Problem Statement
Columbia Plastics division of Fraser Company, the major manufacturer of skylights in the Pacific Northwest, is facing a severe competition from Vancouver Light which has just announced a further price cut of 10%. Alice Howell, president of the Columbia Plastics is unsure of which options to implement – 1) cut the prices at a level that just cover the costs, or 2) continue the current pricing policy and lose market leadership. Fraser is facing the erosion of its market share.
Situation Analysis
Background, objectives and environment assessment
Fraser Company has been the supplier of metal and plastic fabricated parts for Boeing Aircraft and has recently celebrated its 50th anniversary. In the 1960s, in order to diversify its business, Fraser established Columbia Plastics division to apply Fraser’s plastic moulding skills to the construction industry. Currently, 70% of Columbia’s sales come from skylights and the remaining 30% from plastic garage doors, gutters and covers for outdoor lights.
Two years ago, Vancouver Light expanded its business to Seattle. Since then, a few of Columbia's customers have switched to Vancouver Light due to its lower pricing policy. If Columbia does not take necessary actions now, it could lose further business; and in the long-run, its skylight business could be at stake.
Strengths
• Columbia has a well-established clientele, with a high component of customer loyalty and nationalistic feelings among them.
• There is a large domestic market available. Columbia could deliver the products quickly with lower shipping costs due to proximity to these local customers.
• Columbia is currently in a strong financial position. The parent company, Fraser Co, is a l...
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3. Increase direct shipments to medium and small builders and establish Columbia’s brand.
4. Review operations for potential cost-saving opportunities.
5. Continue providing quality services through personal selling, sales promotion, and advertising.
6. Alice Howell, president of Columbia, should consider the possibility of exporting its products to overseas.
Contingency plan
If reducing the selling price to $144 and the resulting action plan does not work, Columbia should benchmark their practices against Vancouver Light. They should streamline their product line and produce skylights only. This should reduce costs close to what Vancouver Light’s costs are. Columbia should then reduce the selling price and aggressively go head to head with Vancouver light on price. This includes Columbia opening a sales office in Vancouver and going after Vancou
The company could not afford to distribute its product to other states than Ohio, Kentucky, and Indiana because bottle taxes and shipping costs would eat up all the profit.
• A more competitive, efficient and profitable business with less competition in the domestic markets.
This analysis will identify the current value of the company at a stand-alone value and explain why Nestle Food would want to buy this company and the synergies involved for their reasoning. We will also discuss who will benefit if Reynolds Metals were to sell to Nestle or were to create an IPO. Finally we will provide a recommendation for Reynolds Metals that will be most beneficial to the company financial needs.
Academic Consortium on International Trade (2000) Letter to Presidents of Universities and Colleges. Available at: http://www.spp.umich.edu/rsie/acit/ [Accessed 1 April 2014]
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Vollrath, T. L. (1991). U.S. trade in competitive world markets. FoodReview, 14(1), 26. Retrieved from EBSCOhost.
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