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Wallace & Hinz

Strategic Audit
by

michael Hultin

on 27 April 2010

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Transcript of Wallace & Hinz

Management History Mission Gallery 30 years ago, Don Wallace, a custom furniture maker, and Tom Hinz, an experienced glass blower, collaborated on their first bar for their friends, Arcata's legendary YoungBergs. “It's simple…We are America's greatest bar builders. We build the best bars in the world. That's who we are. That's what we do."











Owner/CEO Tom Tellner

Chief Financial Officer-Robert DePierro

General Manager-Don Ehnebuske

i.Sales/Marketing-Mark Coates

ii.Manufacturing
1.Design
2.Rough Cutting
3.Assembly
4.Finishing
5.Distribution
Objectives •To ensure high standard of quality.
•To design and build efficiently.
•To safely ship around the world in time.
Steamboat Springs Bar Canadaigua, NY USA Their layout selection includes 14 styles, ranging from the American Sports Bar to the English Pub.

They even built the Cheers restaurant bars in Boston. Specalizing in custom hand-made bars
External Enviroment Internal Enviroment Strategic Alternatives STABILITY:
i.Stay in the current market.
ii.Do no expand the product line.
iii. Maintain their current online marketing, without expansion.
iv.PROS and CONS
1.No increase in costs. (P)
2.Less risk involved because of no changes. (P)
3.Not able to gain more market share or new customers. (C)
4.Missed opportunities. (C)
GROWTH
i.Expand beyond website as the only marketing strategy.
1.Magazine Ads
2.Online Banner Ads
3.Local PR events
4.Re-engage in trade shows.
ii.Implement and expand new technological automated wood machines.
iii.Location change
1. Relocate business close to I-5
a.Lower shipping costs
b.Lower material costs
c.Tax breaks (Oregon)


RETRENCHMENT
i.Discontinue international operations
ii.Create automated process rather than custom hand-made
iii.Discontinue custom production; engage in mainstream mass production
iv.Currently using seasonal retrenchment.
v.Reduce staff to minimal level annually.
vi.PROS and CONS
1.Loss of business from international opportunities (C)
2.Initial increase in costs from automated production versus custom (C)
3.Change core competencies by changing to an automated system from custom (C)
4.Long-term increase profits and reduce labor costs through automated system (P)
5.Maintain minimal staff, save operating costs (P)
6.Reduce costs in labor and materials by mass production (P)
iv.PROS and CONS
1.Increase in marketing tactics will gain more than word of mouth customers (P)
2.New marketing strategies would increase costs (C)
3.Focus on West Coast trade shows to reduce trade show costs (P)
4.For trade shows send small portable bars to reduce shipping and setup costs (P)
5.Relocation would reduce costs overall (P)
6.New technologies would maintain competitiveness as well as increase costs (P and C)
7.Re-locating would alter corporate culture (C)
8.New staffing expenditures from re-locating (C)
9.Re-locating would halt production temporarily (C) 8' Mohagany Portable Bar RECOMMENDED STRATEGY
Growth Strategy
Johnny Foley's, SF, Ca El Toro Brewery, Morgan Hill, Ca Blue Point, Cleavland, OH. CORPORATE CULTURE
1.Close relationships
2.Family oriented- to help encourage stable family environments
Single mother – determination and motivation
3. Skilled workers- Wallace and Hinz core employees: without them the business would operational logistics (S)
4.Create a balance between work ethics and enjoyable environment (S)
5.Developing cross training to increase employee knowledge base (S)
OPERATIONS AND LOGISTICS

1.High operation costs in comparison to competitor because Wallace and Hinz does custom hand wood work, while their competitors are monopolizing on new automated systems. (W)
2.Low production efficiency (W)
a.Automated competitors = 85 cabinets per day
b.Custom handmade = 11 cabinets per day (on a good day)
Implementation Expand marketing strategies and advertisements (Programs A-C.)

