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Business Plan - . What Problems Do You See at Sdi?

Essay by   •  July 6, 2011  •  Case Study  •  1,458 Words (6 Pages)  •  1,795 Views

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1. What problems do you see at SDI? What issues are most urgent and what issues are most important? What do you see as the central problem/issue?

SDI developed the solar feeder without an engineer; which means a lot of money has been and will need to be spent on product development. If a business plan was in place from day one, and they had an engineer in place, product development costs could have been greatly decreased and the production process could have been streamlined. Advertising is sending the wrong message to the target market. The target market as described by Bo as a 35 to 75 year-old affluent woman with the older end of that range accounting for a greater number of sales. Within the advertising problem lies an inadequate website design which is difficult to use for the target market. Consumers also think that the solar feeder hurts squirrels, which then affects sales. Websites are a vital part of advertising and can also be a point of sale. Furthermore if the video would work it may take care of the people who think this product hurts squirrels.

At one point SDI slowed down sales to allow production to catch up with demand. This is never a good thing. Again this points to the lack of planning in the production process. A streamlined process would allow SDI to keep up with demand. SDI missed the retailer's first big ordering window. This was poor planning on the part of SDI and probably a factor in lack of cash flow. Shipping costs are too high. 10-12% of the cost of the feeder is too much to pay, thus distribution may be an issue. SDI does not have a handle on market demographics. At one point SDI claims their optimum age is 60 year old wealthy retirees. Later they say that 30 year old housewives are a big part of their target market. SDI really needs to get a vision of who they are marketing to and just market to them. They really don't know who their target market is. Once they know the demographics they want to market to, they can begin a strong marketing campaign.

Overall SDI's costs are the most urgent problem which relates to their production process. Since costs are so high, SDI's cash flow is poor to say the least. The costs which need to be decreased include marketing, production, and other expenses including labor. Business and marketing plans would help here as well. Another important problem is that SDI has a very small share of the market. This may be due to an inefficient production system, however an in depth marketing plan and marketing campaign should be of some help to increase market share and target the correct market.

2. Is SDI close to achieving a breakeven volume of sales?

The short answer is no, absolutely not. Breakeven volume of sales was calculated given total fixed costs of $59,963 from SDI's 1999 Income Statement. Variable unit costs were given as $50 per unit for the town style and $85 per unit for the country style. Bo stated SDI sold 112 town units at a price of $161 per unit; and 334 country units at a price of $138 per unit. Given that town-style feeders account for 25% of sales and country-style feeders account for 75% of sales volume, fixed costs were then adjusted and a breakeven volume of sales were calculated for each style of solar feeder:

BE¬ (town) = 135 units BE(country) = 848 units

Again, this disparity of breakeven volume of sales is due to the current ratio of the volume of sales for each style of solar feeder, 25% of sales and 75% of sales for town and country respectively. As one can see from the figures, SDI is 23 town units and 514 country units away from breakeven volume of sales given the current sales mix.

If SDI were to sell only town-style feeders or only country-style feeders then the breakeven sales volume for each style of solar feeder would be:

BE¬ (town) = 540 units BE(country) = 1,131 units

3. Identify SDI's present strategy. Is it working? What fundamental changes are needed?

SDI's present pricing strategy involves setting the price equal to competitors' prices and also to what they believe its customers will pay. Other than a pricing strategy SDI does not really have a formulated strategic plan in any other area besides a vague idea in marketing. SDI is not hitting the mark when it comes to advertising toward their target market. Bo hinted

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