Blue Water

1. 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 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. 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. Operational Alternative: Increase Prices – Boats and Repair ChargesImplement Balanced Score CardInstall 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 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: • 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. 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 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 ExpectedProfit Number of Boats Sold • -Can the expected 25 units actually be sold?

21. Implementation Plan Continue producing wooden boats 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

27. Timeline for Implementation

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

29. Questions?