Chapter 2 Worksheet - Salem State University



Chapter 3 Worksheet

The concepts in this worksheet correspond directly with the text. If you do not understand the concept or need to refresh your memory, please refer to the text. I provide the page reference for each of the criteria. You should also use the CD-ROM for concepts that require more detailed explanation than the text provides.

The purpose of the external analysis is to identify opportunities and threats for the industry you are analyzing. Do not focus on the company under analysis. Focus on the industry in which the company competes. Make sure your analysis of the facts leads to a logical determination of specific opportunities and threats associated with the criterion you are analyzing. Consider each criterion from a strategic perspective. In other words, does your analysis lead you to conclude how or in which ways does the criterion under analysis create opportunities or threats for the industry or specific companies in the industry? State the specific nature of the opportunity or threat. This will strengthen your analysis and help you with your subsequent SWOT analysis.

Do not use speculative statements. Typical key words indicating speculation include: if, should, could, would, and may. Avoid contractions in written business reports. You only use contractions in a business report when it involves a direct quote.

Refer to the examples of prior case analyses provided on the web site to assist you with understanding the desired quality of analysis and statement of opportunities and threats.

Macro-environment forces

|Criteria |Facts |What does this mean? |

|(Refer to page 74.) | | |

|The economy at large |Economy is growing in the Memphis region. |This creates an increase in total market volume. This |

|(Address the economic conditions during the |Restaurant industry experiencing growth in the |is a strong threat of new entrants into the industry |

|timeframe of the case.) |Memphis region. |(Deal with the threat of entry in question 2. This |

| | |question is asking you how the economy is driving |

| | |opportunities or threats for the industry.) and also an |

| | |opportunity to grow total industry volume. While this |

| | |is true, I think you can be more specific in the way you|

| | |write the opportunity. For example, “The strong |

| | |economic growth in the Memphis area will increase the |

| | |size of the market, draw customers with prior knowledge |

| | |of and appreciation for specialty sausages, and provides|

| | |for increased disposable income. These economic |

| | |conditions create strong opportunities in increased |

| | |market size, knowledgeable customers and spending on |

| | |specialty items.” |

| | |Please use this as an example of how to write a specific|

| | |opportunity. |

|Legislation and regulation |The following regulatory agencies impact the |Compliance with these regulations is not overly |

| |special sausage industry: |burdensome to the industry, though failure to comply can|

| |OSHA regulates standards for employee work |result in significant fines and/or shutdown of |

| |conditions. |production facilities. Please make sure you state the |

| |FDA & USDA regulate standards for maintaining |specific nature of the threat or opportunity. If the |

| |the production environment. |criterion is neither a threat nor an opportunity then |

| | |say so. |

|Population demographics |There is prolonged growth in the Memphis |Population growth leads to an increase in total |

|(Population demographics analysis relies on |region’s population, resulting in an increase |available market volume. This is a strong threat of new|

|developing various categories of the population|in urban areas. |entrants into the industry and also an opportunity to |

|and analyzing their impact on the industry. |Increases in # of meals per capita obtained |grow total industry volume. |

|Typical categories include gender, age, |from the food service industry vs. | |

|education level, geographic location, and |“home-cooked”. | |

|income levels. In addition to population | | |

|demographics, this type of categorization |OK but you have not really addressed the | |

|includes ethno-graphics and psychographics. |criteria. How do the characteristics of the | |

|Marketing is the usual company source for these|population create opportunities or threats for | |

|types of analysis.) |the industry? | |

|Societal values and lifestyles |Societal trends toward health and fitness have |Health trends provide an opportunity for the industry to|

| |a great influence on food service industries. |expand into a new, expanding market segment. |

| |“Urban” lifestyles are becoming more |This is an opportunity for high quality, differentiated |

| |predominant in the Memphis region, resulting in|product lines. Please be more specific in the nature of|

| |an increase in the importance of fast, quality |the threat or opportunity. For example, Increased focus|

| |service over price. |on nutrition and healthy choices will prevent potential |

| | |customers from choosing sausage as an alternate food |

| | |product. This is a threat to companies unwilling or |

| | |unable to develop products or reach out to this customer|

| | |segment. |

| | | |

| | |Please use this example and the prior example as general|

| | |guidance for reviewing and revising, if necessary, all |

| | |of your responses in the worksheet. |

|Technology |The basic equipment and knowledge required for |Technology does not have a large influence on this |

| |the industry is readily available. The major |industry, except for the threat of rivalry of new |

| |shifts in technology have to do with new |sausage flavors introduced by rivals. |

| |sausage flavors being introduced by rivals. | |

| | |Please consider the internet and other technologies that|

| | |may apply to this industry. |

1. What are the Industry's dominant economic features (page 77)?

Please note that table 3.1 provides a sample profile of the sulfuric acid industry. Table 3.2 provides examples of the strategic significance of each of the criterion. Make sure you know the industry you are analyzing.

|Criteria |Facts |What does this mean? |

|Market size |*462 Million pounds purchased in 1997 *Retail segment of |Large and varied market size with several areas for |

| |>2 billion annually. |specialization; flavors, low-fat styles, and overall |

| | |premium quality products. Specialization will help to |

| |A key fact you should include is the segmented nature of |capture niche markets over larger less diversified |

| |this industry. Some segments include the products (meal,|national brand leaders. This is an opportunity for an |

| |nutritional value) and customers. |existing manufacturer to create extra sales revenue by |

| | |expanding into the specialty area. |

|Scope of the competitive rivalry |*Local; suppliers to specialty restaurants/retail |Regional impact from 25 to 30 suppliers in the Memphis |

|(The competitive scope criterion |*Regional; brokers to distributors |area. National competition from major suppliers who are |

|addresses geographic scope (Global,|*National; major players with national reach and support |able to compete with cheaper economies of scale and |

|National, Regional, and Local), |from distributors |larger distribution channels and marketing plans. |

|product scope, market scope and so |*Large national competitors with brand loyalty following |Competitors are better able to find shelf space in retail|

|on.) | |outlets due to the hold the retailing supermarkets have |

| | |on the industry (controlling up to 50% of the market) |

| | |Scope of competition encompasses all levels. This is a |

| | |threat to the industry because of the great and varied |

| | |levels of competition within it. You need to be specific|

| | |in the nature of the threats. What types of threats by |

| | |whom and for whom? |

|Market growth rate and position in |*National Industry growth rate of 18.3% in 1996 |The industry is in a growth cycle. Current eating trends |

|the business cycle |*Regional industry growth rate of 15.4% |allows the creation of specialized specific niche |

| |within the retail segment regionally creating sales of |markets. The ability to create and manage these markets |

| |12.25 million (6.1 million pounds) |through specialization & brand loyalty is beneficial to a|

| |*Industry in a growth cycle |smaller manufacturer. This is an opportunity within the |

| | |industry for individual manufacturers to grow and expand.|

| | |Once again, you need to state the specific nature of the |

| | |opportunity. To emphasize this comment and to save me |

| | |from writing it repeatedly, look for this color as an |

| | |indicator. |

|Number of rivals and their relative|Bryan National |Larger regional and national competitors tend to focus on|

|size |Jimmy Dean National |increased daily sales from few products. Small |

|(Relative size refers to the market|Healthy Choice National |manufacturers are then able to create greater specialized|

|share based on total sales for the |John Morrell National |products in smaller quantities thereby maintaining |

|overall market or, when applicable,|Johnsonville Regional |increasing local area sales. Trying to compete on a |

|individual market segments.) |Dino’s Regional |national level would have many entry barriers to overcome|

| |Mr. Turkey Regional/Local |due to the high volume of competitors. Even though the |

| |King Cotton Regional/Local |number of rivals is a threat, the fact that they tend to |

| |Guisseppe’s Local |focus their sales to specific items on a national level |

| | |is an opportunity for a small manufacturer to create |

| |Insufficient data to completely answer this question. |niche markets on the local and regional level. This is a|

