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The Solar Feeder Case Study

Essay by   •  January 20, 2011  •  1,741 Words (7 Pages)  •  2,945 Views

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Identification

Ed Welsh and Bo Haeberle discovered an idea of the solar feeder. After years of developing, the product became very successful. It even won several prizes like the best new product in the Bird Watch America trade show, the national birding convention. After this, Ed and Bo decided to sell their final product under new established company Squirrel Defense, Inc. They opened a small shop in Greensboro and begin the production of the solar feeder so they could take orders for the demanded product. Owners spent too much money and time on developing the product and now, their expectations are high because they have an advantage of unique product and even the investors showed interest in the company.

After time, initial enthusiasm passed away, the owners found out that the perfect product is not enough for successful business. There were problems with cash flow, production and unsatisfied needs. While owners were spending time with developing product, they forgot to do a proper market research, didn’t set sufficient strategy, were not able to set the competitive price, did not do proper advertising and forgot about target group. Still, there are new problems Squirrel Defense, Inc. should solve like the last one with investor who requires business plan which actually had never existed.

To solve all visible and core problems, company is facing, it firstly has to identify all of them and mainly find the causes. After this, company should develop a business plan with all its appropriateness вЂ" mission, vision, strategic and financial objectives, business, functional and operating strategies and marketing, production and financial plans. Without these, company is not possible to control its sales, efficiency, costs, flow of money and the most important to attract the investor which is for company the most crucial issue now.

Analysis and Evaluation

Analysis showed several financial problems. After looking at Balance Sheets, it showed that company has very high long term debt. The long-term debt-to-equity ratio (the proportion of equity and debt the company used to finance its assets) вЂ" 95.98 proved it. The negative financial situation is supported also with low net sales (gross profit margin is 59.49%). Moreover, the costs are too high. Costs for labor are high but necessary. On the other hand, it should be reconsidered because they are not generating enough products and are not able to fulfill the demand. Other cost, but not necessary, are those for advertising. They are too high with weak results. Another problem is the price of the product; it is too high from $280 to $300 which is with comparison with concurrency too high. Squirrel Defense Inc. also spent too much money and time of developing the product and concentrating on product itself instead of concentrating on starting up business and limited financial resources. This way, company made a high debt. Overall, financial situation of the company is not positive which could lead to more serious financial problems and even to bankruptcy.

Secondly, there is problem with marketing. Company is not able to advertise its product properly. In spite of the great beginning with winning several prizes, it did not continue successfully. Squirrel Defense Inc. uses the traditional bird and garden stores, website and flyers for promotion which did not show as the most effective way. Advert in garden and bird stores is quite effective but it adverts only to those people who are almost sure of the sale and there is no need to persuade them so much. The perfect advert is on the webpage. There is a video showing how the feeder is working and mainly not hurting squirrels. The only problem is that not many people are downloading this kind of video from the Internet or even looking for something like this. Flyers could be effective but its design is not perfect and the locality for distributing should be chosen carefully which is really complicated and not effective enough. The big problem is that owners have never done a proper and detailed marketing research. The only research which was made was done by students. This research showed several interesting findings but more detailed research would be more effective. The most important information which was missing was the exact target group. Students’ survey showed that the target group was mainly older people between 35 and 75 years old but this survey also showed the interest of younger people in bird watching so it was not so exact. If marketing strategy is carefully planed, it influences the sales in a positive way. Obviously, marketing strategy of Squirrel Defense was not the case.

Another problem which causes financial problems is connected with production. This leads to problems with unsatisfied needs and this leads to loosing customers. Squirrel Defense Inc. has problems with manufacturing. Orders are in high numbers while production lies in small numbers. The result is that demand is higher than the supply. This is definitely bad for customers. When they finally decide to buy this feeder and they can not find it in the store, they will after short time of waiting buy another one. This way, not just customers loose but also the company. The problem with production is really serious and should be solved in short time because it gives advantage to concurrency.

The last problem which causes negative financial results is with distributions. Company is using the UPS which increases the price of the product about 10 to 12 percent. Company should definitely consider if it this is payable. While company has low production, it will have high distribution cost which will lead to higher price of the product and bigger and bigger financial problems.

Recommendations

If the company wants to solve its problems and become attractive for the potential investor, it should solve all its problems. The most important, company has to develop a business plan. In this plan, all the problems will be solved through stating company’s vision, mission, objectives, marketing, production and financial plan.

First step is to set mission, vision and objectives. Mission of the company should represent its current status and it is need for creating a vision. Current status of the company is that it has a unique product which is an advantage among concurrency. The vision means the company’s direction, where company wants to be in several years. The

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