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ABM 437 Strategic Plan Zespri Corp Jeremy Pagel, Zak Kretchman, Robbie Schuler, Andrew Braun, Larry Jacques 4/30/2012 Looks great. I made some very small changes such as capitalization errors and punctuation I was sure of, but some things I was unsure of. So I marked them up with a highlighter. Green - I think it is right Light Blue - not sure Gray - contrasting concept Red - possibly removable Executive Summary The current strategy that comprises Zespri is one that attempts to maximize its strengths and minimize its weakness. However there are some changes that we believe should be applied to the current strategy of Zespri to allow to take advantage of more opportunities for profits. The following is an analysis our strategic plan for Zespri: Strategic Vision/Mission: Zespri should grow in the specialty fruit markets, in particular star fruit Overall Zespri should strive to be a category leader in kiwi fruit; focus on consumer demands while developing new fruit cultivars to maintain customer satisfaction and meet customer demands Core Strategy Niche strategy as a highly valued producer of kiwi fruit Adopt this strategy as Zespri acquires the star fruit line Leverage marketing strengths like strong marketing abilities, and familiarity within the specialty fruit markets Industry Role: First mover accompanied by a continued proactive leader approach in the kiwi fruit market Star into the star fruit market as a challenger to gain market share Maintain the brand equity and consumer perception of value enlisted in Zespri Strategic Scope Zespri should move from a single fruit product and diversify itself into other fruit markets Continuation of sources and selling of Zespri fruit products worldwide Adoption of new fruit products into the Zespri name Strategic Initiative Growth through continued market penetration and new kiwi cultivar development Superior advertising to market to consumers at a premium price in order to generate the necessary revenue to add the new star fruit line Tight logistical control of fruit and market monitoring Maintain two way communication between Zespri fruit growers and Zespri corporate Vertical Coordination Start an equity based alliance with a star fruit grower Maintain the vertical integration that it currently has with its kiwi fruit growers 2 Action Plan for Star fruit Identify regions that have a high probability of success for marketing a new fruit product Identify Star fruit cultivars that exceed expectations and which Zespri will greatly profit from Explore trade barriers and other obstacles that would prevent Zespri from successfully introducing a new line of specialty fruit Table of Contents Executive Summary....................................................................................................................................... 2 Strategic Analysis .......................................................................................................................................... 4 Strategic Vision ............................................................................................................................................. 4 Products and values .................................................................................................................................. 4 Mission Statement .................................................................................................................................... 5 Objectives ................................................................................................................................................. 5 Core Strategy ............................................................................................................................................ 6 Strategic Initiative ..................................................................................................................................... 7 Strategic Scope.......................................................................................................................................... 9 Industry Role ........................................................................................................................................... 10 Vertical Coordination .......................................................................................................................... 11 Resource Needs ...................................................................................................................................... 12 Action Plan Kiwi ...................................................................................................................................... 13 Action Plan Star fruit ............................................................................................................................... 13 Appendix A .................................................................................................................................................. 15 Performance Assessment ....................................................................................................................... 15 External Analysis ..................................................................................................................................... 16 Internal Analysis ...................................................................................................................................... 18 Financial .............................................................................................................................................. 