| | |good example of analysis leading to the specific nature |

| | |of the opportunity. |

|Number of buyers and their relative|*Households (72%) purchasing a processed food product |This hold on the local retail market is pushing out |

|size |monthly. Please writer in complete sentences. |smaller specialty grocery shops and narrowing the choices|

|(Address the number of buyers in |*Sales at large grocery stores were increasing due to the|for consumers. Customers are forced to shop at the larger|

|each market and market segment. |50% market share the covered. |grocery chains where they control the selections |

|Buyer size refers to the buyer’s | |available for purchase. This is an opportunity for |

|volume of sales for the industry.) | |specialty product manufacturers. |

| | | |

| | |Restaurants and institutions also control which products |

| |*Restaurant clients steadily increasing since 1990 |are purchased and used. The use of brokers and |

| |(Annual meals eaten out increased from 113 to 131 in 12 |distributors is necessary to infiltrate this market as |

| |years) Please qualify this statement. |well the ability to sell a premium quality specialty |

| | |product at a less than premium price to this specific |

| | |group of buyers. What is your point? Do these buyers |

| | |create an opportunity or threat for this industry? |

| | | |

| | |Specialty restaurants relative size varies due on the |

| | |menu and type of food being served. The number of buyers|

| |*Specialty ethnic restaurant food eaters on the rise, |is an opportunity to the industry because of the current |

| |i.e. Italian, Cajun and French |growth of these buyers to the market. |

|Extent of rivals vertical |Low One-word answers are unacceptable. Please write in |Rivals utilize broker and distribution channels to move |

|integration (How far forward or |complete sentences. Furthermore, you are supposed to |forward along the value chain. There is potential threat |

|backwards have the rivals extended |provide facts in this column. |from meatpackers to enter the market, but as of yet, that|

|their value chain?) | |is not the case. Please do not speculate on potential |

| |These comments apply to the entire worksheet. |new entrants. Stick with the criterion. Therefore, the |

| | |vertical integration of rivals is almost non-existent. |

| | |This could be used as an opportunity for some |

| | |manufacturers to become more vertically integrated and |

| | |create a cost advantage over the market. |

|Extent of rivals horizontal |Moderate |Smaller manufacturers may not have the capacity to hire |

|integration | |or manage marketing dept. or to ally themselves with |

|(Horizontal integration applies to |*Financial |distribution channel members. This is a threat to |

|using the synergies in your value |*Production |smaller manufacturers in this industry. You did not |

|chain to produce different products|*Distribution |address the question. |

|or provide services for a different|*Marketing | |

|industry or market segment.) | | |

|Types of distribution channels |Both independent and affiliated distributors and |The ability to utilize the brokers marketing resources as|

|rivals use to access customers (Do|brokerage houses. |well as his services for distributing product is very |

|the channel types vary by customer | |beneficial. Using large distributors to carry the |

|segment?) | |product lines makes it readily accessible to the leading |

| | |grocery retailers and restaurateurs. Not utilizing these|

| | |services is also a threat to the smaller sausage |

| | |manufacturer. You did not address the question. |

|Pace of technological innovation in|Slow |No serious changes within the industry at this time. This|

|production process innovation | |could be a threat to the industry overall where |

| | |inefficient practices become the norm. |

|Pace of technological innovation in|Fast |The health trends of the public demand changes quickly |

|product introduction | |acted upon within the industry. Studies have shown that |

| | |lower fat content products were swaying consumers away |

| | |from high fat content sausage products. The ability to |

| | |quickly introduce a product that will meet these lower |

| | |fat needs will capture opportunity and market share for |

| | |whoever creates the varieties first allowing 1st mover |

| | |advantage over rivals. While this is a good response, it|

| | |does not fully address the criterion. |

|Extent to which the rivals products|National competitors are perceived as being |*Ability to better control price strategies |

|and/or services are differentiated |differentiated through their marketing and pricing |*Marketing concepts for coupons/special promotions and |

| |strategies. True differentiation is achieved through |advertising $’s to promote brand loyalty |

| |specialty, flavor and low-fat branding. Please elaborate|*Focus on fewer specialty items to increase saving from |

| |on this response. State the specific type and nature of |economies of scale. This is a threat to the smaller |

| |the differentiation. |manufacturer. |

|Extent to which rivals use |Large national rivals have the ability to utilize |Please address the criterion. Focus on the extent to |

|economies of scale in: |economies of scale throughout the value chain thereby |which rivals actually use economies of scale. I |

|Purchasing |making it quite difficult for smaller manufacturers of |understand the concept. There is no need for you to |

|Manufacturing |sausage products to gain any market advantages except |repeat it application in each step of the value chain. |

|Services |through specialization and differentiation. Please focus|*Ability to use bargaining power with suppliers to gain |

|Transportation (logistics) |on the criterion. Economies of scale deal with lowering |advantage over bulk purchase pricing. |

|Marketing |the cost floor in each step of the value chain. In which|*Ability to decrease manufacturing costs due to the |

|Advertising |ways and to what extent to rivals use economies of scale?|larger production outputs size demands. |

|General and Administration |How does their use of economies of scale create |*Ability to have large marketing concepts which utilize |

|Other steps in the value chain |opportunities or threats for the industry? |specials & advertising |

|(Refer to chapter 4 for the | |*Ability to use the services offered by distributors to |

|description of the value chain.) | |gain access to large grocery chains or food-service |

| | |operations. |

| | |*Ability to cut transportation charges by combining and |

| | |planning shipment routes; delivering more products at a |

| | |time cutting out unnecessary or un-timely shipments. |

| | |This is also a threat to the smaller manufacturer within |

| | |the industry. |

|Extent to which the key industry |Highly clustered (This is typical of metropolitan areas) |In order to compete with the National competitors, the |

|participants are clustered in one |Major retail grocery chains maintain control over 50% of |use of retail grocer distributors is necessary. You will|

|geographic location |the market by supplying competing brands shelf space |have to convince me of this situation. As written I do |

| |within their establishments. |not agree with this sentence. This is a threat to the |

| | |industry overall because of high competition within a |

| | |small geographic area. |

|Extent to which certain industry |See my prior comments about one-word answers to the |Activities done during the production process are most |

|activities result from learning and|question. |likely to be effected by learning and experience curve |

|experience curve effects | |effects. This sentence is too vague. Although, small |

| |Moderate |manufacturers can gain some benefit over time, never as |

| | |great a benefit as the large competitors within the |

| |R & D for flavors/recipes |industry. Research & Development is specialized within |

| | |the framework of culinary and nutritional knowledge. How|

| |Production processes |do learning curve and experience effects impact |

| | |opportunities or threats for this industry? For example,|

| |Distribution channel needs |if there are minimal learning curve and experience |

| | |effects, would it be easy for a new company to enter this|

| | |industry? |

|Capacity surplus or shortage in the|Capacity shortage is creating the current growth cycle |The immediate increase in the market growth as well as |

|industry |for the industry. |the likely future continued growth pattern creates |

|(Capacity refers to the total | |potential for capacity shortage within the industry. |

|manufacturing output capability for| |Even though larger manufacturers have the ability to |

|the industry. Capacity surplus | |fulfill large orders over greater geographical areas, a |

|would indicate that the industry | |shortage within the industry would create opportunity for|

|has the capability to produce more | |smaller manufacturers, specialty niche manufacturers or |

|products than the market demands.) | |new start up companies trying to enter the market. This |

| | |is currently an opportunity for the industry. When growth|

| | |maturity levels peak the opportunity becomes a threat. |

|Capital requirements and the ease |Ease of entry is moderate. |Government regulations pose a moderate obstacle; the |

|of entry or exit | |barriers instituted by the FDA are geared towards |

| |Capital requirements are minimal to moderate. |regulation of the food industry as well as USDA |

| | |regulations. The two largest obstacles are the national |

| | |competitors ability to control the market and the |

| | |difficulty entering the distribution channels, which are |

| | |necessary to compete within the industry. These facts |

| | |are in the wrong column and do not apply to the |

| | |criterion. Capital requirements are moderate. This is |

| | |a repeated fact. This ease of entry is a threat to the |

| | |market. Focus on the industry. |

|Industry profitability |High profitability within the Specialty Sausage Market. |Manufacturers of high quality specialty items are able to|

