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Bluefin Inc.

Bluefin Inc. Seminar: Transnational Strategic Management (IBA 6020) Instructor: Louise Kelly, PhD Student: Christian-H. Knauer Date: October 9, 2007. Outline. Introduction to Industry Business Segmentation Strategy. Mission Statement. Raising high quality bluefin tuna

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Bluefin Inc.

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  1. Bluefin Inc. Seminar: Transnational Strategic Management (IBA 6020) Instructor: Louise Kelly, PhD Student: Christian-H. Knauer Date: October 9, 2007

  2. Outline • Introduction to Industry • Business Segmentation • Strategy

  3. Mission Statement Raising high quality bluefin tuna with the latest most advanced technology to ensure the highest degree of customer satisfaction.

  4. I. Introduction to Industry • Aquaculture: Cultivation of aquatic populations under controlled conditions. Aquaculture vs Captures Fisheries: Million tons • Mariculture: Cultivation of marine organisms in the open ocean. Now supplies nearly 50 percent of available seafood. Growth rate worldwide: 7%/year

  5. 2. Business Segmentation • Four main questions: 1. What need does Bluefin Inc. serve? 2. Who are our customers? 3. What technology are we using to satisfy customer needs? 4. In which geographic area does Bluefin Inc. want to do business in?

  6. 1. What need does Bluefin Inc. serve? • Consumption of high quality bluefin tuna meat. Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography

  7. Bluefin tuna “The Porsche of the Oceans” • Size of a Porsche (10 feet) • Fast as a Porsche (0-60 in 5 seconds) • Value of a Porsche (160,000 USD) Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography

  8. Bluefin tuna • Types of bluefin tuna: 1. Northern bluefin tuna (Atlantic) 2. Southern bluefin tuna (southern waters) 3. Pacific bluefin tuna • Name: tuna (Greek) = rush • Speed: up to 60 mph • Length: 70 inches, max 12 feet • Weight: 200 pounds, max 1,200 pounds • Amount of food: 5% of bodyweight per day • Diet: fish, krill, pelagic red crab, squid, pilchard • Age: up to 40 yrs • Highest price paid in Japan: 160.000USD Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography Pacific bluefin

  9. Bluefin tuna • Migration: 1) Spawning in the Sea of Japan 2) Remaining in the area for 1-3 years 3) Offspring migrate east & remain for an unknown time  Bluefin Inc. catches the fish at this time 4) Eventually return west Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography

  10. Reasons for selecting Baja California as the farming location • Migration of blue fin tuna to the area (easy catch) • Governmental regulations are more sympathetic and pro-industry (than e.g. the US) • Cheap labor • Proximity to LA airport (with 19 flights per day directly to Tokyo)

  11. 2. Who are our customers? • Wholesalers /Importers (which sell our tuna at Japanese fish markets) • Later forward vertical integration possible (after using wholesalers for making our high quality fish well known) Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography

  12. 3. What technology are we using to satisfy customer needs? • Catching: • Our boats catch the tuna 20-30 miles offshore between Magdalena Bay (south Baja California) and Monterey Bay (south of San Francisco). • Between June - August • Tuna is slowly (< 2 mph) towed in the water to our farm in Baja California. • Then carefully put into the circular pens/sea cages Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography Pens in front of Baja California:

  13. 3. What technology are we using to satisfy customer needs? • Cages: • Circular • 30-40 meter diameter rings • Made from high density black polyethylene plastic • Rings float on the water’s surface and are held apart by stanchions • Handrails are attached approximately 1 meter above the water surface • Two nets are attached to the floating rings • The inner net, which contains the tuna, ranges from 60mm to 90mm mesh and has sides which drop twelve to twenty meters • Where an outer, or predator net is used, it serves to keep sharks and seals away from the tuna • Price range: $80,000 to $200,000 • A standard cage holds up to 2,000 tuna Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography

  14. 3. What technology are we using to satisfy customer needs? • Diet: • All you can eat • Sardines • 3 times a day • 6 days a week • 4 to 8 month • Purpose of diet: • Gaining weight (up to 190 pounds) • Building fat Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography Our Japanese customers

  15. 3. What technology are we using to satisfy customer needs? • Transportation/Infrastructure: • By ship • Truck and/or ship to LA airport • Airplane to Tokyo Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography

  16. 4. In which geographic area does Bluefin Inc. want to do business in? Japan 4.1 Growth 4.2 Profitability 4.3 Turbulence 4.4 Success factors Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography 4.1 Growth 4.2 Profitability 4.4 Success factors

  17. 4.1 Growth • Demand stages • Emergence (industry is born) • Accelerating growth (demand > supply) • Decelerating growth (signs of saturation) • Maturity (supply < demand) • Decline (very low to zero demand)  Question: What will be the length of the demand cycle to the arrival of saturation? Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography 4.1 Growth 4.2 Profitability 4.4 Success factors

