1.

Executive Summary: (30%)

a. What is the key challenge faced by Sarah Shell, owner of McAdam? Provide answer

in one/two sentences (15%)

Sarah Shell had decided to move McAdam’s headquarter from Calgary, Alberta to Toronto,

Ontario due to the city having more potential market and providing greater opportunity for

her company, but also posed some challenges to her: she could not produce her bags by

hand anymore, but to produce the bags by an independent manufacturer. Sarah had to

consider the pros and cons between having the mass production done either locally or

internationally.

b. Develop a Vision Statement for McAdam (What type of company does McAdam want

to be in the future?) Provide answer in one or two sentences (15%)

McAdam aims to continue satisfying its existing loyal customers with its unique

and high quality designed handbags, and at the same time expand the

customer base to the Toronto market. McAdam guarantees to always listen to

customers’ ideal and specialized requirements for their handbags.

2. Situational Analysis: (30%)

a. Describe Mc Adam using the Diamond-E Framework (refer to Wal-Mart and Apple

Samples provided in Week 5 class/slides) (15%)

Management Preferences

Organization

Strategy
Environment

Resources

Goals

● Strategy:

Core Activities

Product Market
Focus
● Environment: Testing the Strategy – Environment Linkage using BEAM.

- The relevant environment to focus for McAdam is the luxury handbag industry, as well

as the potential market at Toronto – the city that McAdam is going to move to.

- Isolate and analyze forces of Demand, Supply, Competition, and Government.

+) Demand: Toronto with higher growth rates might provide larger demand from

customers. Consumers have moderate bargaining power.

+) Supply: Suppliers have moderate to high power since McAdam would be a new

brand in Toronto, and either local or international mass manufacturers have already

had their own bases of customers.

+) Competition: There are many competitors with advantages of brand recognition and

consumer loyalty.

+) Government: Federal government provides many tax savings for small businesses.

McAdam needs to be mindful with provincial regulatories.

● Resources:

- Initial purchase of inventory is financed with the business’s cash.

- The owner – Sarah Shell - has experience in luxury fashion industry for 12 years.

- Sarah has a 250-pound industrial sewing machine.

- McAdam has already have its base of customer throughout North America.

● Management Preference:

- The owner is entrepreneurial and risk taking. She has thought about expanding her

business to a completely different province.

- Since this is a proprietorship, the owner does not have to satisfy the shareholders.

● Organization:
 - The owner often talks to botique owners to get to know better the customers’ demand

and preference.

- The organizational structure was not really clear in the case.

b. Develop a Porters 5-Forces Model for Mc Adam (15%)

​Force ​Assessment ​Rationale

​(H, M, L) (Justify the assessment)

​Threat of Entry ​Low ​- Large capital investments restrict new entries.

​- Brand recognition and loyalty are main factors attracting

high income earners.

​Industry Rivalry ​High ​- The presence of established brands in the luxury

market.

​- Some of the competitors have large financial and

marketing resources.

​- Many rising competitors from Internet-based companies.

​Threat of ​High ​- Counterfeit products and black market products are

Substitutes major threats in the luxury fashion industry.

​Buyer Power ​Medium ​- McAdam sells its products mainly using

direct-to-customer channel. The brand has positioned

itself as an affordable luxury brand and receive

recognition of its unique and high-quality handbags.

​Supplier Power ​Medium ​- Most brands do not manufacture their products, for that

many rely on manufacturers located either locally or

internationally.

​- Their suppliers would have many brands as their clients.

3. Understanding: (15%)

a. What additional Qualitative Analysis should be undertaken to help Sarah Shell

decide on best manufacturing options. NOTE: this is a question about Qualitative

analysis not Quantitative analysis.

In my opinion, Sarah Shell should use PESTEL as the additional Qualitative Analysis in

deciding on best manufacturing options. PESTEL anaysis is an useful tool in assessing

external factors affecting the overall business environment.

Source Factors Impact

Political Regulations, import duties, and trade control Threat

– instable because of international trades.

Economic Growth rates, level of consumers’ disposable Opportunity

income: Consumers in Ontario compares to

Alberta have higher level of disposable

income, and Ontario is the province with

higher growth rates.

Social Medium and higher level of income Opportunity

consumers largely contribute to the luxury

fashion industry.

Technological Internet and online shopping has masive Opportunity and

impact on the industry. Threat

Mass manufacturing could have impact on the

uniqueness of the products.

 Ecological Using leather as material involves high Threat

energy consumption, dangerous chemicals,

and endangered species.

Legal Legal factors related to counterfeit products. Threat

4. Development and evaluation of Alternatives based on your analysis (20%)

a. Based on your Diamond-E Framework, Porter’s 5 Forces Model and Qualitative

analysis – should Sarah Shell, owner of McAdam, consider Local or International

Manufacturing? Why?

Based on my above analysis, I would recommend Sarah Shell to manufacture her products

using local manufacturers for the following reasons:

● Local manufacturers require smaller amount of minimum order quantity compare to

international ones. This enables McAdam to better control its inventory levels.

● Risk and time associated with the shipment of products can be reduced.

● McAdam has more control over product quality because accessing the

manufacturing sites is easier.

● Local manufacturers could bring competitive advantage to McAdam since some

customers would prefer locally manufactured products over internationally manufactured.

● International manufacturing might incur other additional costs related to international

trade.