| | |capture premium profits initially. If this is a fact, why|

| | |is Giuseppe losing money? That ability to continue |

| | |realizing these premium profits drops off as competitive |

| | |copying of specific items takes effect. The ability to |

| | |capture premium profits is an opportunity to the |

| | |industry. |

|Degree of alliances |Low |There does not seem to be any alliances within the |

| | |manufacturing of sausage industry, although there is a |

| | |moderate trend toward alliances within the distribution |

| | |chain. Distributors ally themselves with certain retail |

| | |and industrial markets, which ensure specific product |

| | |distribution to those retailers. Although there is an |

| | |alliance of sorts which poses a threat to the industry, |

| | |that of the grouping of major grocery outlet to capture |

| | |and retain 50% of the controlled shelf space within these|

| | |stores. |

2. What is competition like and how strong are each of the competitive forces (page 79)?

|Criteria |Facts |What does this mean? |

| | |(Does this make the force strong or weak for the |

| | |industry? What does it mean for the company?) |

|RIVALRY (pages 81-84) | | |

|How many competitors are there in |There are 9 major competitors with ~30 various product |This large number of competitors creates a strong rivalry|

|this industry? |lines in Memphis region. |within the industry. Please state the specific nature of|

| | |the threat or opportunity. |

|What is the relative size of each |Competitors range in size from national (Bryan, Jimmy |This is a strong industry force and is an opportunity for|

|competitor? |Dean, Healthy Choice and Johnsonville) to regional and |the individual company to compete in a range of |

| |local players (Dino’s, King Cotton, John Morrell, and Mr.|geographical scopes, whether small or large. This |

| |Turkey). |provides greater rivalry among companies with competition|

| | |crossing over between all three distinct market sizes. |

| | |You did not address the criterion. How does the relative|

| | |size of each competitor impact rivalry in this industry? |

| | |What threats or opportunities arise from the relative |

| | |size analysis? |

|What is the industry concentration |The case lacked the required sales information to |Can not assess the strength or impact on rivalry, due to |

|ratio (C4)? |determine the industry concentration ratio. (( sales for|lack of information. |

|( Top 4 company’s sales |Top 4 firms divided by Total Ind. Sales) | |

|Industry sales | | |

|What is the product or service |The industry has grown as a whole at a rate of 18.3% from|This is a strong industry force and an opportunity for |

|demand growth rate? |1996 to 1997. |the individual company. With an increased growth rate, |

| | |there is more opportunity for sales volume and potential |

| | |profit making. |

|Are rivals using price cuts or |Yes, competition is centered on price, also included are |Weak industry force and poses a threat to the industry. |

|other competitive weapons to boost |special promotions, advertising, and the variety of | |

|unit volume? |product offerings. Shelf space, competitive interbrand | |

| |pricing, marketing campaign, and use of the | |

| |broker/distributor channel are also key. | |

|Are the customer's switching costs |Yes, non-traditional outlets such as Super Kmart, Super |This is a strong industry force and a threat to |

|low? |Wal-Mart and Sam’s Club offer lower prices with bulk |individual companies. This also means that companies have|

| |purchasing making it difficult for profit with small |to use marketing tactics such as other promotions, focus |

| |sausage producers. These non-traditional outlets allow |on product differentiation, cost, and specials to promote|

| |can easily switch to another product if they don’t like |their products. OK, but you need to address the |

| |the price, causing the sausage industry to switch costs |criterion. |

| |lower to compete. | |

|Are rivals launching moves to |Yes, large companies had the ability to wage significant |This strong industry force and is a threat to the |

|change their market share or |marketing campaigns, which creates a major barrier for |individual company. This also means that there is heavy |

|industry position at the expense of|smaller companies. Another major move is the purchasing |competition revolving around the retail segment of the |

|other industry participants? |of shelf space from retailers. |market. What is the specific threat or opportunity? |

|What are the payoffs for strategic |Payoffs include increased market share, increased sales, |This means that focusing on marketing and strategic moves|

|moves? |possible higher profit margins, and overall company |plays an influencal role in a company’s success. This is |

| |success. |strong industry force and provide and opportunity for the|

| | |individual company. |

|Does it cost more to exit the |Yes. |The industry is growing at a rate greater than 18% in the|

|industry than to continue | |last year. This means that exiting the industry would |

|participation? | |cost more because the company would be losing it’s |

| | |potential for a piece of that growing market. This is |

| | |strong industry force and an opportunity for the |

| | |individual company. This response does not address the |

| | |criterion. |

|How consistent are rivals strategic|(??) Two answers: (1.) Rivals strategic visions and |Overall this is a weak industry force and a threat to the|

|visions, strategic intents, |intents, objectives, strategies, resources, and origins |individual company. |

|objectives, strategies, resources |are very consistent. Large regional and national |Could be seen as being good in that consistency helps |

|and origins? |companies tend to concentrate on fewer varieties and a |companies formulate strategies based on which segment |

| |larger volume of sales per variety, while smaller |they fall into (local, regional, or national). |

| |companies offer a wider variety of specialty sausages in |Could be a disadvantage because inconsistency provides no|

| |smaller volumes. Large companies have much larger |foundation to build strategies from. |

| |production volume and marketing campaigns. Smaller |If the rival’s vision etc. are consistent would it |

| |companies lack these traits. Also, specialty sausage |increase or decrease rivalry? If it increases rivalry |

| |makers maintain their sales volume in their regions and |you have a threat. If it decreases rivalry you have an |

| |large, national competitors are able to generate sales |opportunity. Your response does not address the intent |

| |over a wider geographical area. (2.) Overall the industry|of the question. |

| |shows inconsistencies. | |

|Are strong new entrants acquiring |No |This is a strong industry force and is an opportunity for|

|weaker rivals and launching | |the individual company. |

|well-funded, aggressive moves? | | |

| | | |

|THREAT OF ENTRY |Under the heading of new entrants, your analysis should | |

|(pages 84-87) |lead you to conclude that new entrants are likely or | |

| |unlikely to challenge the existing firms in the industry.| |

| |Therefore, new entrants are likely (threat) or unlikely | |

| |(opportunity) to pose an opportunity or threat to the | |

| |existing firms in the industry. | |

|What economies of scale exist in |Large national companies have the ability to utilize |This is a strong industry force and a threat to the |

|each of the following areas: |economies of scale throughout the value chain making it |individual company (especially a new entrant). |

|Production |difficult for both small and new companies to gain any |This is a huge threat of entry for entering companies in |

|Purchasing |market advantages. This favors large companies and |all of the value chain links. Please re-read the |

|Inbound and outbound logistics |creates difficulty for new entrants. |instructions for this section. See the yellow |

|Advertising | |highlights. The only exception might be customer |

|Financing | |service. In this activity, economies of scale may not |

|Customer service | |affect the small or new entrant. Customer service costs |

|Raw materials | |would not decrease with volume and or size. (?) |

|R&D | | |

|Other steps in the value chain? | | |

|(Please note that synergies across | | |

|the value chains of related | | |

|diversified corporations also | | |

|constitute economies of scale.) | | |

|Cost and resource disadvantages |Disadvantages include: |This is a weak industry force, but is a threat to the |

|independent of size |- Competitors are at the mercy of the market |individual company. |

| |- Costs of raw materials (without vertical integration) | |

| |- Having to use retailers’ distributors, not the | |

| |company’s own | |

|What are the learning curve and |Effects include; problems developing and establishing new|This is a strong industry force and a threat to the |

|experience effects to enter? |accounts, lack of consistency in sales volume, inability |individual company. Without experience and prior |

| |to develop long-term relations with major customers, |knowledge, these effects could be difficult obstacles for|

| |financial instability, establishing broker/distributor |an entering company. |

| |relations, and utilizing production capacity. | |

|Inability to match the technology |Those entering on a small scale can easily match |This is a threat to the industry because any one seeking |