18 Human Resources ............................................................................................................................... 18 Operations .......................................................................................................................................... 18 Management ....................................................................................................................................... 19 Organizational Resources ................................................................................................................... 19 Information Resources ........................................................................................................................ 19 3 Future Scenarios ..................................................................................................................................... 19 Strategic Analysis Based on our analysis of Zespri we determined that their strengths in marketing, operations and more, far outweighed their weaknesses of declining financial ratios. In our next step we determined that their opportunities in both the kiwifruit and other global fruit industries far outweighs their threats to their current position, therefore we placed Zespri in the “offensive quadrant of the change grid. For more on the internal and external analysis including porters 5 forces analysis and some key scenarios see Appendix A. Through the completion of our analysis we determined three key issues that Zespri must focus on when moving forward these are as follows: (1) How is Zespri going to gain a better understanding of foreign markets in order to better capitalize on current market growth? (2) How is Zespri going to increase its supply of premium kiwifruit in order to meet this growing demand? (3) How is Zespri going to lower its risk by diversification into other fruit markets? Throughout our strategic plan we will focus on solving these key issues. Strategic Vision Products and values Zespri’s strategic vision is based on many factors including the products Zespri sells and Zespri’s value system. Zespri’s current products include the marketing and sourcing of green and golden kiwifruit. For future growth we would like Zespri to broaden its product line by first continuing development of kiwifruit cultivars but also (then second or then next) going into new specialty fruits such as the Carambola also known as the Star Fruit. 4 Zespri’s values should always remain constant and they include: Good customer relations, grower development, global supply, environmental sustainability, corporate responsibility and food safety. These values are essential to keep Zespri’s reputation of being a quality fruit producer. Mission Statement Having a current, up-to-date mission statement is essential for any business to succeed in today’s tough economy, because of this we have decided to update Zespri’s current mission statement which read: To be the ‘acknowledged world leader in kiwifruit’ and the retail category leader in kiwifruit: To be the retail category leader in kiwifruit, Zespri provides unrivalled excellence in: (1) Brand-based consumer focus. (2) Customer relationships and innovation. (3) Cost-effective sourcing of superior fruit globally. We decided to make several changes to this mission to make it more in line with the new product focus while still maintaining Zespri’s core values. The new mission statement should read as follows: To be the world leader in kiwifruit in both quality and price, and work to introduce new fruits to the world market: (1) Continue development of kiwifruit in order to create a better more sustainable fruit to the world on a year round basis. (2) Focus on consumer demands to provide the most desired product to the end user. (3) Develop new fruits to introduce to the world market. This new mission statement will serve as a guidepost for the new direction of Zespri. Objectives Along with the new mission statement we have developed several objectives to help guide the company to achieve its long term goals these objectives are as follows: Improve customer service by, growing consumer knowledge of kiwifruit in order to broaden possible customer basis and use current communication channels to introduce new fruits to the world market. Improve our ability to do better than the competition by, using current marketing channels to inform consumers as to the high quality of Zespri’s kiwifruit and work with growers around the world to encourage cooperation in order to create a more sustainable global year round supply. Improve productivity by, continuing research in new 5 cultivars in order to create more efficient and productive cultivars and develop distribution channels that are more reliable and product less carbon pollution. Improve profitability by diversifying production into areas with lower cost production. Improve employee performance and satisfaction by, developing incentive based plans in order to encourage global cooperation between managers and provide access to a global network of employee resources that allows employees to create and share new ideas and developments. Finally create innovation by encouraging all employees to supply input on ways to better the company and provide rewards to employees that develop new business models. Core Strategy Zespri uses a niche strategy as a world class provider of kiwifruit. The kiwifruit is exported around the world and demand is driven by their high quality, year-round availability, sweet taste, health benefits and product variety. This strategy will also apply to star fruit as its attributes