Activities
1.Online Banner ads/ Magazine ads (Program A)
a.Yacht magazine
b.Home Design
c.Interior Design
d.Wine Spectator
e.Food & Wine Research new developments (Program B.)
a.Hotels
b.Casinos
c.New Construction
d.High end houses (Planning Departments)
e.Country Clubs
f.Gentlemen’s Clubs
g.Breweries
h.Wineries Re-engage in tradeshow activities (Program C.)
a.Hire new tradeshow/marketing manager to travel and implement.
b.Develop easy to transport display (e.g. portable bar).
c.Focus but don’t limit to West coast shows to reduce cost.
d.Limit annual number and focus on the shows with the most appropriate clientele.
e. Create extensive display catalog of previous work.
f.Push the portable bar as a product that everyone can afford and enjoy.
g.Provide free accessories to attendees as a means of cheap advertising.
Wallace & Hinz Sweet River Saloon, Eureka, Ca CORPORATE RESOURCES
MARKETING

1.Entirely online (W)
2.Trade shows- eliminated (W)
3.Exceptional website construction (S)


FINANCE

1.RATIOS
Wallace and Hinz 2009 Financial Ratios2009
Current Ratio-.086
Gross Profit Margin37.7%
Debt to Asset Ratio95.02%
ROA8.92% HUMAN RESOURCES MANAGEMENT (HM)

1.Transform old employee habits (techniques/styles) toward faster more productive techniques/styles (S)
2.Hiring new fresh employees with innovative ideas
a.Help communicate to older employees who are stuck in their ways to transfer new knowledge (W)
INFORMATION TECHNOLOGY (IT)

1.Trying to integrate more modern technologically advanced design and implementation techniques. (S)
a.Eliminated trial and error process
b. Promotes efficiency
c.Exact manufacturing
2. Bringing in new machinery to implement faster production and efficiency.
a.CNC Machine- Computer automated cutting machine (S)
Growth Strategy—Through Marketing (Functional-level Strategy)

Expand marketing strategies and advertisements
1.Online Banner ads
2.Magazine ads
3.Research new developments
4.Re-engage in tradeshow activities

Production line process
1.Increase advancements in new technologies

Continue and broaden accessory line to gain brand awareness and offer customers a complete package.

Design and build portable show room bar to decrease cost of shipping to each tradeshow.
1.Allow increased exposure due to ease of shipping
2.Lower cost of booth space Production line process (Program D.)
Activities

1.Increase advancements in new technologies, which will reduce operational costs (time value and wages).
a.CNC machine
b.Utilize new technologies and machines to make production more efficient.
Continue and broaden accessory line to gain brand awareness and offer customers a complete package. Offer accessories at a discounted rate due to the added benefit from brand advertisement. (Program E.)

Activities
1.Custom brand labeled stools/chairs
2.Glasses: Pint/wine
Engage in vertical integration by cutting out transportation companies and focus on implementing the businesses own transportation. (Program F.)

Activities
1.Reduce the costs of transportation fees.
2.Continue or begin building your crates for transportation.
3.Increase in ability to use as a tax write off.
4.Create new price structure for transportation fees.
WHO WILL IMPLEMENT THE PROGRAMS

Program A., Program B. and Program C.

1.Hire a new marketing/advertising manager to oversee and implement the three new programs.
2.Current employment can design and build portable bar for tradeshows.
WHO WILL IMPLEMENT THE PROGRAM

Program E.
1. Find a manufacturing company who can create complimentary accessories.
2.Current employees can design and build the chairs/stools for clients. ONLINE/BANNER-ADS:

CPM-Cost per mili-impressions-charges every time you load or re-load a web page or an advertisement (advertisements popup).
Average Cost: $0.01-$0.80 per mili-impression (1,000) when not targeted.
Average Cost on search engines: $10.00-$35.00 per mili-impression (1,000) for specifics targets.
CPC – cost per click – (PPC-pay per click) advertisers pay each time they click on their advertisement and are redirected onto their main website.
Average Cost: $1.00-$2.00 per click.