|and specialized know-how of firms |engineering used by small firms in the specialty sausage |to enter can easily acquire the technology and proceed to|

|already in the industry. How |industry. Equipment utilized in the production level is |better it overtaking incumbent producers. New entrants |

|accessible is the industry's |available, affordable, easy to operate and maintainable. |have the potential to copy and improve specialized |

|technology? |The steps taken to produce the sausages can be learnt |know-how that could enable them to gain a competitive |

| |easily for they are simple. |edge and thus be successful. Overall, this is not a |

| | |strong barrier for entry |

|Brand preferences and customer |Brand preferences and customer loyalty is low especially |Loyalty is based on price and other great deals thus |

|loyalty |in the food service segment. Retail customers are easily |brand preference and loyalty are not big entry barriers. |

| |swayed by low prices, product offering and special |This creates an opportunity for entrants who plan to keep|

| |promotions |their costs low hence sell sausages at a low price to |

| | |retailers and the food service industry. Please re-read |

| | |the instructions for this section. |

| | |Loyalty is based on price and reputation….This is a |

| | |threat to the industry |

|What are the capital requirements |Capital requirements to enter the sausage specialty |Since capital required to make sausages is low, any |

|to enter? |industry are low. Some entrants begin from their kitchens|determined person could join the specialty industry on a |

| |and grow to become licensed sausage producers. Then, |small scale. Low capital requirement is a weak barrier |

| |capital is required to lease or purchase equipment and a |for entry which creates an opportunity for entrepreneurs.|

| |place to continue production. Capital ranges from $100 to|Amount required is easy to get. |

| |$200,000 depending on scale of entry. |This is threat to the industry |

|What other resource requirements |Equipment: Sausage processor, freezer, food mixer, etc |Resource requirements are basic. The equipment is easy to|

|are necessary to enter? |Raw material, recipe, utilities, human labor, skills and |get and affordable. Some (skills and knowledge) are |

| |knowledge. |learned and developed naturally. This creates an |

| | |opportunity for the entrant. |

| | |This is threat to the industry |

|What is the access to distribution |There is an established distribution system in place. The|Access to commonly used distribution channel is hard for |

|channels? |easiest but the least used is mail order. Commonly |new entrants. To be accepted by brokers and distributors,|

| |preferred and used by large companies and retailers is |the entrant may be pressurized to offer better margins |

| |broker to distributor to retailer or food service. In |than others and incentives. This may strain their profits|

| |Memphis alone there are approximately 6 brokers, 3 |especially if it goes on for a long time. Access to |

| |company distributors to their store and at least 2 |distribution channels in the sausage industry is a strong|

| |distributors to the food service industry. Small firms |entry barrier. |

| |attempt to bypass the distribution chain. They distribute|Making it an opportunity for the industry Please write in|

| |directly to retailers and food service markets, which is |complete sentences. |

| |difficult. | |

|What regulatory policies apply? |FDA-Nutritional facts to appear on food labels |The sausage specialty industry is heavily regulated by |

| |USDA-Ensure that the raw material used, the facility and |several government agencies. Costs to implement and |

| |equipment adhere to set standards |maintain the requirements are high. Routine inspections |

| |Health department (OSHA)- Emphasize on hygiene and |may result to hefty fines due to a small mistake. |

| |safety. |Government regulations and policies are strong entry |

| | |barriers. Entrants see this as a threat. |

|What tariffs and trade restrictions|N/A |N/A |

|apply? | | |

| | | |

|SUBSTITUTES (pages 87-88) |Under the heading of substitutes, your analysis should | |

| |lead you to conclude that substitutes are likely or | |

| |unlikely to challenge the existing products the industry | |

| |produces. Therefore, substitutes are likely (threat) or | |

| |unlikely (opportunity) to pose an opportunity or threat | |

| |to the existing firms in the industry. | |

|What is the availability of |High. Anything that can be consumed as a snack, for |Sausage substitutes are a threat to the industry. Many |

|attractively priced substitutes? |breakfast, lunch or dinner is a substitute for sausage. |customers consider price while shopping. If dinner |

| |Cereal, (processed meat) cold cuts, unprocessed meat and |sausages happen to cost more than regular beef, the buyer|

| |poultry, vegetables, fruits etc are just a few |will pay for beef. |

| |punctuation | |

|Is the substitute of better, worse,|Subjective based on the personal preference of the buyer |This is a threat to the industry because substitutes are |

|or equal quality? |(insufficient data to more narrowly define). Normally, |readily available to consumers. Address the criterion. |

|Is the substitute of better, worse |food is consumed when people feel hungry. Sausages as | |

|or equal performance? |well as the many substitutes available are all | |

| |satisfactory. | |

|Is the substitute of better, worse |Subjective based on the personal preference of the buyer |This is a threat to the industry because substitutes are |

|or equal nutritional value? |(insufficient data to more narrowly define). Sausages are|readily available to consumers Address the criterion. |

| |the least nutritious when compared to whole meats and | |

| |vegetables. They contain high amounts of sodium and fat, | |

| |which may cause serious health issues when consumed | |

| |excessively. | |

|Is the substitute of better, worse |Subjective based on the personal preference of the buyer |Consumers are already aware that excessive salt is |

|or equal taste? |(insufficient data to more narrowly define). Too much |unbearable. This is a threat to the sausage industry. |

| |sodium in the sausages alters taste. |Address the criterion. |

|Can buyers easily switch to the |Yes. There is no cost for consumers to switch from |This is a very strong threat to the industry. |

|substitutes? |sausages to substitutes. Substitutes are readily | |

| |available. | |

|SUPPLIERS (pages 88-90) | | |

|Is the item or service a commodity |Meat, the primary ingredient in sausages, is a commodity |The commodity status of meat results in an opportunity |

|available on the open market from |and readily available from a large number of suppliers. |for the industry to maintain low cost and high |

|many suppliers who are capable of |  |availability of supplies. |

|filling the order? |  | |

| |  | |

|Are there good substitutes for the |There are a variety of meats available, providing |Availability of substitutes is an opportunity to the |

|product or service to which the |acceptable substitutes for a particular meat product. |industry, while lack of substitutes is a threat. |

|buyers can easily switch? |However, there are no good substitutes available for meat| |

| |in general. | |

|Is the company a major buyer? |Neither Guisseppe’s nor the sausage industry in general |No major influence on their suppliers, so this could be a|

| |is a major buyer of meat. The sausage industry accounts |threat to industry. Not a strong force, since meat is a |

| |for less than 1% of total meat product consumed in the |commodity and readily available from many suppliers. |

| |US. (0.8% = 462 mil lb. / 260 Mil persons * 208.8 | |

| |lb./person) | |

|Does the supplier dominate the |No, there are many suppliers in the Memphis area. |An abundance of suppliers results in an opportunity for |

|industry? (The supplier provides | |the industry to maintain low cost and high availability |

|the industry with an item that | |of supplies. |

|accounts for a sizable fraction of | | |

|the costs of an industry's product | | |

|(or service), is crucial to the | | |

|industry, or significantly affects | | |

|product quality.) | | |

|Does an outside supplier provide a |The only value vertical integration would add to the |While individual firms may use vertical integration to |

|cost advantage over vertical |industry is material cost reductions or improved material|improve image, there are more effective (and less costly)|

|integration? |quality. Since meat is a commodity, both quality and |means available to the specialty sausage industry for |

| |prices are stabilized. |image enhancement. This does not address cost advantage |

| | |relative to vertical integration. Not a significant |

| | |threat to the industry. |

|Does an outside supplier provide |The major suppliers for sausages are all commodities, so |Due to the availability of suppliers, there is |

|other advantages over vertical |there is no significant value added or cost savings in |flexibility to institute just-in-time supplies for |

|integration? |vertical integration. |production, reducing costs of inventory. What is the |

| | |opportunity or threat that arises from your analysis of |

| | |this criterion? |

|What types of working relationships|Supplies need to make sausages: |The suppliers has little or no bargaining power in these |