are similar to kiwifruit. Zespri obtains its objectives through the niche strategy to out provide & outperform the competition, increase profitability, expand their markets, innovate all well providing quality jobs with opportunities to diversify. As they are in the category of healthy specialty fruit the act of adding star fruit helps resolve some of the issues that they had been facing such as understanding foreign markets, increasing supply of products, and decreasing risk through diversification. They can do these things by leveraging some of their strengths such as their strong marketing abilities, and familiarity in specialty fruit. They are also leveraging their abilities to share information, provide very efficient refrigeration, and use their worldwide in store relationships. Potentially, as star fruit comes online they may find some other opportunities such as bundling the rejected fruits from both categories to create new juices or other non-fresh market products. They will also be looking to as quickly as possible create and patent new star fruit cultivars that could set them apart from the industry. As they expand their line to include star fruit they will find that many benefits will occur from the expansion of their markets and from the reduction in risk associated with a sole crop. This will, however, incur some costs as they are unfamiliar 6 with the star fruit industry and current players and in addition there are major investment costs in equipment and training. Despite the risks and costs Zespri will find that the addition of star fruit will align with their objectives, expand their current resources, and mimic their current structure and lines of communication. Strategic Initiative Current Strategic Initiative- Zespri is currently utilizing the growth strategic initiative by trying to gain increased market penetration through new kiwi cultivar development. Recommended Strategic Initiative- We recommend growth through continuing market penetration and new kiwi cultivar development, as well as, finding new customers in star fruit markets. Zespri’s strategic vision/mission will be attained through growth by “introducing new fruits to the market”. Resolution of Strategic Issues- By expanding Zespri’s business to another market, the strategic issue of supply risk of relying on kiwifruit will be reduced. Risk in its business will be spread to another fruit market, and Zespri will not be solely reliant on kiwi sales to achieve profitability. Also, through continuing to grow and develop new kiwi cultivars, Zespri will be able to help meet growing demand for a variety of kiwi fruit and gain more penetration in other foreign markets. Marketing- This strategy must utilize superior advertising to get consumers to pay a premium and to eventually price setter in the star fruit market. This has been a successful strategy in kiwi fruit and should be utilized in this new endeavor. Also, Zespri should continue to build and maintain relationships by dealing directly with large retailers and distributors to keep transaction costs down. Human resources- The past experience of the sales staff with the fruit marketing industry will be essential in promoting new products. This sales force will be able to adapt and gain new knowledge of the star fruit industry along with the new expert employees that are hired. 7 Operations- Tight logistical control of fruit and market monitoring will continue to be used in star fruit markets to promote success. A 12 month supply and offshore sales support are vital to be carried over to star fruit marketing based on the success of these tactics in kiwi fruit marketing. This must also be continued and improved in kiwi marketing endeavors to gain market penetration in foreign markets. Organization- Zespri must maintain a solid public image in star fruits branded by Zespri. Brand equity is what makes consumers pay a premium for the Zespri brand, and the same image must been realized by consumers of Zespri branded star fruit. Information- There will continue to be two way communications between growers of kiwi fruit and star fruit with Zespri about production and other issues like new technology or improved growing techniques. External Opportunities- Because there is increased globalization it is feasible and necessary for Zespri to keep a 12 month supply of kiwi fruit and expand this to the star fruit in order to keep shelf space at retail outlets full for consumers all year. Additionally, there is a growing consumer demand for health benefits of nutrient dense fruit. This will be captured through the increased cultivar development of kiwi and star fruits that Zespri will market. Benefits of Growth/Diversify- Zespri will be able to reduce the reliance on kiwi as sole source of income. (Spread risk) It will gain the possibility of greatly increasing overall profitability in the long run. Although Zespri already has a strong brand, it can increase brand loyalty and awareness by supplying consumers with a new variety of quality kiwi and star fruit products. Costs/Risks of Growth/Diversify- There will be a large capital investment to spread scope of the business and grow into other markets. It will be costly to hire experts in other markets. (Diversify marketing force) Zespri faces the risk of losing focus and extending past its core competencies in unfamiliar 8 markets. When attempting to start and police licensing of other fruit, Zespri could have issues handling the volume of work that needs to be accomplished. In this instance, Zespri could start to lose quality control and the brand image. Strategic Scope Zespri’s current scope