The following marketing strategies run similarly to the above price structures:
CPV – Cost per visitor – advertisers pay for the delivery of the targeted visitor to the advertisers’ website.
CPV – cost per view – pay fee for each unique viewer on each website; usually used with pop-ups.
CPE- Cost per engagement – different from CPM- advertising per impression is free, but they are charged whenever a customer clicks on the advertisement. Hybrid between CPM and CPC.
NON-ONLINE ADVERTISEMENT AVERAGE COSTS:
Newspapers – $1,300 per week for 2” x 2” ad
Television – $200,000 for one 30-second commercial (during prime-time)
Direct Mail - $1,500 for 1,000 4x6 postcards (includes postage)
Radio - $90 to $120 per week on a rotator (prices higher if time slots for ad are selective)
Magazines - $1,200 to $5,000 per month or per issue (depends on ad size and demographics)
Outdoor (billboard) - $3,000 to do artwork and install media on billboard; rates depend on impress level, ranges from $5,000 to $500,000 (the higher the quality of the artwork and the larger the demographic group, the higher the price); minimum contract is 16 weeks.

*Note: Prices reflected are negotiated prices for a 12-week campaign
WHO WILL IMPLEMENT THE PROGRAM

Program D.
1.Tom Tellez- important for CEO, in order to maintain assets and operations. PROGRAM B.: Engage in long-term contracts with companies:
Average cost: personal travel and phone expenses.
$100.00-$1000.00
This can be one of the lower cost programs to implement.

This program will allow for consistent business income and expansion internationally by developing a contract with international hotel/timeshare chains.
Average Tradeshow activities and costs:

On average, project a budget total of $10,000 per trade show exhibit. This should cover all expenses of an average booth, with the following cost breakdown:

Space: 24%
Booth expenses: 33%
Show services: 22%
Transportation: 13%
Advertising, promotional and special activities: 4%
Personnel (including travel, hotel and expenses): 4%
WHO WILL IMPLEMENT THE PROGRAM
Program F.
1.Tom Tellez-CEO. PROGRAM D. : New Technologies/Machines:

CNC MACHINES: RANGE FROM $20,000-$90,000.
owww.woodweb.com
owww.k2cnc.com
owww.wwthayer.com
ohttp://www.cncmasters.com/
PROGRAM E. : Expand business line with accessories for Bars:

CHAIRS/STOOLS- Utilize excess wood materials and build complementary bar stools/chairs.

GLASSES: WINE AND PINT:
W/ETCHED LOGO: 24 Pint/wine glasses: $200-$300.
W/PRINTED LOGO: 24 Pint/wine glasses: $150-$250.
PROGRAM F. : Internal Transportation:
Semi-truck
New - $100,000 +
Depends on size, weight, model, and make.
Used- $75,000-$100,000
Insurance
Average: $600-800 per year
Depending on size, weight, brand, model, make and driver.
Gasoline
Current I-5 Diesel averages: $3.18-$3.35 as of 4/23/2010.
Average MPG for semi, is 6-8 mpg.
Average gas tank: 250-300 gallons (between two tanks)
Crating and Freight

Depending on the costs of building crates internally, can reduce costs.
Assuming on average 10 bars are produced a year with $74,000 per year in crating costs, that’s approximately $7,400 per crate.

Total approximated costs for transportation:
Miscellaneous expense (labor, food, lodging): $2,000.
Crate expense: $7,400.00
Semi-transportation: $1,342.71

Total approximated costs: $10,742.00 per bar.
A. Review overall financials and compare to the previous year before program implementation.

B.If marketing programs are implemented; are you receiving more client inquiries? Also, hire a very qualified marketing consultant.

C.Utilize benchmarking to verify that program implementation is successful.

D.Look into hiring financial personnel to oversee the profits/losses from programs as well as daily operational expenditures and develop methods/strategies to reduce unnecessary costs.
EVALUATION AND CONTROL
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