13 - Ganong Bros Ltd

13 - Ganong Bros Ltd - Business Level Strategy: Creating...

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Business Level Strategy: Creating and Sustaining Competitive Advantages Assessing the performance of Ganong Brothers Limited (GBL) enforces that in order to achieve the objectives set by the Board of Directors, a suitable course of action would be to focus time and money on private labelling, as well as alternate financing with the international chocolate firm that recently approached GBL acquiring a minority position. This is most appropriate with respect to the future direction of the business, since it is important for GBL to achieve their main objective of increasing revenues by 50% (sales to increase from $23,472,000 to $35,208,000). It is also vital for GBL to remain a private company committed to its community and employees. Dropping some products with high COGS, as well as distributor lines with high fixed costs and low sales could also be an option if profitability did not improve. GBL has remained “Canadian Competitive” and built a name for itself against Moirs, Laura Secord, Smiles and Chuckles, Neilson and Lowney. They are a strong player in boxed chocolates in Atlantic Canada while a borderline player in other product lines, such as staples and cellos, which are not excessively profitable. With the new facility, GBL now has the potential for expansion and growth including the ability to reduce unit costs so it could compete more effectively. The two consecutive years of financial losses and the low inventory turnover can be restored with the increase in volume that private labelling will exploit as well as with the extra financing that will be received from the minority partner. Further identification and support for this direction will be discussed. Currently, GBL provides service for private labels occasionally, and only when asked. Since this service is not part of the main business lines, becoming more proactive in this area may perhaps increase volume and limit competition. Focusing on the external environment, there is a medium level threat of entrants in the confectionary industry, as there are some one or two person operations. Therefore, establishing a strong position is simplified through private labelling, as retailers incur most of the marketing, overhead and logistical costs. Although buyers may have a variety of substitutes to choose from, private labelling will force brand names to improve marketing efforts and continuous value added products to compete with their low costs.
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Internal analysis of the 1994 financial statements shows that private label sales were $1,450,000. With improved focus in this area, it can be assumed that private label sales will increase significantly. The incentive for this assumption is that George Weston Ltd’s private label for Loblaws accounted for about 80% of its sales. Since Loblaws is already a well-established company, private labelling for another company could account for an estimated start up of 40-60% of sales for GBL. This would bring GBL’s profitability up by about $9,388,800- $14,083,200. With private label production for retailers, focusing on
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13 - Ganong Bros Ltd - Business Level Strategy: Creating...

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