is single business oriented around the kiwifruit, they are globally orientated in both sales and product procurement and primarily focus on internal development of talent through education and training. We would suggest that they change a few parts of this plan. First, they should change to a slightly less broad scope of single business dominated, this way they will be able to expand into new fruits to reduce risk and increase potential profits. They should continue to globally source and sell their products but also look to possible mergers in order to gain knowledge of the new fruit. This decision helps to attain the mission of introducing new fruits by broadening the scope, also by keeping a broad global scope Zespri will be able to utilize and grow current market and supply channels. Our choice to continue global sales and sourcing also helps to resolve the strategic issues of gaining better understanding of global markets and continued year round supply. Expanding the business scope to include new fruits also helps to alleviate the issue of reducing risk through diversification. The new strategic scope exploits many of the company’s current strengths including: Exploiting Zespri’s fruit marketing strength by adding a new fruit and exploiting Zespri’s brand strength by putting the new fruit under their brand. The new strategy will also take advantage of many market opportunities including: New fruit market growth, and increased globalization. Some benefits of this direction include; reducing risk while still staying focused on limited and similar product lines. The global scope allows for continually increasing market potential and year round sourcing. Finally the possible merger can increase market knowledge and introduce new efficiencies. 9 These benefits also come with new costs and new risks. Some new costs include the cost to introduce new fruits to the market. Zespri must build up a new knowledge base on the fruit they intend to introduce and develop new marketing strategies as well as the ability to source the product. Also they will continue to add new costs with their continued globalization. Some of the new risks included with the new plan include the limitations of a new fruit, whether or not it will grab public attention the same way that kiwifruit did. If the fruit has issues it could damage Zespri’s brand name. Industry Role The current industry role Zespri assumes is the proactive leader role. They have the largest market share, and have been the first mover in many products such as the gold kiwi they came out with. The industry role we strive for will be to continue in the proactive leader role. We want to continue to be the market leader and continue to gain market share. We also want to take use of the first mover advantage as we have done in the past with Zespri Gold. We can take that same strategy as we roll out our new products such as the two red kiwi fruit varieties currently being worked on. We will assume a lot of the risk in the market doing this, but with the high risk comes a high reward with the first mover advantage, getting a premium price on new products before others enter into the market. As we expand into other fruit markets such as the star fruit market we will take on a different industry role compared to our kiwi fruit production. We want to enter the star fruit market as a challenger. We will not start off as the as the market leader, but could move to that in the future. As a challenger we do not need to have as much as the initial capital investment as we would if we were the leader. We can test the market and see if we can be successful before we try to gain more market share. Another advantage to being the challenger is we can learn from what the others are doing in the market and copy what they are doing well, and improving on their weaknesses. Our experience in marketing kiwi fruit will also help us to be a better challenger, because we can transfer what we had learned with kiwi fruit to the star fruit. The marketing aspect is one of Zespri’s core competencies and they can use that in 10 the star fruit. Also the brand of Zespri is well known and recognized as a good quality product so bringing that into the star fruit market will help us penetrate the market and challenge the leaders of the industry. Vertical Coordination Currently Zespri has a market relationship with its kiwi growers and we believe that they should continue this method in order to keep a constant supply of kiwi’s moving towards Zespri’s final kiwi consumers. Additionally, Zespri is currently vertically integrated with the farmers that supply them with kiwi fruit, which allows them to control and monitor production costs, and maintain high quality standards. While this strategy is currently working, Zespri is facing a lot of risk from rising costs of kiwi production, an increasing risk of lower cost substitute products, and an overall change in consumer preferences to lower cost fruits. With this in mind, Zespri should strive to create and equity-based alliance with another specialty fruit product such as a star fruit company that would give them the option to acquire other fruit products or brands and sell them under the Zespri name on a small scale in a niche market. Additionally, by creating an equity based alliance with a star fruit company Zespri would have the opportunity to develop their own cultivars of star fruit, and sell licensing fees to their allies and collect capital for having the Zespri name on the final product. In doing this Zespri would not only decrease its risk of having only one product to market, but they would also have