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Alex Milovic MNGT 3280 Amy’s Bread Case study April 5, 2005 Amy’s Bread Strengths: Amy’s entrepreneurial spirit; Toy Kim Dupree-excellent right-hand manager; Already has about 50 wholesale customers, plus 30 on a waiting list; Company is finally turning a profit; Positive work environment (5 day work week, better pay than competition, benefits package, 401(k) plan, employees allowed to speak freely, low turnover); Retail business allows for higher profit margins, and now represents 25% of Amy’s business; Good niche product mix-high quality bread products, micro-bakeries; Makes herself available to the press/public, leads to word of mouth advertising; Can now secure bank financing due to Amy’s proven track record; Wholesale business (representing 75% of the business) is more stable than retail business. Opportunities: Much higher profit margins in high-end breads (black olive, apple walnut rasin-$2.40 wholesale, $3.40 retail profit with the high-end breads vs. $1.71 wholesale, $2.60 retail without high-end breads); Retail business (currently 25% of business) allows for higher profit margins and payment is only in cash; Hiring another manager could allow Amy more time to run the company; Buying 31st street location would allow for production facility expansion and the ability to cater to customers currently on the waiting list; Leasing the 15th street location could allow both retail and production expansion. Weaknesses: Bakery industry is highly competitive with low wholesale profit margins; NYC locations are very expensive; Higher labor costs due to hand-production techniques (35% of CGS); Ingredient prices are volatile; Ingredients are more expensive than the competition’s; CGS is 65% of net sales; Competitors can enjoy better economies of scale due to automated production and cheaper ingredients; 75% of the business is through lower-profit wholesalers; Current production location is too small to meet growing demand. Threats: Dieting trends (i.e. Atkins diet) could affect consumer demand for bread. Mission: To produce high-quality, handmade breads for wholesale and retail customers through our retail locations and door-to-door deliveries. Objective: Amy’s Bread has seen steady growth over the last few years. This success has overextended both the employees and the warehouse space. Amy is looking to move operations to one of two locations: a building on 31st street, or one on 15th street. The 31st street location would allow Amy to expand her wholesale business and allow her to invest in a property instead of leasing. Amy should also look into adding a manager to allow her the time to focus on the overall business. Her most profitable bread lines are the high-priced breads, she should look into increasing the number of high-priced bread. Eventually, Amy should consider opening small retail locations in New York City. Action Plan: Who What(goal) When How Amy Scherber and Hire new assistant 3-6 mo. Recommendations from Toy Kim Dupree manager Amy, Toy, or her business contacts. Amy Scherber Purchase 31st street 3-6 mo. Secure funding through location bank loan, personal loan, and current savings to purchase $300,000 facility. Amy Scherber Purchase 3 retail 3 mo.-2 yrs. Purchase small retail kiosk/booth locations locations in high-traffic over the next 2 years areas to increase retail business. One in Rockefeller Center mall, one in the village, one to be determined. Amy Scherber Purchase 4 additional 6 mo. Purchase vehicles with trucks to increase Amy’s Bread logo to deliveries increase delivery speed and capacity. Amy Scherber Increase percentage of 2 yrs. Grow business through retail sales from 25% to additional high-priced 35% over the next 2 items and additional years retail locations. Amy Scherber, Toy Introduce 5 new high- 3 mo.-1 yr. Create new, high-quality Kim Dupree end breads over the bread products. These next year. will be sold in both retail and wholesale channels. This will increase the average profit margin.
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