|exist? Start by listing the types | |relationships, resulting in an opportunity for the |

|of working relationships that |Meat (primary ingredient)– commodity (pure exchange) |industry to maintain low cost and high availability of |

|exist. Then, focus on the |Spices – commodity (pure exchange) |supplies. |

|strategic importance of |Casings – insufficient data | |

|relationships with suppliers in | | |

|this industry. Are these | | |

|relationships of strategic value | | |

|for the competitors in the | | |

|industry? If so, why and how do | | |

|the relationships impact the | | |

|competitive structure and | | |

|environment of the industry? | | |

|What is the relative quality of the|Meat is a commodity, so no significant effect. Any |This is an opportunity to the industry. |

|supplier and his services or |desired quality can be obtained from a variety of | |

|products? |suppliers. | |

|BUYERS (pages 90-92) | | |

|What is the cost of switching? |There is little or no perceived cost to buyers for |This is a threat to the industry because it creates more |

| |switching. There are a variety of competitors and |competition among rivals (strong competitive force). |

| |substitutes | |

|How many buyers are there in this |The ‘eating’ public in the Memphis region (large number |This is not a threat to the industry. A small # of |

|industry? |of small quantity buyers) See my prior comments about |buyers would mean that possibly an individual buyer could|

| |writing in complete sentences. In addition, please |exert competitive force to lower prices. |

| |elaborate on the different types of buyers. | |

|What is the relative size of each |Individuals are buying for personal consumption, so only |Retail & grocery outlets poses a threat to the industry |

|buyer? |a small volume per buyer. Grocery/retail outlets, |due to their superior bargaining position. |

| |particularly larger chains, wield significant bargaining | |

| |power with sausage manufacturers. Please elaborate on | |

| |the relative size for different types of buyers. The | |

| |current response does not incorporate all of the buyers. | |

|What is the buyer's knowledge |High, as they specialize as the manufacturer’s primary |Label product to express the above USDA recommendation of|

|level? |marketing/sales force. They were familiar with their |sausage prepared consumer consumption. I have no idea of|

| |entire product line punctuation |the thought you are trying to convey with this phrase. |

| | |Please state the specific nature of the threat or |

| | |opportunity. |

|Can the buyers threaten the |The cost and effort required for individual buyers to |Large ‘chain’ grocery outlets pose a threat to the |

|industry with backward integration?|backward integrate are prohibitive. Larger retail |sausage industry by threat of entry and tying up current |

| |grocery outlets within the Memphis region have the |distribution channels available to the industry. This |

| |ability to backward integrate into the sausage-making |response does not address the criterion. |

| |industry. | |

|Are the industry's products |Yes. Buyers can hold off on purchases at their own |Aware of shifts in consumer product judgment. The |

|discretionary purchases? |discretion. Customers can put off on purchases until |company should market product attributes verses those of |

| |their ready. (i.e.) after prices decrees or substitute |their competitors to customers in an effort to maintain |

| |for another meat product. Please write in coherent, |brand loyalty and continued purchases. While this |

| |whole sentences. |recommendation may be applicable, it is speculative in |

| | |nature, does not address the criterion, and does not |

| | |state the specific nature of the opportunity or threat. |

3. What is (and how are they) causing the industry's competitive structure and business environment to change (page 93)?

Please refer to the Cannondale1 example on the web site for good examples of appropriate analysis for this question.

|Factors |Industry competitive structure |Industry business environment |Strategic implications |

|(pages 94-100) |This factor is supposed to capture how the drivers of |This factor is supposed to capture how the drivers of | |

| |change are altering the industry's competitive |change are altering the industry's business | |

| |structure. |environment. | |

| |The competitive structure of an industry entails the | | |

| |number of competitors and their competitive | | |

| |relationships. For example, an industry entering | | |

| |maturity causes fewer, larger competitors. This | | |

| |affects the industry's structural arrangement between | | |

| |rivals, buyers and suppliers. When approaching | | |

| |maturity or when in decline, the industry's business | | |

| |environment will create intense rivalry for a | | |

| |diminishing market. | | |

|Internet and new e-commerce |The internet radically changes the industry’s |The internet provides buyers access to increased |The internet poses a strong threat of |

|opportunities |competitive structure by expanding exposure to the |information regarding products and firms. This |cross-market competition and of increasing|

| |number of available buyers. |increased knowledge increases the buyers bargaining |the buyers bargaining position. |

| |Please remember the discussion we had in class about |position. | |

| |structure. Structure deals with the organizations that| | |

| |comprise the industry (rivals, suppliers and buyers) |Environment deals with creating opportunities and | |

| |and the relationships. Your task in this question is |threats for the industry. In which ways do each of the| |

| |to state how the criterion is either creating new |criterion impact the industry’s competitive | |

| |entities or changing the relationships between the |environment? Please try this question again. This | |

| |existing entities. Please try this question again. |comment applies to the entire question. | |

| |This comment applies to the entire question. | | |

|Increasing globalization of the |This is not a major factor in the industry’s |This is not a major factor. Currently, there are 3 |Not a major factor in the industry. |

|industry |competitive structure. There are no major players on a|national competitors out of 25-30 in the Memphis area. | |

| |global scale at this time. However, there are 3 | | |

| |national competitors and numerous local/regional | | |

| |competitors | | |

|Long term industry growth rate |The impact on the industry’s competitive structure is |More demand for product (based on growth) creates the |Large long term growth creates a threat of|

|The US specialty sausage industry |the increase of rivals due to new entrants into the |threat of new entrants into the industry. |new entrants, particularly with the low |

|experienced significant growth in the |industry. | |entry barriers in the specialty sausage |

|latter 1990’s. From 1996, the | | |industry. |

|industry grew 18.3%. | | | |

|Who buys the product and how do they |The public’s perception of the specialty sausage is |The public’s perception of the specialty sausage is |The changes in the use of specialty |

|use it |shifting from primarily a breakfast food to a foodstuff|shifting from primarily a breakfast food to a foodstuff|sausages provide the opportunity to open |

| |for all meals. In response to this trend, the food |for all meals. This fundamental change in the business|new market segments for the industry. |

|The primary buyers are the general |service industry is becoming a more significant player |environment creates the opportunity of new market |The food service industry’s drive to |

|(sausage-eating) public, retailers |in the competitive structure, driving the industry in |segments for the industry. |rapidly adapt to this changing trend |

|(supermarkets, butcher shops, etc.) |two distinct areas: | |threatens the specialty sausage industry |

|and the food service industry |High-quality/taste ‘branded’ specialty sausage in the | |by applying immediate competitive pressure|

|(restaurants, hospitals, etc.) in the |restaurant/casino/hotel segment | |to adapt product lines & marketing |

|Memphis region and the casinos/hotels |Low-cost, average quality/taste specialty sausage in | |strategies to meet the growth in demand or|

|in the adjacent Tunica area. |the ‘institution’ market segment (hospitals, nursing | |lose market share to substitutes. |

| |homes, etc.) | | |

|Product innovation |New product can be rapidly replicated by competitors, |This is a major factor to the industry’s business |This is a strong threat, requiring product|

| |minimizing any impact on industry’s competitive |environment. Growing interest in ethnic foods is |differentiation to attract/maintain |

| |structure. |inspiring a variety of new specialty sausages flavors |customers, driving up product development |

| | |among rivals. The effect here is to differentiate |& marketing costs. |

| | |products along ethnic themes. | |

|Technological change |Refer to product innovations and the internet sections |Refer to product innovations and the internet sections |Refer to product innovations and the |

| |of question 3, as these are the major technological |of question 3, as these are the major technological |internet sections of question 3, as these |

| |factors for this industry. |factors for this industry. |are the major technological factors for |

| | | |this industry. |

|Marketing innovation |Distributors use marketing tools to study and collect |Retailers control shelf space, thereby controlling |This is a threat, as distributors wield |

| |information on the end user. Manufacturers can run |demand. They obtain their specialty sausages primarily|significant influence in this arena. |