less investment risk into researching and developing a new value added fruit for their customers. Also because the Zespri name is a well-known branded product, this new fruit product would appeal to existing customers who had previously purchased Zespri kiwi fruit. This form of vertical integration would also make it possible for Zespri to enter existing star fruit markets because they would be relying on the star fruit company that they are aligned with to supply the customers. This would be a possible source of risk for Zespri to vertically coordinate in this manner because if the star fruit product does not perform well Zespri may lose some brand equity due to decreasing customer perception of feature/benefits. If the alliance fails 11 Zespri will also be liable for the capital it invested in the venture and because of the margins that Zespri operates with they cannot afford to lose a lot of capital at this point in time. Overall an equity alliance would be a great avenue for Zespri to pursue in order to diversify themselves (eliminating risk), and enter into the star fruit market (taking advantage of the opportunity for additional customers and revenue) while maintaining their mission/vision goals. Resource Needs Core Competencies- Zespri must utilize similar product control and marketing competencies it has used to excel in the kiwi market while achieving expertise in the star fruit market. To attack the need of better understanding foreign markets, Zespri must expand and improve upon market research of global preferences of taste for kiwi and star fruits. Technology- Zespri should acquire the skills to develop new cultivars for star fruit and continue new cultivar development of kiwi fruit. New development of technology has kept Zespri profitable in the kiwi fruit industry and this should be spread to the star fruit market to promote success in marketing the product to consumers. Zespri should also improve the communication technology used to monitor and track an additional market segment of fruit to handle increased volume of the need for product control. (Improved data tracking systems) Human Resources- Experts in the star fruit marketing field must be acquired to determine how to license star fruit growers and gain market penetration in this field. Technical database employees should be hired to develop a new functional tracking and communication system and train Zespri employees in its use for the star fruit market. Also star fruit cultivar development experts will need to be employed to gain a challenger position in the star fruit market. 12 Financial Resources- License fees from licensed star fruit growers must be collected to help finance the marketing of the new product and new cultivar development of this segment of business. A start up loan from a financial institution may be needed to cover initial costs of procuring the new licensing, information, control, cultivar development, and marketing systems if retained earnings prove to be insufficient. Action Plan Kiwi One of our goals for Zespri is to continue to expand our market share by expanding into new geographic markets. The plan we have for this is to expand and get more growers in Chile, China, and the United States. All these countries are among the top in kiwi production, but Zespri does not have a strong presents in these countries. We believe we can bring the growers from these areas to work with us. This will benefit both the grower and us; the grower will have a consistent way of selling their product through us, and receive premium prices using the Zespri name. This will also benefit us because we can increase our year round supply allowing us to gain market share. We will also focus on marketing in other areas such as the United States, Europe, and China, because these are relatively untapped markets, and we see a lot of potential for future sales. We can get these countries to start consuming our products though in-store taste tests, and marketing the health benefits which will be very attractive to the Europe and U.S. markets. Action Plan Star fruit In order to bring star fruit online as a challenger product we will need to obtain a few goals first. The first thing Zespri will need to identify is regions globally that have a high probability of success. Within those regions we will be looking for cultivars with higher than average qualities, great yields, and hardiness against disease and weather extremes. Next we will be looking to Identify and train growers that are willing to provide fruit to our specifications. Zespri will need to coordinate transportation and refrigeration services. They should also explore what trade barriers they may encounter such as import 13 policies, intellectual property rights protection, investment barriers, anti-competitive practices, etc. They will also need to communicate the changes with grocers and start a new marketing campaign to introduce our line expansion to existing and new consumers. All of this should be done at a slow and safe pace paying extra attention to our methods as future expansion of healthy specialty fruits should follow a similar model. Zespri should immediately work internally towards creation of new Star fruit cultivars as they could potentially capture more value from the fruit in the same manner they do with the gold variety kiwifruits. 