Class- or Mass

Written Analysis and Communication I

Submitted to: Prof. Manaswini Acharya

Submitted by: Roll No.Section- B Date of Submission: Nov 5, 2012 12 PGDM 079

LETTER OF TRANSMITTAL
NEPTUNE GOURMET SEA FOOD North America Date: 23 April 2005

To: Stanley Renser Chairman From: JIM HARGROVE Marketing Director

Subject: A report on the immediate and a sustainable solution to the problem of excess inventory we are struck into.

Please find enclosed a report on the course of action to be taken regarding the problem of excess inventory. The problem has been evaluated by taking into account our brand image, target customers, financial aspects and competition. Giving due consideration to all these aspects it is recommended that we launch a new product to cater to a different set of consumers.

EXECUTIVE SUMMARY

We are currently engulfed with the problem of excess supply and have to get rid of this excess without diluting our brand image. We are premium brand and enjoy brand equity from the niche sector we serve. We have considered options of reducing the prices, giving discounts in business markets, stop going for catching for a while or launching a new product to cater to a new segment on basis of financial aspects, brand image and competition. We have found that reduction of price and stopping going for fishing can harm us in long run and on considering financial long term aspects we recommend to go for a new product for a lower segment.

Word Count 114

Table of Contents

Serial No.

Contents

Page No.

1 2 3 4 5 6 7 8 9

Situation Analysis Problem Statement Options Criteria Evaluations of options Recommendations Action Plan Contingency plan Exhibits

4 5 5 5 6 7 8 8 9-10

Situation Analysis
The decision which we finally about excessive inventory decide to arrive can really affect our image as a brand and moreover can also be a deciding factor in our bottom line. The decision which we take here should take into picture not only the present pro jections of the companys profit and its image but also should take into consideration long term implications. Analysis of Neptune Neptune Gourmet Seafood is an $820 million company and is the third largest producer of sea food in North America. We are a premium sea food brand. We have recently invested heavily in the technology to adhere to our tagline The Best Sea Food on the Water Planet. There has been a problem of excessive inventory in the recent times with inventory levels rising to twice the normal levels. Though not peculiar till now the reason for the same happening but the investment in recent technologies and new government laws seem to be the reason. Amidst all this the company is seeing the demand growing and our brands seafood has been rat ed foremost in quality 10th year in a row. Analysis of Customers we serve The company reaches its target customers through various channels and enjoys very strong brand equity. We charge them with a premium of 25-30% which they are ready to pay without any sort of considerations. But currently the customers targeted are majorly in the eastern segments and are only high end customers. Analysis of competitors There has been a tough competition from China, Japan, Chile and Peru but still we cater to only a niche market as of now so we are able to have good brand equity. But there are many players in the other segments and this area is attractive for even potential players in future.

Problem Statement:
To turn the excessive inventory carrying cost ultimately into the bottom line of the business without diluting the brand image.

Options:
The current options which we have in our hand are 1. To lower the market price of our products permanently. If we go ahead we have to decide how much to lower. 2. The other option is to give discount in our B to B business that is to the restaurants and the whole sellers and sell off the excessive inventory in short run and Increase the Size of the packets marginally and sell at same price in the long run. 3. The other option is of product development where we will be developing a product exclusively for a slightly lower end of consumers and thus have a new product in the market 4. Dont go for catching of Sea food for a while

Criteria for Evaluation

The above options mentioned will be evaluated on the basis of the following criteria in their priority order 1. Effect on Bottom Line in both short and long run 2. Reaction of the Customers in hand 3. Effect on operations 4. Reaction of Competitors to our decision

Evaluation of Options
Option 1 Profits might decrease or increase depending on the reaction of customer and competitor in short run but in long run they will be stable. Few of the new customers might be attracted but the loyal customers might perceive that we were cheating them before and thus might end up moving away from the brand as they are premium customers. Moreover it might be perceived as a bad quality product because of decrease. This is as well undesirable. If sales get boosted our excess inventory gets over otherwise it remains same or can even increase

 By lowering the prices we might see a new chunk of competitors to compete with and moreover as this can be a trend of extra inventory in the industry so if competitors as well reduce price we might land in Price War and this is undesirable Option 2 We might see this being positive in short run but in long run if customers store this will be same. The customers getting discount might order bulk in quantity if they have a storage capacity to store or if they could end up selling more giving lucrative schemes from their end and other customers have no reaction and this fits to our criterion In short run operations i.e. removal of excess might get over and to cater to long run we have a marginal increase in size and now we are serving more so problem is solved even in long run. Giving discount may not be visible to competitors as we will be catering to restaurants and whole sellers without any advertisements. This is desirable Option 3 We might end up with decreasing profits in short run but in long run it is bound to give lucrative returns.(Based on Market Research Projected profit shown in exhibit 2) We will be attracting a new set of customer altogether so we can impress them with our quality better than competitors as they are a lower end of customers but we might as well attract same old loyal customers but with the difference in quality they might get back to original, even if not, our product will be sold.(survey results shown in exhibits) We will have a permanent solution for both short and long term in operations We will have a new set of competitors for new product to compete with but since we have been catering to a premium segment and we can operate on profit margins and can easily compete with good quality even without ASPD stamp. Option 4 No effect on bottom line No effect on consumers purchasing. Operations get resolved No effect on competitors as they are un touched but they might get hold of all good quality fishes in the new area in that time. This is Undesirable.

*Financial analysis of all the options and their impact has been given in exhibit 1*

Recommendation On the basis of above options, the financial viability of all options and on the basis of survey results it is strongly recommended that Neptune should go for developing of a new product and should target the middle level group and should maintain a good quality but with a significant difference from the best except from the fact that best will be ASPD approved.

Action Plan We will first launch the product into a test market and observe the results Through same distribution network we will sell the new product. We will highlight ASPD accreditation on Neptune Gold to make it look significantly different and retain the brand loyalty.

Contingency plan For the plan given above there is a slight risk that product might fail in test market. In that case it will be viable for us to dump away the excessive quantity highlighting it to be of low quality because the R & D expenditure wont allow us to go for other options and then increase the packet size after stabilizing.

Word Count : 1107

Exhibits
1. Financial analysis of all the options Option No 1. 2. 3. 4. Investment Needed Zero Zero Medium Zero Effect on sales Profitability long term

Negative or atmost Gets reduced same in the long run Same in long run Remains the same Increase Nil Increases No effect

Making of a new product Projected Profit bars for next 5 years

IRR of Project : 24%

Projected Profits for New Product

400000 300000 200000 100000 Series 1 0 -100000 -200000 -300000 2012 2013 2014 2015 2016

Survey Conducted on Middle Income group Why dont you try Neptunes product??

Survey 1
Other reasons Charged too High 0% 50% 100% Series 1

Survey on High End Customers purchasing Neptune Why you purchase Neptune??

Survey 2
Other reasons Status Trust on quality 0% 20% 40% 60% 80% Series 1