Pei Preserves Problem Annd 5 Forces

Problem Identification

Problems

MacNaughton is over diversifying in non-core business activities with too many different business lines. With MacNaughton’s lack of vision, this is distracting from the main business of preserves. MacNaughton also has lack of human resource planning as he wants to be involved in every aspect of the business with little aid. As a result, the side businesses are failing, losing money, and are taking away focus of how to expand the preserves business.

Porter's Five Forces Analysis

The company's overall risk from its industry is medium.

Threat of new entrants: medium to high

● Entry barriers are relatively low for the gift/gourmet and specialty food industry.

● Low economies of scale

● Low to medium capital requirement

● Hard to secure distribution channels

● Product differentiation

● Switching costs – marketed as a specialty product, PEI Preserves is at risk of losing out to lower cost grocery jams. This price sensitivity can have a big impact should a shift in the economy occur

● Access to distribution channels

The bargaining power of buyers: low to medium

● Individual consumers have very little bargaining power when they only make small purchases

● Health conscious consumers are willing to pay premiums for high quality and natural products

● No consumer switching costs