14 Appendix A Performance Assessment This Performance Assessment of Customer Satisfaction, Competitiveness, Productivity, Profitability, and Customer Satisfaction will provide insight to Zespri’s actions in a world economy. In customer satisfaction Zespri ranks high due to four main factors. The first factor, “Branding” links the product to quality, country of origin, and variety which helps create customer pull. The second factor, “Customer Segmentation” is the process of varying products for a variety of demands which helps capture a higher percentage of the consumer surplus. The third factor, “Sweeter Cultivars” sets the leading standard, which result in deterred competition. The fourth factor, “Year Round Accessibility” maintains retail space, enhances demand, and strengthens distributor relationships. Zespri is a competitive player in the world kiwi market. The company is highly integrated and cuts information asymmetry and costs by freely sharing information throughout the company. As a cooperative they also experience benefits of purchasing power. However, there are three main concerns regarding competiveness on the world market which include labor costs, fluctuating currencies, and potential emerging competitors. The current competitor on the world market is Chili as their exports and yields have recently been gaining on New Zealand, while China and Italy hardly export and their yields are either unknown or far beneath New Zealand’s. (See fig.1). Zespri still leads the world in both kiwi yield and in profitability (See fig. 2) due to their ability to capitalize on their resources, and on their capabilities as a company. The resources are highlighted by their strong investment in human capital, strong financial backing as a cooperative, and their reputation as a quality driven company. The capabilities that set them apart from the competition include; investing heavily in research and development, managing their supply chain in a way that assures year-round availability and premium quality, and the ability to market the kiwis globally. This assessment indicates that Zespri has a strong ability to satisfy their consumers by offering a superior, safer kiwi fruit worldwide in a competitive manner, while remaining a leader in both productivity and profitability. 15 External Analysis 5 Forces Analysis 1. Threat of New entrants: Weak a. High barriers to entry i. Zespri has a large experience advantage 1. New Zealand has been exporting kiwifruit since 1952 2. 1970 Kiwifruit Export Promotion Committee formed to promote exports, would lay groundwork for Zespri brand ii. Zespri owns patents on new kiwifruit cultivars 1. Limits other companies access to newer technologies iii. Brand Equity – Zespri has been known for high quality kiwifruit b. Kiwi fruit is still a competitively small market therefore there are not many newcomers interested 2. Threat of Substitutes: Strong a. Kiwifruit is very new, many people know little about it b. Other fruits such as oranges and apples are already a part of many people’s diets c. Other fruits are very competitive and often priced lower 3. Bargaining power of Suppliers: Weak a. Zespri is owned by kiwi growers i. No bargaining for supply of kiwi b. Bargaining for inputs for kiwi growers: weak to Medium i. Develop their own cultivars for new varieties ii. Fertilizer and sprays are commodities iii. Competition for land is increasing causing more bargaining power for suppliers of land c. Zespri can threaten to integrate backwards 4. Bargaining power of buyers: Low a. Zespri sells to many countries around the world b. Zespri offers differentiated products based on quality and innovation 16 c. Since Zespri is formed by a large number of producers the number of producers that are able to sell to buyers is relatively small 5. Rivalry: Medium a. Zespri doesn’t compete for lowest price b. Constantly working to improve quality c. Lots of advertising/sales promotion i. Not to fight competition but to raise awareness of kiwifruit Opportunities Analysis 1. Change in buyer demand: a. Kiwifruit is still a niche product b. Large markets in Europe, China and Japan i. New markets in China account for 1/3rd of Zespri’s growth c. Not catching on yet in US and other western countries d. Introduction of Golden kiwi i. More of a new niche than the original green e. New customers brought in by health benefits 2. Information technology a. Introduction and use of wide spread information technologies helps in marketing and demand figures b. Ability to track shipments helps to ensure traceability and quality management c. New scanner data information from retailers keeps real time demand information and reorder needs 3. Shipping and storage technology a. Faster shipping methods i. Helps product have more life once it makes it to the specified market b. More efficient cooling houses for storing fruit 4. Increasing globalization a. Use of worldwide production to ensure year round fresh supply b. Ability to ship all around the world enables access to all markets Threats Analysis 1. Food safety a. Constant scrutiny from consumers and press i. One illness related to kiwi fruit could affect entire world demand b. Increasing concerns over kinds of fertilizers and pesticides used on fruit could limit their use 2. Government regulations and taxes 17 a. Local governments sales tax and regulations on exports can always increase b. Over 60 foreign markets i. Makes foreign policy difficult to maintain ii. 60 different import policies, tariffs and other regulations iii. Subject to change from year to year iv. Different consumer behavior in each market 3. South American kiwifruit a. Sell for up to half the price of Zespri at wholesale b. Potential for market domination c. Currently lower quality however may improve to compete on standards as well as price 4. Other Kiwifruit growers a. Italy and China produce large amounts of kiwifruit b. Majority is consumed