Question

Background: The Clearfield Cheese Company was established by two brothers, Terry and Ted Edwards, in 1931, in Clearfield, Pennsylvania. This section of Central Pennsylvania's economy was based largely upon coal and agriculture at this point in time. The U.S. economy was in the throes of what is usually referred to as the Great Depression, and coal production and agriculture were both experiencing the effects of the slumping economy. The farms in the area were mostly small- to medium-size dairy operations. The farmers were under financial duress because they could not sell their milk in the local area for a price to cover their cost of production. There were better market opportunities in Pittsburgh and Harrisburg, Pennsylvania, but their transportation costs put their "landed cost" at a disadvantage with dairy farmers in Erie, Pennsylvania, and Eastern Ohio. The Edwards brothers were not farmers but rather entrepreneurs and owned several tanker trucks, which could be used for hauling milk. They decided that instead of using their equipment to haul milk to potential markets for very meager profits they would start a cheese processing operation in Clearfield. They had some savings and were able to borrow money from The First National Bank of Clearfield, which was still solvent. Their grandfather who had emigrated from Switzerland was knowledgeable about cheese production and processing and helped them get started. They purchased milk from local farmers with lenient payment terms and started a successful venture. World War II presented some challenges in terms of labor supply and fuel rationing, but they survived and prospered by hiring more women and utilizing more rail service. The next major hurdle was the government-subsidized cheese producers in Canada selling into the Pennsylvania market in the 1980s. Tom Powers, CEO of the Clearfield Cheese Company, with the assistance of two of his key executives, Andy Reisinger (CIO) and Sandy Knight (CSCO), developed a plan, which included improving their supply chain operation efficiency by lowering inventory levels with better forecasting and procurement practices. They expanded their product offerings by adding cottage cheese, sour cream, and yogurt. They also purchased a Canadian company in 1995 because their Canadian sales were growing. This lowered their costs to serve the growing Canadian market and made them much more competitive in Canada. This was an important step to make them a global company.

Current Situation Their board of directors in 2017 was delighted with their cash flow and profits. However, they were concerned about future growth because of the changing diets of many consumers who had become more concerned about consuming milk-based products. The company had already added low-fat versions of the major products, but the board members were concerned that this would not be sufficient to sustain their growth and profits. Some possibilities that were suggested for consideration included (1) setting up a new company to produce non-dairy-based products such as almond milk and other alternatives to cow milk. All the new products would have a healthy "spin" such as the White Wave company; (2) market expansion of their existing product lines into Mexico and Central America; (3) expanding their current product offerings by adding ice cream, high-end cheeses made from goat and sheep milk, and high-end milk-based candy; and (4) a combination of one or more of these alternatives.

Note: Read the case study and answer the following question. The answer should be a minimum of 20 lines. No Plagiarism.

1. Evaluate all three alternatives offering pros and cons of each.

2. What would you recommend? Why?

Answer 1

answer-

part A) the option is to set up a new company to produce non dairy products such as almond milk or soymilk or any other alternative to cow milk.

pros:

1) products like almond milk or a soymilk would be more beneficial for the health. it lasts long after opening.

2)proportion of vegans are increasing in USA and around the world, which might improve the demand in the future.

3)No problem in procurement of raw material because, USA is the one of the largest producer of the almonds in the world.

4)Animals will be less exploited or maybe unexploited. Animal rights would be protected.

5) we can expect an increase in employment level, because workforce is needed to set up a company or a factory, and of course in the production of the new products.

cons:

1) non dairy products are expensive.

2) at present, consumption of non dairy based products are very less, that means demand is too low.

3) setting up a new plant or a company might not be profitable move, because it will be very difficult to penetrate the market in the present situation.

4) Income of the farmers supplying cow milk, to the organisation might get affected.

situation 2- market expansion of their existing product lines into Mexico and Central America

pros:

1)increased global reach.

2) would be able to penetrate into the market in the Mexico and the central america.

3) It would help to create new tastes and demand amongst the people of these countries.

4) employment generation in these countries.

cons:

1)difficulty in capturing the market due to the well established competitors in those regions.

2) less demand of their products due to different tastes and appetites in those regions or country.

3) risk of setting up a plant in new countries might be higher, there might be risk of less returns because of tastes, culture and various socio economics reasons.

situation 3- expanding their current product offerings by adding ice cream, high-end cheeses made from goat and sheep milk, and high-end milk-based candy

pros:

1) innovation or introduction of new products can lead to the overall growth of the company in terms of sales and profits, which can further lead to expansion of the company.

2) Demand of candy's is always high among the age group of 5-15 years, so it might be hit to roll out such kind of a products.

3)employment generation will take place.

4) farmers would able to supply more milk, and that will be very profitable for them as well

cons:

1) exploitation of animals would increase.

2)sugary products like candy's are not so healthy to consume that can create many health issues like dental problems, diabetes etc.

3)production of all these diversified items can lead to diseconomies of scales, which might affect the  profits of the company.

Q2)

I would recommend to start the production or set up a new plant to produce almond milk or other non dairy products because, there has been a change in the diet of many consumers of dairy items.And nowadays, numbers of vegans are increasing rapidly. since USA is one of the largest producers of almonds in the world, so there might not be any problem in procurement of raw materials(almonds) as well. But the company should also start thinking of producing milk candies or other high end milk products like sheep milk, milk ice creams etc. as a facelift of cow milk. so this would give consumers a diversified choice of goods to choose from. But before that company should carry out proper market research to take the most profitable decision.

And for setting up a plant in mexico or in other central American countries, company should run out a detailed risk analysis of that country. so that they can penetrate into the market and earn a good profits. I would recommend the company to first carry out a rigorous market research or survey to reach the best decision.

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