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Giuseppe’s Sausage company strategy is to start small and work up to a larger clientele by initially concentrating on high quality, unique specialty sausages customized for clientele in their local region. Smaller companies are able to offer a wider variety of specialty sausages because they are only concentrating on a smaller client base whereas larger companies tend to focus on producing a few varieties to cover a larger customer base. Giuseppe’s would only buy top of the line ingredients and developed their own special recipe using exotic meats and spices for production of sausages. Giuseppe’s product line consisted of more than 80 different sausage related products to be marketed to supermarkets, restaurants, casinos, and mail order/individual call in. Giuseppe strategy was to develop a reputation of being the best in the industry. To do this they focused on and provided what their customers wanted – customized specialty sausages, priced their products competitively – just a few cents above competitive prices, and prided themselves on being above average USDA and Health Department standards and regulations when it comes to cleanliness of the sausage making areas.
2. What is the nature and strength of the competitive forces confronting Giuseppe in the Memphis area specialty sausage industry? Is the Memphis area market attractive from the standpoint of offering Giuseppe attractive profit prospects?
The nature and strength of the competitive forces confronting Giuseppe’s in the Memphis area specialty sausage industry are:
1. Rivalry among competitors
The sausage industry is a highly competitive market in Memphis. Already 25 to 30 major brands of sausages sold in the Memphis retail market. The major competitors included Bryan, Jimmy Dean, and Johnsonville.
Competition among these companies is focused on price. Bigger companies with mass production are able to buy their products cheaper therefore able to produce and sell more cheaply than smaller businesses. Other competitive activities included sales promotion, advertising, and product differentiation. Larger companies have a much greater financial ability to be able to invest more into advertising than a new business starting out would be able to. Shelf space and competitive pricing were two major issues that affected sales. Because they are already recognizable brands they can afford to purchase the best shelf space. Consumers will see their products before noticing other not so well known products.
2. Substitute Sausages – Health conscious people who want to decrease the fat content in their diets.
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3. Entrance of Non- traditional grocery stores such as Kmart, Walmart, and Sam’s Club now offer a grocery section in their stores. These stores became the new source for the grocery consumer and was forcing many small grocery store out of business. Larger organizations tend to buy their resell goods from already established well known sellers while smaller grocery stores tend to purchase more locally. With smaller grocery stores being forced out of business this was cutting down on the number of potential buyers for smaller businesses to sell to such as Guiseppe’s.
4. Threat of new entrants – with only a few government regulations to deal with and overcome entrance into the sausage industry is relatively easy. It does not cost a lot nor does it take a long time to enter, as well market growth is attractive to new companies who want in the business such as large meatpackers who may monopolize the market share.
5. Bargaining power of both suppliers and customers. – The greater the amount of competition the more bargaining power suppliers and customers have. They will seek out the best prices not necessarily the best quality. Larger well established companies are more able to offer lower prices because of bulk production whereas smaller companies such as Giuseppe’s will pay more to produce because they don’t sell in bulk volumes therefore don’t get bulk purchasing discounts that larger companies do.
2b. Even though population in Memphis city have dropped from 646,174 in 1980 to 610,337 in1990, the Memphis area is very attractive from the standpoint of offering to Giuseppe attractive profit prospects. The Memphis area is unique for high sausage product consumption. Memphis market trends in 1997 are: 6.1 million pound of sausages consumed, $12.25 million in sales, market growth rate 15.4%. Memphis is a major transport junction, with a busy river port, many rail and highway connections, and an international airport, and is a commercial centre. It is currently experiencing overall economic growth (new casinos, restaurants, etc. as well as an increase in tourism. I think that the combination of all these factors make the market potential high for Guiseppe’s profit projections.
3. What do you see as Giuseppe Sausage Company’s competitive strengths and weaknesses?
1. Uniqueness of Giuseppe’s Italian sausages.- There is market potential for specialty sausage companies. The owner Joseph Cotrone is well versed in the art of making specialty sausages.
2. The company is original in the design of its’ product lines and can use that as a differentiation strategy. Because Giuseppe’s is a small business it can be more flexible in meeting the needs of its customers.
3. Giuseppe’s produces a very high-quality product that has potential in the marketplace.
5. The increase in public awareness and interest in ethnic foods provides a great opportunity for Giuseppe’s to gain market share and create a strong brand image.