within the country c. Does not have very much effect on Zespri’s world market. Internal Analysis Strengths Zespri is a marketing firm; its sole focus is on marketing 3 varieties of kiwifruit. The main source of Zespri’s success is through its ability to provoke consumers to pay a “premium” for their branded product. The company uses billboards, print, and digital signs on cabs and busses to gain brand recognition with consumers. Zespri also utilizes television advertising, and it is one of very few fruit marketers to use this mode of communication because of the large expense. The industry average spending on advertising is .7% of total revenue, but Zespri spends 6% of its total revenue on Promotion. Zespri is a price setter, not a price taker in the marketplace. It sells its whole sale product 50 to 100 percent above the prices of its Chilean competitors. Zespri also offer grower tours so growers can see where their product ends up. Also, retailers, distributers, and wholesalers are brought to Zespri licensed farms to see the operation first hand. They return to their companies as ambassadors to the Zespri brand. Zespri works directly with retailers and distributors and builds local offices to support sales in large markets to ensure customer satisfaction in these vital areas. In store tastings boosted Zespri sales as much as 93% for up to three weeks following the program. Financial Zespri is a very profitable company. In 2010 the net profit after tax was almost 26 million. Also, partly due to the large scope and nature of the company, Zespri has a large portion of its current assets in a liquid form. ROI is over 50 percent on average from 2006-2010. Human Resources The employees at Zespri are very skilled at communicating with growers and customers. There are 117 staff members offshore to accommodate needs of customers. Operations It has tight logistical control; kiwi is only accepted after it is inspected, loaded and on a ship to its destination. Each kiwi can be traced back to a packing plant and farm it came from. There is also tight control on licensing to produce the brand. The Gold variety is very profitable for growers. The facilities built near large sales areas are essential to the effective operation of Zespri. During the growing season, Zespri closely 18 monitors each market’s performance and re-optimizes product allocation when necessary. Zespri provides a 12 month supply of kiwis is to keep market share in this market. Management The CEO has a unique set of skills to have to communicate effectively with growers all the time. Many CEO’s do not have an effective skill set to accomplish this. Organizational Resources Zespri’s public image is strong, and this is reflected in the consumer willingness to pay a premium for the product. Local Sales people are available to better carry out their tasks for the customer in large markets. Information Resources Zespri practices two way communications through call centers and the internet with its growers to get them the best info to enhance production practices as much as possible. It funds market research studies to understand consumer kiwi buying habits. Weaknesses We took a look at the financial statements produced by Zespri Group, and dissected the balance sheet and income statement, and found some weaknesses in Zespri Group. The current ration over the past two years averaged 1.29, which may look good initially, the three years previous to it had an average current ratio of 1.64. The current ratio shows the current assets over the current liabilities, which if the trend continues and the ratio drops bellow one Zespri Group could have trouble paying off short term debt. The debt to asset ratio in 2010 is .79, and has been consistently rising from the .52 in 2006. As this ratio increases, so does the concern of creditors, and could cause problems for the company if they are unable to get loans as the ratio increases. The total asset turnover ratio has been decreasing considerably over the past 5 years. In 2006 they had a TAT ratio of 6.60, and in 2010 the ratio dropped to 4.16. The ratio shows that in 2006 for every dollar they invested, they would make $6.60, and now in 2010 they are only getting $4.16 from each invested dollar. This is a weakness because they are not earning as much per their investment in the company as they were in years past. Although some of the ratios may not look like weaknesses initially, looking at the history of Zespri Group and seeing how they have gotten worse over time we found these are problems that should be fixed. Future Scenarios Decline: Any supply shortage issue or negative change of consumer preferences of kiwis Zespri may incur will be detrimental to its survival. This loss of revenue will spiral into fewer and lower compensated employees which will decrease employee quality in the long run. A lower Quality marketing force may be unable to overcome the challenges of giving Zespri a new direction in unfamiliar waters. Same but Better: Zespri could continue to develop new cultivars of kiwis to maintain consumer interest, and it could continue to utilize its marketing and sales strategy. To have a gradual incline, Zespri should add more than its current 117 offshore sales people since it operates in 60 countries. 19 Fundamental Change: Zespri could realize the opportunity to spread to other fruit markets to reduce the risk of supply or consumer demand issues of kiwis. Zespri already has impeccable marketing strength with kiwis, so it should have less of a learning curve in spreading to other markets. This will make Zespri grow by leaps and bounds in the long run. 20