| |large retail (or wholesale) promotions to increase |through distributors. Success here is dependent upon |Creating distribution agreements with |

| |demand for their products. |having a distributor carry your product. |distributors may reduce prices, forcing |

| | |The food service industry controls menus and |either reduced profits or cost reduction |

| | |ingredients, thereby controlling demand. Restaurants |strategies. |

| | |may be willing to pay premium prices for a high-quality| |

| | |product, but institutions are more focused on average | |

| | |quality & below-average cost. | |

|Entry of major firms |No major firms entering the industry at this time. |No major firms entering the industry at this time. |This is an opportunity; as no additional |

| |Therefore, no major effect on the industry’s |Therefore, no major effect on the business’s |strategies will need to be formulated to |

| |competitive structure. |competitive structure. |protect against additional large entrants.|

|Exit of major firms |No major firms leaving the industry at this time. |No major firms entering the industry at this time. |This is not an immediate threat, though |

| |Given the growth and acceptable profitability currently|Therefore, no major effect on the business’s |prolonged industry growth will necessitate|

| |in the industry, this is not a likely event. |competitive structure. Based on the industry’s growth |the need for strategic planning to dealing|

| | |rate, this may change. |with the entry of major firms in the |

| | | |future. |

|Diffusion of technical know-how |This is not a major factor of change at this time. |Since the know-how is out there, this is not a barrier |This poses a threat of new entrants, since|

| |Technological know-how is thoroughly diffused |to entry into the industry |anyone could obtain the necessary know-how|

| |throughout the industry. Since the know-how is out | |to enter the industry |

| |there, this is not a barrier to entry into the industry| | |

|Cost and efficiency |The specialty sausage industry focuses on a |The specialty sausage industry focuses on a |This is not a major threat to the |

| |differentiated product, and therefore does not focus on|differentiated product, and therefore does not focus on|industry. |

| |low cost. Also, due to the commodity nature of the |low cost. Also, due to the commodity nature of the | |

| |supplies need to make specialty sausage, costs of |supplies need to make specialty sausage, costs of | |

| |supplies are fairly stable. Cost & efficiency do not |supplies are fairly stable. Cost & efficiency do not | |

| |significantly effect the industry’s competitive |significantly effect the business environment. | |

| |structure. | | |

|Growing buyer preferences for |This is a major factor in the industry competitive |Nationally, there is a growing interest in ethnic |The interest in ethnic foods provides an |

|differentiated products instead of a |structure. Nationally, there is a growing interest in |specialty foods. The popular flavors and their growth |opportunity to open new market segments |

|commodity product |ethnic specialty foods, changing the demographics (and |rates are shown below: |for the industry. |

| |size) of the specialty sausage buying public. |Flavor Market % % Growth |The two primary threats associated with |

| | |Smoked 45.7% 15.6% |this opportunity are possible new entrants|

| | |Polish 21.3% 24% |attracted to these new market segments and|

| | |Italian 4.3% 31.2% |competitive pressures to adapt product |

| | |Hot flavor 7.7% No info |lines & marketing strategies to met the |

| | | |changing customer preferences. Additional|

| | | |product development & marketing costs are |

| | | |incurred as a result. The effect is that |

| | | |companies must target these growing |

| | | |interests to maintain/grow their customer |

| | | |base. |

|Regulatory and government policy |This is a minor factor in the industry’s competitive |There is increased regulatory pressure for accurate |Current regulatory and government policy |

|changes |structure. Some barriers present for new competitors |labeling of products. |present two minor threats to the industry:|

| |to meet government regulations, but not significant (as| |1) new companies could enter the market in|

| |evidenced by Guisseppe’s entry into the industry). New | |a relatively short period of time and 2) |

| |companies could enter the market in a relatively short | |labeling, combined with consumer |

| |period of time. | |preferences for lower fat products, would |

| | | |highlight the high fat content of most |

| | | |specialty sausage. |

|Societal concerns, attitudes and |Generally people are focused on eating healthier foods.|1998 survey showed the average time for meal prep was |The increase in overall available |

|lifestyle changes |Typical specialty sausages have a high fat content. In|decreasing. 70% of households spend no more than 45 |suppliers is an opportunity to the |

| |response to this changing trend, the industry is using |minutes in preparing a meal. There was insufficient |industry’s competitive structure, keeping |

| |lower fat alternatives to the traditional sausage |information available in the case to determine how |costs of supplies relatively stable. The |

| |ingredients, introducing a new set of suppliers |specialty sausages rate with respect to preparation |increased importance of shorter |

| |(chicken, turkey, etc.) to the competitive structure. |time. In general, lower preparation times create |preparation times among consumers creates |

| |These common substitutes for pork & beef are |greater perceived customer value, so this poses a |threats within the industry’s business |

| |commodities, increasing the overall # of suppliers |threat to the industry of substitutes that better meet |environment. |

| |available to the industry. |this developing customer need. | |

|Reductions in uncertainty and risk |Supply channels are plentiful and numerous, so costs | |Centralization of distribution is a |

| |for raw materials are kept low/stable by competitive | |threat, as centralization of distribution |

| |forces. | |for the retail market applies competitive |

| |Distribution channels for retail customers are becoming| |pressure to keep prices low. |

| |more centralized, reducing the overall # of buyers and | |Availability of suppliers is an |

| |therefore changing the industry’s competitive | |opportunity, as the competitive pressures |

| |structure. Increased bargaining power on the part of | |are on suppliers to keep costs of raw |

| |the buyers due to centralization threatens the | |materials relatively stable. There is an |

| |industry. | |opportunity to further reduce costs by |

| | | |forming strategic alliances with certain |

| | | |suppliers, hence driving down costs |

| | | |further. |

4. Which companies are in the strongest/weakest positions (page100)?

Companies in price rage

High Johnsville, Bryan, Giuseppe’s (high price products)

Medium Jimmy Dean, Mr Turkey, Healthy Choice,

Giuseppe’s (medium price products)

Low King Cotton, Bryan, John Morrell (low prices products)

narrow broad

Market scope

Based on the graph, Bryan and Giuseppe’s are in better position than others due to the price range they are covering. Bryan sells

high and low price sausages, Giuseppe’s is covering medium and high, while others are concentrate in only one range of

prices.

High 1,4,7 Companies in market

1 Johnsville

2 King Cotton

3 Jimmy Dean

4 Bryan

Medium 2,3,4,8 5 John Morrell

6 Mr. Turkey

7 Healthy Choice

8 Giuseppe’s

Low 6,7,8

Narrow Broad

Market Scope

Based on the graph, stronger companies are those in medium fat content range. The products have a medium standard in terms of price and fat content, what might attract most consumers. Those companies in high and low fat content are in the extreme positions and the prices are too high. However, between these last two companies, the ones in low fat content are in a stronger position due to the fat content. Even though prices are high, these companies are offering healthier products.

5. What strategic moves are rivals likely to make next (page103)?

Refer to Table 3.3 on page 105.