  18. Demand stage: Accelerating growth (demand > supply) • Following several tuna management programs and fishing restrictions worldwide, globaltuna landings have started to shrink but importvalues are movingup. • January-March 2007: Total tuna (fresh and frozen) imports during this time fell by nearly 20% in quantity to 69 505 MT compared to 86 430 MT last year same period. Import value on the other hand, increased by 11.5% to ¥70 billion during this period. Fresh tuna imports were record low at 10 334 MT.  Supply & Demand high Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography 4.1 Growth 4.2 Profitability 4.4 Success factors

  19. Demand stage: Accelerating growth (demand > supply) • Market size: Japanese imports of fresh/chilled tuna (MT) Japanese imports of frozen tuna (MT) Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography 4.1 Growth 4.2 Profitability 4.4 Success factors

  20. 4.2 Profitability • Buying habits: • Main season between October and March • Demand peaks around Christmas • Competitive structure (global): • Tuna sea farmers (Mexico, Australia, Africa, Mediterranean sea) • Tuna fishers • Fish farmers of substitute fish • Fishers of substitute fish Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography 4.1 Growth 4.2 Profitability 4.4 Success factors

  21. 4.2 Profitability • Distribution: • Use of Japanese based agents (wholesalers) • Located at the Tokyo’s fish market Tsukiji • Process: • Agent orders an specific amount of bluefin (e.g. Monday) • Fish is killed fast and immediately frozen (no stress hormones which negatively impact quality of fish!) • Fish is shipped immediately to LA • Via airplane to Tokyo Japan (e.g. bluefin arrives customer on Wednesday) Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography 4.1 Growth 4.2 Profitability 4.4 Success factors

  22. 4.3 Success factors • 2 major factors which will determine strategies of top competitors: • Quality of tuna • Consistency of availability ( competitive advantage, since we are able to deliver whenever the customer orders) Segmentation: 1. Need 2. Customer type 3. Technology 4. Geography 4.1 Growth 4.2 Profitability 4.3 Success factors

  23. Start-up Cost (in USD) Available capital = 10,000,000USD

  24. Costs (in USD) • Monthly cost (fishing season): 625,000 • Labor: 45,000 • Consultant: 12,000 • Diver: 3,000 • 3 fisher men: 20,000 • 2 ranch workers: 10,000 • Fish food: 400,000 • Insurance: 20,000 • Operational cost: 50,000 (electricity, work cloth, transportation, gasoline, car etc.) • Boat lease: 110,000 • Vessel: 90,000 • Transportation: 20,000

  25. Income Statement

  26. III. Strategy • Optimization of ROI by reaching for two major objectives: 1) Matching aggressiveness of Bluefin Inc. strategic behavior to turbulence of its environment. 2) Matching responsiveness of the firm’s capability to the aggressiveness of its strategy.

  27. Future turbulence level of bluefin tuna industry • Complexity: Global (5) • Familiarity of events: Discontinuous familiar (4) • Rapidity of change: Comparable to response (3) • Visibility of future: Partially predictable (4)  Environmental truculence: Discontinuous (4) • Occurring changes could be: • Increase in supply • Stricter import regulations for tuna in Japan • Changes in technology which allow tuna to be farmed completely in captivity • Market saturation • Stricter global regulations which pressure Mexico to change farming regulations • Catastrophes (pollution of sea) • Activist such as Greenpeace attack/damagefarm

  28. Strategic Aggressiveness of Bluefin Inc. • Entrepreneurial (Based on expected future) • Bluefin Inc. continuously scan its environment in order to identify future economic, competitive, technological, social, and political discontinuities. Responsiveness of Bluefin Inc. capability • Strategic (Environment driven, We seek new change) • Bluefin Inc. continuously challenges the future validity of historical success strategies and the future attractiveness of historically attractive markets.

  29. Thanks for listening!

  30. References • Implanting Strategic Management, 2nd edition, H.I. Ansoff & E. McDonnell, Prentice Hall, 1990 • www.baja-web.com/punta-banda/tuna.html • http://casamarintl.com/CrowsNest/1999/apr_CrowsNest.html • www.encyclopedia.com/doc/1G1-107524526.html • http://findarticles.com/p/articles/mi_m0FDG/is_2_103/ai_n13801781 • http://govdocs.aquake.org/cgi/reprint/2004/802/8020800.pdf • www.infofish.org/marketreports/tuna0607.html • www.investopedia.com/articles/04/022504.asp • http://marinebio.org/species.asp?id=236 • www.montereybayaquarium.org/efc/living_species/default.asp?hOri=0&inhab=433&hab=3 • http://mt.essortment.com/bluefintuna_raem.htm • http://news.mongabay.com/2007/0806-tuna.html • www.oceansalive.org/eat.cfm?subnav=fishpage&fish=154 • www.sargo.net/aquaculture.htm • www.spc.int/coastfish/News/Fish_News/99/NIAR_99_2.htm • www.smh.com.au/news/national/12-million-thatsa-four-tuna/2006/10/25/1161699385987.html

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