6. Giuseppe’s does not carry any long-term debt.
1. Poor Marketing Skills – Cotrone is more focused on making sausages than he is on planning how and to whom he will sell his sausages to. He lacks the skills himself for marketing his product.
2.Giusueppe’s does not have a well defined strategic plan of distribution and promotion. Their orders are unevenly distributed, resulting in high finished goods inventory. Also, there is not enough attention is paid to advertisement and promotion.
2. Operation level activities are not automated. Although it is labor intensive industry, heavier automation would reduce long processing times. New trimming and packing equipment should be bought. Additional personnel hired.
3. What problems do you see at this company? Should Mr. Catrone be pleased with the progress the company is making? Why or why not? Why has it taken the company seven years to get this far?
1. The company lacks leadership. Joe Cotrone may very well be able to make unique high-quality sausages but he is sadly lacking in leadership, financial, and marketing abilities.
2. Guiseppe’s does not have a formal business strategy or operating procedures that should be followed.
3. Mr. Catrone lacks the skills and knowledge in accounting.
Not only does he not understand the costs of productions, he do not keep accurate records. Mr.Catrone had to “scrounge up” sales receipts from a box to try to understand the financial situation of his company.
4. Giuseppe’s is behind the times in the use of technology. They have a Microsoft Small Business package, but no one knows how to use it.
5. Small individual orders are too time consuming and costly to produce. Add to that when they are not picked up it ends up spoiled and money is lost. This cuts in on the profits.
6. Lack of marketing skills has resulted in not enough buyers. Giuseppe’s does not seem to be able to attract new and bigger accounts such as grocery chains, institutions, and casinos. They are too focused on the smaller markets such as restaurants and corner grocery stores which has put limitations on their sales potential.
7. The sausage has traditionally been associated with being a breakfast food, even though it is gradually being accepted to be eaten at other meal times. Giuseppe’s has not developed their brand image enough in order to overcome this belief.
8. Productivity cost (COGS) is to high in comparison to the amount of revenue received in sales. Cost of goods sold in 1994 is 58.18 % of $139,821 in sales and labour cost (wages and salaries} is 43.19% of sales. After wages and salaries are paid without any other expenses in consideration Guiseppe’s profits are at a loss.
9. Guiseppe’s does not have enough people hired in order to run the business properly. The manager is collecting the spices from the cooler that is to be used daily. Obviously, his services would be more beneficial in other aspects of the business and more labourers should be hired to cover the day to day factory operations.
10. Not enough control over their accounts receivable. They need to develop a better accounting system that will provide timely invoices and billings to customers as well as keep track of who pays and when they should be paid.
11. Giuseppe’s relies heavily on external investors for its financial backing. Their return on investment has not been strong thus far, which puts the company in a weak financial position.
Mr. Catrone should be pleased that his product has proven to be a diffinite seller in the smaller market however, because he has limited his company to these smaller marketsand not upgraded to make better use of technology and not investing in hiring appropriate staff and investing in advertising, he has limited his company’s potential growth. This is the reason why his company is still not much further ahead than it was seven years ago.
5. What must Giuseppe’s do to be successful in the specialty sausage industry?
I think Giuseppe should take a look at his marketing mix - the 4p’s: 1.Price 2.Product 3. Placement and 4.Promotion
Price and Product - Giuseppe’s currently offers a unique high-quality sausages at premium prices. There has been a proven market for specialty sausages and if they were to lower there prices to be more competitive with the larger companies then this might devalue their product and therefore lose brand loyalty. I think Cotrone should offset the cost of these specialty sausages by offering flexible price discounts. Ie. The more you buy the less they will cost. This strategy would probably generate buyers’ interest from other markets other than those of high end restaurants such as local supermarkets.
Promotion - Giuseppe’s Original Sausage Company made a big mistake when they initially introduced the company by not investing heavily in advertising. In order for a company to gain brand recognition it has to gets its name out there in the introduction and growth stages in order to obtain a significant portion of the market share.
Place – Focusing solely on smaller businesses to sell their product will not generate long term growth. Cotrone should focus on developing a method of distribution with already established brokers and distributers selling his product not only to small retailers but to to large supermarkets in Memphis. This is where his product would gain most access to the consumer and build brand recognition.
In addition to the above he should also seeks other means of generating financial investment into his company ie bank loan, investors etc. in order to expand on his companies production facilities so that he will be able to keep up with increased demand. Also he needs to skilled and knowledgeable staff that can deal with the various areas of specialty, ie Marketing, Accounting, Promotion, etc.