|List the |What is the |What is their |What is their market |What is their |What is their |What is their |What does this mean in terms of |

|competitors |competitive |strategic intent |share objective |competitive position |strategic posture |competitive strategy |their most likely moves? |

| |scope of each |(dominant leader, |(aggressive expansion,|(getting stronger, |(offensive, defensive,|(low cost, | |

| |(local, |overtake the |expansion via internal|well entrenched, stuck|both)? |differentiation, broad | |

| |regional, |leader, top 5, move|growth, expand by |in the middle, going | |or narrow, best value)? | |

| |national, |up a position, |acquisition, hold |after different market| | | |

| |multi-country, |maintain position, |present share, give up|position, losing | | | |

| |or global)? |survive)? |share)? |ground, retrenching)? | | | |

|Johnsonville |National |Insufficient |Insufficient |Insufficient |Insufficient |Best value |Insufficient information in the |

| | |information |information available |information available |information available | |case. Would require some |

| | |available in the |in the case. Would |in the case. Would |in the case. Would | |information on each company’s |

| | |case. Would |require visions & |require visions & |require visions & | |business strategy. |

| | |require visions & |mission statements and|mission statements and|mission statements and| | |

| | |mission statements |relative sales for the|relative sales for the|relative sales for the| | |

| | |and relative sales |industry |industry |industry | | |

| | |for the industry | | | | | |

|Dino’s |Regional | | | | |Differentiation | |

|King Cotton |Regional | | | | |Low cost | |

|Jimmy Dean |National | | | | |Best value | |

|Bryan |National | | | | |Differentiation | |

|John Morrell |Regional | | | | |Low cost | |

|Mr. Turkey |Regional | | | | |Differentiation | |

|Healthy Choice |National | | | | |Differentiation w/narrow| |

| | | | | | |product line | |

6. What are the key factors for competitive success (in this industry) (page 106)?

How does each competitor fare on each success factor? To use this tool, start by determining which of the KSFs apply. Then provide your justification for choosing these KSFs. Generally, there are less than ten (10) KSFs applicable to an industry. Then assess each of the industry competitor's capabilities for the KSF. Please note I provide space for three competitors. You should add the number of columns necessary to evaluate all of the competitors in an industry. You should also add industry specific KSFs when they apply. Refer to Table 3.4 on page 107.

|Giusseppe’s |What is their capability for this factor? |What does this mean? |

|Manufacturing quality: Quality is essential to people |Superior. “Giusseppe’s prides itself in producing high quality|Quality manufacturing is an important aspect for Giuseppe. Its |

|who buy specialty products |premium sausages. Their strategy involves purchasing only top |high end customers seek high quality products. |

| |of the line ingredients, requiring employees to take | |

| |precautions when producing the various types of sausages and | |

| |insisting that every aspect of production process follow a | |

| |specific set of procedures.” Pg. 6 | |

|Manufacturing flexibility: Specialty sausage industry |High. Giusseppe’s is a local, small producer. Its size enables |In case of any changes in production e.g. introduction of new |

|in Memphis caters to a wide range of customers with |it to produce a wide variety of specialty sausages in small |types and variety, Giusseppe’s has the capability to |

|different tastes. Ability to change and adapt |volumes |accommodate the change. Therefore, Giusseppe’s is flexible |

|production to satisfy them is a plus. | |enough to produce a variety of products. |

|Distribution Network strength: - A strong network of |Medium. Outbound Logistic - At the present time, the majority |Guisseppe's is a small producer who is yet to form |

|suppliers, -brokers and distributors. |of Guisseppe's sales did not originate from using the |relationships with dealers. By passing dealers increases their |

|-In Memphis, meat products are normally marketed and |broker/distributor channel” p.11 |profit margins by avoiding markups and surcharges along the |

|distributed to the retailer/end user by a broker/ |In bound Logistic- Suppliers are many and deliver on a weekly |way. On the other hand, Guisseppe’s potential to increase |

|distributor. Producers who utilize this channel gain |basis. |market share in Memphis is dependent on achieving a strong |

|access to many customers. | |network. |

|Ample space on retailer's shelves: |Low. Giuseppe sells to at least 10 stores out of 71 in Memphis.|“Giuseppe’s had significant sales potential in major |

|-Supermarkets have many customers. A conspicuous |Distributor/broker channels are not fully established. |supermarket chains, particularly in the large up scale markets |

|product is usually selected. Also “Shelf space and | |located in the more affluent geographic areas of Memphis. If |

|…were keys to success in this market”. P 4 | |Giueseppe decided to market its sausages to these markets, it |

| | |would have to deal with their distributors”. P 10 |

|Speed of distribution: How fast the supplies and end |“ The meats used in the sausages were ordered weekly…Both |Giuseppee Original Sausage company knows the importance of |

|products get to their users is important due to the |freezing and immediate shipment ensured the freshness of the |speedy distribution. Chances of sausage contamination are low. |

|nature of the product involved- meat. This strength |sausage.” p.7-9 | |

|is partly dependent on the networks established. | | |

|Breadth of product line and selection: A producer’s |Excellent. “Giueseppe’s product line consisted of more than 80 |They have the ability to attract, serve and satisfy their |

|ability to have a broad product line and selection is |different sausage-related products”. P 7 |target customers. This is the company’s differentiation point. |

|a factor to differentiation. | | |

|Attractive styling/packaging: Final presentation of a |Good Vacuum sealed packages for individual customers; plastic |Giuseppe’s packs to suit consumer’s expectations (nothing |

|specialty product is important to the buyers. |wrapped and boxed for food service customers |fancy). The vacuum sealing ensures freshness |

|Quality control know-how: This is important in the |Excellent. “…Strategy involved purchasing top of the line |They have set quality control procedures that contribute to |

|meat manufacturing process. Products are thoroughly |ingredients, requiring employees to take extra precautions when|exceptional production and customer satisfaction. |

|assessed for freshness and distinctive taste. |producing the various types of sausage and insisting that every| |

| |aspect of the production process follows a specific set of | |

| |procedures he had personally developed”. Pg.7 | |

|Jimmy Dean |What is their capability for this factor? |What does this mean? |

|Manufacturing quality: Quality is essential to people |Average. |Quality for the Jimmy Dean’s sausage is just right for their |

|who buy specialty products |Jimmy Dean’s sausages are vacuum-sealed to maintain freshness. |low-end customers. They appeal more to cost conscious consumers|

| |On the other hand they do not have instructions, sell by date | |

| |on the package and are high in fat; 15g. | |

|Manufacturing flexibility: Specialty sausage industry |Medium |Large companies have the resources to be flexible especially in|

|in Memphis caters to a wide range of customers with |Jimmy Dean is a national producer who manufactures fewer |increasing or decreasing capacity. However due to their size |

|different tastes. Ability to change and adapt |varieties in large volume. |and set procedures, they tend to be less flexible when it comes|

|production to satisfy them is a plus. | |to introducing new sausage types. |

|Distribution Network strength: - A strong network of |Very good. Jimmy Dean is a large regional and national company |A strong network of both suppliers and Distributors/brokers |

|suppliers, -brokers and distributors. |with a strong supplier and distributor/net work. |allows Jimmy Dean to increase market share by reaching many |

|-In Memphis, meat products are normally marketed and | |customers. |

|distributed to the retailer/end user by a broker/ | | |

|distributor. Producers who utilize this channel gain | | |

|access to many customers. | | |

|Ample space on retailer's shelves: |High. Jimmy Dean is a large producer who utilizes the |Using the distribution channel gets products ample space on |

|-Supermarkets have many customers. A conspicuous |distribution channel to get their sausages out to consumers. |retailers’ shelves in Memphis. This will helps increase their |

|product is usually selected. Also “Shelf space and |They therefore get ample shelf space |sales and market share. |

|…were keys to success in this market”. P 4 | | |

|Speed of distribution: How fast the supplies and end |High. |Products are fresh. Chances of contamination are low. |

|products get to their users is important due to the |Established distribution channels assured fast distribution. | |

|nature of the product involved- meat. This strength | | |

|is partly dependent on the networks established. | | |

|Breadth of product line and selection: A producer’s |Poor. |Jimmy Dean is a regional national company with fewer varieties.|

|ability to have a broad product line and selection is |One listed product |This satisfies its customer base. |

|a factor to differentiation. | | |

|Attractive styling/packaging: Final presentation of a |Good Vacuum sealing |Freshness of the product is ensured. Vacuum-sealed products are|

|specialty product is important to the buyers. | |attractive. |

|Quality control know-how: This is important in the | | |

|meat manufacturing process. Products are thoroughly | | |

|assessed for freshness and distinctive taste. | | |

|Bryan |What is their capability for this factor? |What does this mean? |

|Manufacturing quality: Quality is essential to people |Average. |Bryan is national producer who caters to a low end and Broad |

|who buy specialty products |Similar to Jimmy Dean; They are vacuum-sealed. They are high in|market. |

| |fat – between 16g and 22g, no sell by date and instructions on | |

| |package. | |

|Manufacturing flexibility: Specialty sausage industry |Same as Jimmy Dean |Same as Jimmy Dean |

