Itroduction:
Pleasure Craft was formed more than forty years ago, the main source of income of the company is the manufacturing of snowmobiles and personal craft. The initial days of the company proves to be very profitable, the revenues grows at a very good rate, however, the directors are now feels that the industry is going towards the maturity with little opportunities for the growth.
The profit margins are also declining due to the increased competition and lower prospects of growth. Not only the financial factors of the industry are deteriorating but the non-financial factors are also seems to be very adverse of the industry as well. The competitive advantage is very difficult to obtain due to various unfavorable aspects of the industry for the Pleasure Craft. On the other hand, the overall business strategies of the Pleasure Craft appears to be positive, the company and its management have managed to gain sustainable competitive advantage in the past.
In order to cope with the declining profit margins and increased competitive, the senior management is considering to undertake the production of some new products which are different from the current products. The senior management have identified two new products which can result in higher profit margins and sustainable competitive advantage of Pleasure Craft for a long period. Both the projects i.e. front end loaders and outboard motors appears to be financially viable and operationally feasible, both the projects have positive net present value and IRR is also exceeding the cost of capital. However, the outboard motor project appears to be more financially lucrative as its NPV and IRR are higher as compare to the NPV and IRR of front end loader.
Pleasure Craft Inc Harvard Case Solution & Analysis
Problem Statement:
Despite the positive outlook of the Canadian economy and good reputation and business strategies of Pleasure Craft, the future of the company and the industry appears to be very uncertain. It is highly likely that the profits and revenues will decline substantially due to the poor future financial aspects of the industry. The government and regulatory authorities are limiting the operations and sales of the products of Pleasure Craft due to the high carbon emission and poor consequences of the products of the company.
Industry analysis:
Bargaining power of Customers:
The bargaining power of customers appears to be high, there are many reasons which leads to the high bargaining power of the customers. The competition within the industry has increased drastically in the recent past which enables the customers to switch to different suppliers of the snowmobiles and personal craft thus, decreasing the switching cost from one supplier to another.
Furthermore, the competition from the oversees suppliers has also increased considerably which also affects the local market of the Pleasure Craft. In addition to this, the main customers of Pleasure Craft i.e. municipal departments such as military of Canada are manufacturing these specialized snowmobiles on their own in order to reduce the dependency on the civil suppliers which is also increasing their power to bargain........
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