghurt and is the industry leader with 24 % market portion. Its fabrication procedure including the particular formula, longer shelf-life, no unreal ingredients, and merchandise assortment differentiated the trade name and positioned it distinctively. The yoghurt was produced in Vermont and sold in natural nutrient shops merely. The current quandary is for them to make a strategic program, based chiefly on distribution-oriented options, to transcend the $ 20 million gross grade by the terminal of FY 2001. This was fueled by the backdown of the venture capitalist house. The distribution schemes revolve around remaining in the natural nutrients shops or farther spread outing out in to the supermarket channel. Therefore, the job definition is that there is a demand to spread out and increase client base to drive gross revenues which would ensue in additions in grosss to run into corporate aim. Appendix 1 has a SWOT analysis that will assist steer the remainder of the treatment.
Appendix 2 briefly explains the three options in inquiry and has a fiscal prognosis for all three options if they were pursued. Option 1 seems to achieve the highest gross and net income. The house nevertheless would be put on the lining come ining the mass market distribution channel which would be a important displacement with its current operations i.e. both the selling and operations of the house would necessitate to be re-aligned to run into the big distribution channel. Puting up and effectual executing may non be faithfully predicted given the 12 month execution program. Furthermore, horizontal channel struggles would besides perchance be occur due to the clients purchasing the same merchandise at a cheaper monetary value at a more accessible location. This would give the supermarkets more channel power due to them being able to drive higher gross revenues. Overall, the 8oz market has a 3 % expected growing rate, and this figure needs to be taken into history every bit good since it’s non every bit high as some of the other realized tendencies which will be discussed below.
Option 2 has the following best gross but non a great net income border. Again, similar to the old option, the house would be come ining the mass market distribution channel with all the hazards highlighted above including horizontal channel struggle. With this option, the growing rate of the size of the yoghurt is at 2 % per twelvemonth ; nevertheless, the gross net income per sale is comparatively high at 43.6 % . Again, there is a slower growing rate nowadays here but what’s more of import to observe is the deficiency of support provided by retail merchants for this size of the merchandise. Given that a significantly smaller population purchases the larger bath, the supermarkets place it in the lowest shelves in-stores and therefore, may be overlooked in most scenarios.
Finally, Option 3 gives a better net income than the former but non sufficient gross. However, this option highlights the tendency and the researched growing rate of 12.5 % with the children’s market and multi-pack gross revenues which is an chance to capitalise on. This option besides bears the least sum of hazard due to minimum investing, keeping and heightening relationships with bing mediators and channel spouses, and non holding to undergo selling alterations such as trade name placement, or important production alterations. Gross net incomes with merchandise gross revenues here are 37.6 % .
There are some critical issues and analysis that need to be investigated before urging which option be best for Natureview Farm. The first critical issue is that of maintaining the company’s bing stance in head: “We owe it to our clients, our providers, and our distribution spouses to do the right strategic choices…” The 2nd is that of non being able to procure other funding options for the company which implies that bad enterprises need to be chosen with excess cautiousness.
The channel flow analysis in Appendix 3 shows the differences between the supermarket channel and the natural nutrients channel. The relationship of the inducement compatibility with the service end product of bulk-breaking is of import since bulk-breaking is one of the primary value-added services that the mediators provide, which in bend increases the monetary value of the yoghurt for the terminal consumer. In add-on, the merchandise shelf-life is another factor that’s relevant with respect to service end product demands. Both these factors are high in demand for the natural nutrients channel but non the supermarket channel which implies higher incentive compatibility with the former channel partnership. Consumers in bend would besides desire to be able to buy a merchandise that lasts longer and is broken down for them already. In the supermarket channel it can besides be seen that there are more duties added for Natureview to cover with such as selling, payments such as the slotting fee, and added publicities. The natural nutrients channel has these duties eliminated and has farther benefits such as tracking paperwork being down with the mediators and the information being passed upstream to Natureview. This does stop up increasing the cost due to the extra work done by the mediators. The cardinal issue is the horizontal struggle that could potentially happen due to impart power displacements and deficiency of control from the natural nutrients channel. Research showed that 67 % of the US consumers find that monetary value is a barrier to them buying the organic yoghurt ; this implies that these monetary value sensitive persons would be more inclined in buying the merchandise at the supermarket.
Based off the analysis, the best option to travel Forth with would be Option 3. This is chiefly because it is the best channel that would avoid any horizontal struggles stemmed because of a power battle between the two separate channels. Option 3 besides capitalizes on a turning tendency in the market and the natural nutrients industry is expected to turn at 20 % yearly every bit good. It would be of involvement to keep and heighten the bing relationships with the channel spouses since adding the supermarket channel into the system would do the partnership with the natural nutrients channel incompatible due to miss of inducements. Furthermore, this is the least hazardous option that they can put in with higher returns on investing in comparing with the other options. With bing happy clients, a premium trade name place, and strong partnerships with distributers like Wholefoods, Natureview can leverage its equity beginnings to increase gross and market portion by fabricating the multipacks targeted towards the younger population. The determination matrix in Appendix 4 farther supports this recommendation.
Appendix 1 – SWOT Analysis
|SWOT ANALYSIS – NATUREVIEW FARM|
No artificials, natural ingredients
Market leader with 24 % portion in Natural Foods Channel
Highest shelf-life merchandises
Strong Channel Partner Relationships
Highly dependant on agents
Merely in natural nutrient channel/not supermarket
Still a little portion in the full yoghurt market
12.5 % growing rate with multi-packaged merchandises for kids
Not sufficient capital and funding options
No experience with supermarket channel
Competition intensifying ; Horizon Organic with 19 % market portion
Cannibalization of gross revenues
Appendix 2 – Three options: Financial prognosis
|Option 1 Forecasted Income Statement ( Isolated )||Price = $ 0.74|
|Gross Net income||$ 15,050,000|
|Gross saless||$ 200,000|
|SG & A ; A||$ 320,000|
|Sloting Fee||$ 1,200,000|
|Trade Promotions||$ 3,840,000|
|Broker Fee||$ 1,036,000|
|Net Income||$ 5,934,000|
|Option 2 Forecasted Income Statement ( Isolated )||Price = $ 2.7|
|Gross Net income||$ 9,405,000|
|Gross saless||$ 160,000|
|Sloting Fee||$ 2,560,000|
|Trade Promotions||$ 4,096,000|
|Broker Fee||$ 594,000|
|Net Income||$ 1,875,000|
|Option 3 Forecasted Income Statement ( Isolated )||Price = $ 3.35|
|Gross Net income||$ 3,960,000|
|Gross saless||$ 0|
|Sloting Fee||$ 0|
|Trade Promotions||$ 0|
|Cost of Complementary Cases||$ 150,750|
|Broker Fee||$ 241,200|
|Net Income||$ 3,318,050|
All the tabular arraies presented supra have used informations from the instance for the Numberss. The cost of each SKU is derived from Exhibit 3. The Expenses have been derived from the options described in the instance. The statements are isolated i.e. they do non take into consideration bing operations and gross revenues of merchandises through the nature nutrients channel – they are merely measuring the options themselves at an single degree.
Appendix 3 – Channel Flow Analysis and Incentive Compatibility
|Supermarket Channel||15 % Markup||27 %||$ 0.74|
Payment ( Slotting Fee )
Appendix 4 – Decision Matrix
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