EVAN KRISTEN SPECIALTY FOODS (A) CASE ANALYSIS Case Solution
First Order Competitive Residual
Â Â Â Â Â Â Â Â Â Â Â The EKSF management has a strong potential to capture value from this business model. There is room for capturing a maximum value for the business. This could be explained by looking at the following factors:
Competition for EKSF Buyer: Weak
- Most of the EKSF buyers would not want to switch to the other brands if EKSF is unavailable.
- However, the company is in the initial stage of its start-up and it does nothave excess capacity to meet additional demand.
Competition for EKSF Distributors: Moderate
- The EKSF distributors might have a cost advantage in other VNs.
- This is because of the requirement of cryopac for the herb products of EKSF.
- The main reason for the inventory management system is due to long distance.This might not be a problem for other VNs.
Competition for EKSF retailers: WEAK
- The competition for EKSF retailers is low due to the profit margin of about 15% which is higher than the industry average of 10%.
- The retailers are also able to serve additional demand for EKSF.
- The availability of the other brand will have a moderate impact on EKSF retailers.
Value Capture Ranges
The value capture ranges for EKSF have also been analyzed by assessing the total value which could be created by the EKSF and the transaction partners of the company. The total added value could be seen in the table below:
|Other distributors would take a lot of time|
|to pick up the demand of EKSF customers. This is|
|because implementing cost savings is going to take a lot of|
|time for these distributors. Such cost saving systems include|
|If the company loses its sales channels then the demand|
|of the company’s food products would be affected. This is because|
|the buyers might not get convenient access to the herb products of|
|the company with ultimate high quality. Buyers would as a result move to other retailers.|
|The company targets the up-scale market and there would be no sales|
|without the buyers. The capacity of the company is currently limited.|
|If in future the demand increases the company might face problems.|
|Moreover, the company would then also be not able to pick up additional|
|buyers from lost demand.|
Â Â Â Â Â Â Â Â Â Â Â The value appropriation for the company in year 1 has been performed for EKSF as shown in the excel spreadsheet based upon the assumptions that the first years total TTL would be 285 and it would be shared among all the supermarkets and a larger value would be distributed to EKSF after MF which is its supplier, as seen in the shares of all the players in the game. It could be seen from the objective of the problem that EKSF being an innovator has a clear advantage in the market with a good share in the market. Therefore, a significant value would be created and then appropriated by EKSF.
Reasonableness of Wholesale price assumption of $0.87 per unit
Â Â Â Â Â Â Â Â Â Â Â The results of the four month product test market were impressive. However, there were some key challenges before the business model for EKSF could be implemented. Most of these challenges such as the issue related to in-store merchandising and distribution of the products have been resolved by the company. The company is also looking ahead for a long term contract with Monterey Farms in order to lock in the supply of its key raw material input. Looking at all this, it could be said that the business model is going to work for EKSF……………..
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