Solar Feeder SDI
...plaining how the Solar Feeder works so that potential buyers don¡¦t mistakenly think that squirrels are hurt. ƒØ Retail costs are too high for to promote sales growth to other customer segments. ƒØ SDI has not been able to entice individuals to invest in the company. Vision and Mission When SDI first started developing the solar feeder, its vision was to defend birdwatchers from the vicious attacks of squirrels upon their birdfeeders. Today, this vision has become a reality, and now SDI is focusing on its mission to succeed in the mass retail market by providing an innovative, cost competitive, visually pleasing birdfeeder resistant to squirrel attacks. SDI¡¦S SHORT TERM OPTIONS As their financial statements indicate, SDI is in a position where immediate action is required for its survival and SDI¡¦s owners/managers are faced with the following three options: ƒØ Sell the business and all rights to the Solar Feeder to another manufacturer ƒØ Keep the business and continue in house manufacturing, or ƒØ Keep the business and outsource manufacturing. To determine the best course of action, the external and internal factors affecting SDI¡¦s probability of success if the owners keep the business must be analyzed to determine if they have the ability to: ƒØ Increase sales ƒØ Reduce Costs, and ƒØ Produce Solar Feeders faster and more efficiently. If SDI is able make considerable improvements in each of these three key areas, it will also be able to remain in business and achieve its mission. External Competition Considerations SDI¡¦s competitive strategy is one of focused differentiation. The only product SDI produces is the Solar Feeder bird feeder that is primarily targeted towards the bird watching population of America. However, since the Solar Feeder is so labor intensive to produce, its retail price draws in the more affluent bird watching customer, who can afford a $300 bird feeder. The Solar Feeder sets itself apart from its competition in three primary ways: ƒØ it is a squirrel resistant ƒØ unlike other squirrel resistant feeders, it has great lawn appeal, and ƒØ it has three stylish mounting options that prevent swinging and spilling of seed. Important factors for SDI to consider when making strategic business decisions include: Considerations Market Availability of Substitutes Currently, there are at least 30 other bird feeders on the market, 14 of which are squirrel resistant and 15 of which have a fair to positive (rating of 5 or higher on a scale 1-10 scale) lawn appeal. Potential of New Entrants Relatively easy entry. Low start up costs. No government regulations preventing/slowing entry. Bargaining Power of Buyers Because of wide selection and varying costs, buyers have substantial power. Market Segment Potential Studies conducted by the US Fish and Wildlife Service, the American Birding Association (ABA), and the US Department of Interior revealed the following details about the Solar Feeders targeted customer segment: ƒØ there are 50.4 million bird watchers in the US, ƒØ the most popular activity among wildlife watchers was wild bird feeding, and ƒØ consumers spend approximately $843 million per year on feeders, baths, and nesting boxes. Having captured less than .0002% of the expenditure in the market (446 feeders sold in 1999) means there is incredible opportunity and growth potential for the Solar Feeder product in this market segment. INTERNAL STRENGTHS AND WEAKNESSES ¡V S.W.O.T. ANALYSIS Strengths ƒØ Superior/high quality product ƒØ Attractive design ƒØ Innovative features ƒØ ¡§Best Product Awards¡¨ Weaknesses ƒØ Ongoing research and development costs ƒØ Cost to produce ¡V materials/labor ƒØ Time to produce ƒØ Very little market research/Poor marketing strategy ƒØ Product has low tolerance for machine production ƒØ Clarity of advertising ƒØ Poor warranty ƒØ Poor distribution Opportunities ƒØ Production efficiency/Improve manufacturing ƒØ Different materials to produce ƒØ Open product to larger customer segment through reduced wholesale/retail prices (Home Depot/Lowes) ƒØ Distribution improvements ƒØ Develop models of varying cost/quality ƒØ Utilize Ed more ƒØ Create a marketing plan ƒØ Build to order Threats ƒØ Poor cash flow ƒØ Lesser-priced competitors ƒØ Payments from distributors ƒØ Shipping the product before sold ƒØ Building the product before sold ƒØ New entrants COMBINED EXTERNAL/INTERNAL ANALYSIS RESULTS Based on the above outlined external competition and internal strength and weakness factors, it is recommended that SDI keep its business and continue with in-house manufacturing. The primary justification for this recommendation is as follows: First, SDI has capitalized on Solar Feeder¡¦s strengths and has already gained considerable momentum from its exposure and awards at various trade shows. As word of the ¡§Best New Product¡¨ spreads to various bird watching enthusiasts through word of mouth and improved marketing, this momentum will continue to grow. SDI should take advantage of this success they¡¦ve started and not allow another company to capitalize on its innovative idea and research and development hours. In addition, SDI should be able to capture a greater market share in a customer segment that spends $843 million annually. However, to capture greater market share, SDI will need to make drastic improvements in its weaknesses and start taking advantage of some of the opportunities available to increase revenue and decrease expenses. Many of the items listed under the weaknesses and opportunities headers in the SWOT analysis SDI can tackle themselves and there would be no need to outsource the manufacturing once these items have been addressed. Finally, one of the Solar Feeder¡¦s greatest strengths is that it is a high quality product. Outsourcing manufacturing could compromise this quality and diminish the good reputation the Solar Feeder has started to develop. RECOMMENDED ACTION PLAN Based on the current issues and the need for immediate action if manufacturing is going to remain in-house, SDI must prioritize some change initiatives to improve cash flow through increased sales and decreased costs. Decreased Costs SDI¡¦s primary opportunity to improve cash flow is to decrease costs. This can be accomplished by focusing on ƒØ the cost of materials, and ƒØ improved manufacturing efficiency. The cost of materials and manufacturing is a clear concern for SDI. Currently, they are manufacturing the Town Solar Feeder for $95 per unit on average and...