Requirement 1 (4 marks)
a) (2 marks)
If EFI does go forward with Lucia’s idea of developing a high-end accessory line, their value proposition strategy would be a mix of focused/niche and differentiation. Because EFI mainly deals with sponsors and a select clientele (the wealthy), their client base is relatively small, but loyal and stable. EFI maintains their loyalty by offering quality products and giving its customers excellent customer service. This strategy would work since the new product line would follow EFI’s existing tradition of exclusive design, high quality and personalization. By offering unique and custom made (personalized to the client’s liking) high-end accessories, this would allow them to distinguish their product from the competition since little to no competitors offer this type of product and therefore differentiating them from the competition and allowing them to justify their premium price on the accessories.
b) (2 marks)
Two main strategic vehicles would be represented by developing the high-end accessory line. The first o would be horizontal diversification. The high-end accessory line would be part of a horizontal diversification because the creation of this line is not directly related to the high-end customized skis, but would most likely appeal to EFI’s existing clients. The second one be that the company would most likely be outsourcing. Although Lucia would be the one designing the accessories, EFI might want to consider outsourcing the production of these products allowing them to have lower production costs (lower material and workforce costs) and allowing them to focus more on the main part of the business – the high end customized skis.
Requirement 2 (32 marks)
a) (12 marks)
Risk classified by PESTEL force
- Outsourcing the manufacturing process to China means operating in another country. While operating in another country could be beneficial economically, some countries have tighter political systems than others. Regulations imposed by the Chinese government might restrict on what EFI can and cannot do in their country and therefore making it difficult to enter the country outsource their manufacturing process.
- China’s federal central government and provincial governments don’t always state the same, making it hard for businesses to know exactly what the rules are, therefore EFI needs to make sure that they are aware and understand the laws and regulations in place.
- The commercial lending prime rate in China is higher than it is in Canada. Currently the commercial lending rate in China is at 4.35% whereas it is currently set at 2.7% in Canada, therefore making the cost of borrowing more expensive in China.
- Operating in another country would also mean operating in a foreign currency. EFI would need to consider the exchange rate on the costs of manufacturing in China and to consider the fact that exchange rates fluctuate.
- EFI needs to consider the age...