Solar Bird Feeder Case Analysis

1.What problems do you see at SDI, and which of these problems is the most important issue facing management?

The most important issue facing management is the lack of a business plan and a logical strategy and objectives. It seems as though there was never a plan to make money. Strategic and financial objectives were not considered and goals were not measurable, time bound or assignable. Producing high quality squirrel resistant bird feeders is both time consuming and costly. In addition to high costs, demand is not being met and sales opportunities are being lost. Management needs to troubleshoot both production issues and sales strategies in order to reduce costs and build sales.

Other problems involve the assembly line, accounting for the inventory, accurate financial statements and high debt.

2. How many units of the Solar Feeders (both the Town and the Country models) does SDI need to sell each year in order to break even?

Using units sold in 1999, I have weighed the sales contributed by each product. Weighing fixed costs, I have projected that the Town model break even point will be 1361 and the Country model will need to produce 228 units in order to break even. A total of 1589 units need to be produced in the year 2000.

What are the strategic and economic implications of your calculation of the B/E point for this company?

SDI will need to meet and exceed this Break Even Point in units in order to maintain and to build their business. In order to be economically possible, more units will need to be produced and more demand will need to be created. Successfully achieving these goals will not take care of the debt and lost opportunities. A radical cut in costs along with building sales over a period of time before a profit will be realized. Bo, Ed and Scott have been successful in getting their product out to the public to a limited basis. They need to capitalize on this interest from the public and their past successful awards for their product. In order to be economically viable, they may need to outsource.

3. What is SDI’s present strategy? Is the strategy working? Are fundamental changes needed?

Current strategy is differentiation. To differentiate their product from any other product available on the market while also providing high quality. The fact is, the bird feeders have won several awards and have proven to be a popular novelty, especially by women. There is obviously a market for this item. Differentiation is a good strategy to gain and sustain a competitive advantage but fundamental changes are definitely needed in order for the business to survive and to grow.

4. What are your recommendations to the owners and managers of SDI in regard to the Solar Feeder product? Why do these recommendations make sense?

Strategic planning needs to begin with a good business model, identifying financial and strategic objectives, and realizing goals. Objectives need to be measurable, time bound and assignable. Either drastically cutting costs of production by using materials that are both less expensive and easier to use or outsourcing production needs to be considered. Since using the cost-base approach didn’t’ work for pricing, they need to reduce prices to what customers are willing to pay, $150. The wholesale price will need to be $75 in order for the retailers to make the 100% profit that they desire. A consultant, such as an engineer, needs to be consulted on ways to improve the feeders, and hopefully cutting costs. Mounting kits and plant boxes should be taken off of the available products for sale since only one mounting kit out of three bird feeders were sold. This would reduce the amount of postage charged to the customer and help bring down the price.

Creating more of a demand for the feeders will involve creativity and utilizing what facets that they already developed. Bo had discussed the fact that they had missed the traditional January through March “ordering window” of 1999, which had caused a major set back in the initial start up of their company. Currently they are in the beginning of the 2000 ordering window with backorders. Timing is critical to not miss out on this opportunity for the second year.

Other marketing recommendations:

Continue with the specialty stores as they have been doing. Do not market to businesses such as Walmart and Home Depot. These clients would demand a lower cost and more production, unless outsourcing makes this an option.

Develop and expand the web-site and make it “user friendly” for this market.

Expand on the already established market of women, birdwatchers and the retired population.

Change the name of the feeders to clearly identify what the feeder does.

Capitalize on the following data to targeting this market:

Consumers spend $843 million per year on feeders, baths, and nesting boxes then SDI should be able to attain more of a market share.

The average member of the American Birding Association is between 40-60 yrs of age with an average income of $60,000. 35% are women (up from 25% in 1989) and have college degrees.

Five states (California, Florida, Pennsylvania, Texas and Illinois) have the most members. ABA membership has tripled in the 1990’s

Finally, if outsourcing is not utilized, inventory needs to be accounted for in the various stages of production, Raw Materials, Work In Progress and Finished Goods. Accurate records need to be maintained and used as a guidance to deviate from the planned strategies.