Introduction
Pennycook Power Boats Company was founded by two brothers, who were also engineers of yacht in Canada. Both brothers started the company with a CA$2 million amount borrowed from family and friends, and formed a company named Pennycook Power Boats to manufacture next generation water ski boats. The company was successful in manufacturing the ski boats and it successfully attracted many customers from all over the world.
In 2010, company introduced its 5th generation power ski boats into the market, and it was soldthroughout the world with the help of dealers anddistributors.Many products of the company were also placed in variousshowrooms in North Carolina and Texas. The company’s product price range was between$80,000 and $100,000. Many clients were satisfied with the products of the company and many professionals also encouraged the products.
The 5th generation power ski boats were well known among the dealers, clients, and professionals for two reasons.First, that theirdesign was very attractive, and second that theyhad high power relative to the weight of boat.These two features of the boat provided a competitive advantage to the company, and differentiated its products from the industry peers. Furthermore, company has invested huge amount in the capital expenditure to support development of its new wakeboard series of boats in 2017.
The company’smanufacturing team did not realize that parts used in the engines were not appropriate. As after a successful launch of the Wakeboard series into the market,the company’s reputation in the market was threatened when the Wakeboard series’ engines completely collapsed and the company had to get back their products from their clients and distributors of North Carolina and Texas.
Many clients of the company stepped back from their orders, and the company had to get back the products from clients and dealers anddiscontinueits products in the market. The resulted in the market turning towards Pennycook’s competitor Darwin Ski boats. On the other hand, company was also considering to be acquired by Cochrane Boatworks (Cochrane) as the future growth prospects were lower for the company in the given situation.Therefore,it had become a dilemma for the company that should it go with the status Quo or should itbe acquired byCochrane Boatworks.
Pennycook Power Boats Considering an Offer to Sell the Firm Harvard Case Solution & Analysis
Situation of the Pennycook
Pennycook had been one of the most reputable manufacturers of power ski boats in the market, and its products were given priority over other products due to their beautiful sleek design, and the power of the boats was higher relative to their weight. But, due to engine failure of the Wakeboard series launched in 2017, reputation of the company just collapsed, and dealers anddistributors stepped back from buying boats, and many clients also cancelled their orders.
Company is in theworst situation because on one side it has lost many relations including dealers, distributors, and clients, and on the other hand both co-owners of the company who are also brothers, they are looking for the right successor of the company whocan continue their business in their absence. So, they have two options either they should continue their business withintheir current operational capacity, and or they should sell the firm to Cochrane and choose them as the successor of Pennycook............
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