1. Scott Farmer Consulting How to stay afloat
Blue Water
Scott Farmer Consulting
How to stay afloat

2. Agenda External and Internal Environment Alternatives
Analysis and Recommendations
Implementation Plan
Financial Forecasting

3. Porters’ Five Forces Moderate to Highly Competitive Environment Low
Medium
High
Degree of Rivalry
Low
Medium
High
Threat of Substitutes
Low
Medium
High
Buyer Power
Low
Medium
High
Supplier Power
Low
Medium
High
Barrier to Entry
Moderate to Highly Competitive Environment

4. Mission, Vision, and Strategic Direction
Consistent in building boats that customers will value
Performance and appearance
Using expertise in wood and classic boats
Blue Waters does not have its strategy explicitly communicated
Mission, Vision and Strategic statements are not available

5. Developing a Strategy
A mission and vision statement helps to direct the mentality and goal congruence of management and employees
Helps identify gap between performance and target and ways to close the gap
Overarching targets the firm wants
Considering the internal and external environment
Long term goals are developed from the overarching goals
Short term goals are developed through long term goals

6. Industry Key Success Factors
Innovative Designs and Technology
High Quality and Performance
Experienced Shipbuilders
Eco-efficiency
Marketing

7. Sources of Competitive Advantage
Quality Wooden Boats/Good Reputation
Environmentalism
Skilled/Experienced Workers
Blue Water “Classics”

8. Key Risks
Declining Market
Poor cost control
Retiring Employees

9. Alternatives Considered
Strategic Alternatives:
Switch to Manufacturing Aluminum Boats and Place Government Bid
Maintain status quo of Manufacturing Wooden Boats
License Manufacturing of Sykes Class Sloop using fiberglass
Operational Alternatives
Construct a New Storage Shed
Increase Prices (Boats and Repair Charges)
Install New Information Technology (IT) System
Implementation of Balanced Score Card

10. Alternatives Considered
Strategic Alternatives:
Switch to Manufacturing Aluminum Boats and Place Government Bid
Complete overhaul of labour force, yard and business strategy
Build new reputation
No guarantee of government bid

11. Leverage on competitive advantage of reputation
Strategic Alternative: Maintain Status Quo of Manufacturing Wooden Boats
Pros
Target niche market
Environmentally friendly
Established market reputation
Supplement other departments
Cons
Declining wooden boat market
Senior employees set to retire soon
Lack of employee training facilities
Leverage on competitive advantage of reputation
Focus on key success factor of environmental friendliness

12. Strategic Alternative: Licence Manufacturing of Sykes Class Sloops
Pros
Blue Water only yard with mould
Continue to supplement repairs and fittings divisions
Target emerging sloop market
Cons
Expired Intellectual Property on mould
Boston manufacturer may not produce to Blue Water standards
Focus on competitive advantage of Blue Water Classics
Overcome unfair trade policies

13. Operational Alternative: Construct New Storage Shed
Pros
Target larger market and wait list customers
Good reputation in market
Cons
Assuming labour and materials available
Require hiring new employees
Leverage on competitive advantage of reputation

14. Focus on key success factors of marketing, innovation and technology
Operational Alternative: Increase Prices – Boats and Repair Charges Implement Balanced Score Card Install New IT System
Pros
Earn full potential
Create benchmarks and targets
Cons
Customers unwilling to pay more if prices increased
No external experience of Balance Score Card and IT System
Focus on key success factors of marketing, innovation and technology

15. Firm Value Aluminum + Government Bid
Calculated using a discount rate of 6% (government loan rate available to the company) -> does not matter too much as both projects use the same discount rate
Aluminum + Government Bid
Provide a higher firm value
Have a greater uncertainty about the operating cash flow that is sustainable (i.e. projects renewed every 2 years)
Stay with Wood, Construct the Shed, & License Manufacture the Syke
Lower firm value when projected into the future
Less risky as no major change

16. Firm Value

17. RECOMMENDATION Strategic Alternatives: Operational Alternatives
Switch to Manufacturing Aluminum Boats and Place Government Bid
Maintain status quo of Manufacturing Wooden Boats
License Manufacturing of Sykes Class Sloop using fiberglass
Operational Alternatives
Construct a New Storage Shed
Increase Prices (Boats and Repair Charges)
Install New Information Technology (IT) System
Implementation of Balanced Score Card

18. Charge-Out Rate Sensitivity
Sensitivity Analysis
Charge-Out Rate Sensitivity
Additional Income
Charge-Out Rate
-Current charge out rate: $25
-Industry average rate: $42
-Raising the charge out rate by as little as $3 significant increases in NI

19. Sensitivity Analysis Price
Additional Income
Price
-Canoes and Sykes Sloop priced below competition
-Can still price both much lower then the competition and still substantially increase revenue
-Risk – customers may not appreciate price hike

20. Sensitivity Analysis -Can the expected 25 units actually be sold?
Expected Profit
Number of Boats Sold
-Can the expected 25 units actually be sold?

21. Implementation Plan Continue producing wooden boats Niche market
Target Marketing
Niche market

22. Implementation Plan
License production of the Sykes Sloop in Fiberglass
Low cost to implement
Greater production capacity

23. Implementation Plan
Build a new shed  increase indoor storage capacity  accommodate customers on the waiting list

24. Implementation Plan Implement an IT System Need to acquire hardware
Off the shelf software
Training for Roselle

25. Balanced Scorecard Sample

26. Financial Perspective Learning and Growth
Return on Investment
Net Income
Profit Per Unit
Sales Growth
Learning and Growth
Apprenticeship program
% of employees trained
Hours of training
Customer Perspective
Customer Satisfaction
# of complaints or concerns
# of returns or “fixes” needed to correct orders
# of jobs
New customer jobs
Returning customer jobs
Wait time for custom jobs
 Positive Recognition in the media
Internal Perspective
Employee Satisfaction
Employee Turnover
Unit costs for jobs

27. Timeline for Implementation
Action
Responsibility
Cost
Start Date
Finish Date
Strategic Implementations
License Sloop Manufacture
John Sykes
$ 2,000
March 1, 2002
Ongoing
Operational Implementations
Market Research
David Hamilton
Marketing Campaign
Roselle Deveau
$ 8,000
April 1, 2002
Construct New Shed
$15,500+
June 1, 2002
August 31, 2002
Install IT System
March 15, 2002
Balanced Scorecard
$ 1,000
October 1, 2002
Implementation complete by fiscal year 2003

28. Future benefits from price increases, improved costing system,
balance scorecard and marketing

29. Questions?