|in Memphis caters to a wide range of customers with | | |

|different tastes. Ability to change and adapt | | |

|production to satisfy them is a plus. | | |

|Distribution Network strength: - A strong network of |Same as Jimmy Dean |Same as Jimmy Dean |

|suppliers, -brokers and distributors. | | |

|-In Memphis, meat products are normally marketed and | | |

|distributed to the retailer/end user by a broker/ | | |

|distributor. Producers who utilize this channel gain | | |

|access to many customers. | | |

|Ample space on retailer's shelves: |Same as Jimmy Dean |Same as Jimmy Dean |

|-Supermarkets have many customers. A conspicuous | | |

|product is usually selected. Also “Shelf space and | | |

|…were keys to success in this market”. P 4 | | |

|Speed of distribution: How fast the supplies and end |Same as Jimmy Dean |Same as Jimmy Dean |

|products get to their users is important due to the | | |

|nature of the product involved- meat. This strength | | |

|is partly dependent on the networks established. | | |

|Breadth of product line and selection: A producer’s |Good |Same as Jimmy Dean |

|ability to have a broad product line and selection is |5 listed products | |

|a factor to differentiation. | | |

|Attractive styling/packaging: Final presentation of a |Good Vacuum sealing |Freshness of the product is ensured. Vacuum-sealed products are|

|specialty product is important to the buyers. | |attractive. |

|Quality control know-how: This is important in the | | |

|meat manufacturing process. Products are thoroughly | | |

|assessed for freshness and distinctive taste. | | |

|Johnsonville |What is their capability for this factor? |What does this mean? |

|Manufacturing quality: Quality is essential to people |Average. |They seem to focus on buyers who value taste thus produce |

|who buy specialty products |Johnsonville produces sausages that are high in fat –25g. They |sausages that contain a lot of fat. E.g. restaurants. |

| |are packaged in trays which have instructions and no sell by | |

| |date | |

|Manufacturing flexibility: Specialty sausage industry |Same as Jimmy Dean |Same as Jimmy Dean |

|in Memphis caters to a wide range of customers with | | |

|different tastes. Ability to change and adapt | | |

|production to satisfy them is a plus. | | |

|Distribution Network strength: - A strong network of |Same as Jimmy Dean |Same as Jimmy Dean |

|suppliers, -brokers and distributors. | | |

|-In Memphis, meat products are normally marketed and | | |

|distributed to the retailer/end user by a broker/ | | |

|distributor. Producers who utilize this channel gain | | |

|access to many customers. | | |

|Ample space on retailer's shelves: |Same as Jimmy Dean |Same as Jimmy Dean |

|-Supermarkets have many customers. A conspicuous | | |

|product is usually selected. Also “Shelf space and | | |

|…were keys to success in this market”. P 4 | | |

|Speed of distribution: How fast the supplies and end |Same as Jimmy Dean |Same as Jimmy Dean |

|products get to their users is important due to the | | |

|nature of the product involved- meat. This strength | | |

|is partly dependent on the networks established. | | |

|Breadth of product line and selection: A producer’s |Good |Same as Jimmy Dean |

|ability to have a broad product line and selection is |3 listed products | |

|a factor to differentiation. | | |

|Attractive styling/packaging: Final presentation of a |Good |Products packed in trays are easier to open than vacuum- |

|specialty product is important to the buyers. |Tray |sealed. They are also attractive. |

|Quality control know-how: This is important in the | | |

|meat manufacturing process. Products are thoroughly | | |

|assessed for freshness and distinctive taste. | | |

7. Is this industry attractive and what are its prospects for above-average profitability (page 108)?

|Criteria |Facts |What does it mean? |

|Industry growth potential |Good. Based on the increased sales it is a growing industry. |Strong growth allows increase in customer base, creation of |

| | |specialty niche markets, and eventual expansion of market |

| | |share. |

|Does competition permit adequate profit potential? |Yes. Demand is high in this growing market. |Demand exceeding supply creates the ability to charge higher |

| | |prices for product, allowing for above-par profits. |

|Does competition lead to stronger or weaker forces? |Strong force, primarily due to the high availability of |Strong competition between existing rivals as well as the |

| |substitutes |threat of new entrants, high presence of attractive |

| | |substitutes, and moderate buyer bargaining position creates a |

| | |strong competitive environment for the industry. Do these |

| | |factors make the industry more or less attractive? |

|Will the prevailing driving forces positively or negatively |Positively. Threats through product innovations, life style |We will have to react to such driving forces, as we are more |

|impact profit potential? |changes. |flexible to changes. Do these factors make the industry more |

| |Internet |or less attractive? |

| |Product innovation | |

| |Increased buyer preference for a differentiated product. | |

| |Societal/lifestyle changes | |

|What is the company's relative competitive potential in this |Guisseppe’s potential is good competitively. Our larger rivals|Guisseppe’s focuses on a niche market with small competitors |

|industry? |focus on large volume sales on a restricted product line rather|who produce high quality sausage products. The company |

| |than quality and taste. |exploits its innovative quality products to the |

| | |general/affluent markets. Guisseppe’s has the opportunity to |

| | |increase sales volume by selling a more differentiated product |

| | |with a higher price structure. |

|What is the company's ability to capitalize on its |Small production capacity with flexibility to change production|Giuseppe’s has the flexibility to adjust product line to shifts|

|competitor's weaknesses? |schedules to changing sales. |in customer preferences more quickly than its larger rivals. |

| | |Do these factors make the industry more or less attractive? |

|Can the company defend against or is it insulated from the |Here are the major unattractive elements of the industry: |The only defense against substitutes is creating a perceived |

|factors that make this industry unattractive? |Substitutes are readily available & no cost of switching |cost of switching among customers. Guisseppe’s is focussing on|

| |Threat of entry |branding a highly differentiated, quality product. |

| |Access to outbound distribution channels |Threat of entry – This is an ongoing challenge to all members |

| |Access to shelf space |of the industry. |

| | |Access to outbound distribution channels – Guisseppe’s has |

| | |failed to utilize the available distribution channels (brokers |

| | |& distributors) |

| | |Access to shelf space – due to the expensive nature of this |

| | |challenge, Guisseppe’s is not capable of immediately addressing|

| | |this challenge. |

| | | |

| | |Do these factors make the industry more or less attractive? |

|How well does the company's capabilities match the industry's|The following KSFs do not match up well Guisseppe’s |Ineffective use of available distribution channels. The costs |

|KSFs? |capabilities: |involved with procuring premium shelf space are prohibitive. |

| |Ample shelf space, due to the expensive nature of procuring |Do these factors make the industry more or less attractive? |

| |premium shelf space. | |

| |Distribution channels | |

|What are the future uncertainties and risks for this |The major uncertainties are threat of entry and social concerns|Significant threat of entry due to growth in the industry. |

|industry? |regarding health issues. |Societal changes force product innovation upon the industry. |

| | |Do these factors make the industry more or less attractive? |

|What is the severity of the issue(s) or problem(s) facing |List issues & severity. |Need to take strategic actions to counter new entrants into the|

|this industry? |threat of entry due to growth in industry moderate |industry from eroding current market share. |

| |social concerns regarding health issues moderate & growing |Need to focus on new product lines to address this growing need|

| |substitutes severe |Building brand loyalty and product differentiation strategies |

| | |to counter the impact of substitutes. Do these factors make |

| | |the industry more or less attractive? |

|If a corporation, will continued participation in this |Guisseppe’s does not currently participate in more than one |Not an immediate concern for Guisseppe’s. |

|industry positively or negatively impact its ability to |industry. | |

|compete in other industries? | | |

Now go to the summary section of the case analysis outline and complete the summary of external factors matrix. You should be thinking in terms of opportunities and threats the external environment presents to the industry company under analysis.

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Prices

Fat content

Please address rivalry in the industry in the context of how rivalry creates or drives opportunities or threats in the industry. Please focus on the industry and not a single company. Please re-read the general instructions at the top of the worksheet. This comment applies to the entire rivalry section.

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