Azalea Seafood Gumbo

Executive Summary

A thorough examination of Azalea Seafood Gumbo Shoppe was done to provide a strategic plan that will enable Azalea to maintain long-term growth and a sustainable competitive advantage. For Azalea to succeed, they need to consider valuable options presented in the following report. Included in the analysis is the following information that comprises the complete proposal:

* Analysis of the current market

* Analysis of forces that drive the industry

* Description of Azalea's strengths and weaknesses

* An identification of the opportunities and threats that face Azalea Seafood Gumbo Shoppe

* Analysis and proposal of possible options for Azalea Seafood Gumbo Shoppe

Azalea Seafood Gumbo Shoppe and the Value-Added Seafood Industry

Azalea Seafood Gumbo Shoppe was established in Mobile, Alabama in 1971. The company changed hands once before Mike Rathle, John Addison, and Bill Sibley (who would soon sell his part of the company to Mike and John) took over ownership. Mike and John had to move the business due to lease issues and the since the new location was too isolated to support retail sales, they would have to focus on commercial accounts for future business. They now had a clear vision of where Azalea was headed. The facility enabled eight-ton-per-day production capacity. It wasn't long before Azalea was producing more than 45 tons of gumbo and other seafood products each month. Their products were sold in many local restaurants, supermarkets such as Wal-Mart, and other types of food retailers.

Driving forces in the industry (Appendix C) are evolving as the Value-Added Seafood Industry begins to looks more and more profitable. Azalea has dealt well with their uncertainty and is well aware of the risks at hand. Azalea has to expand its production facilities in order to surmount production problems it faces inhibiting larger more profitable accounts. As they accumulate more accounts Azalea will begin to build a strong presence in the market. Once Azalea has reduced perceived risk levels and established itself financially, it needs to introduce new products in efforts to differentiate itself from the competition and increase its customer base. Once the industry begins to see long-term demand, competition will become a contest of who can capture growth opportunities and distance itself from the other competitors.

Porter's Five-Forces Model of Competition (Appendix B) thoroughly exposes what the competition is like in the Value-Added Seafood Industry. The strongest of these forces is the competitive force of potential entry. Azalea has had great success with its gumbo, but because it only produces gumbo on a large scale, there are many unfulfilled niches left to pursue. If another company were to enter the industry with its own gumbo, it could be potentially devastating to Azalea if this gumbo was better tasting and competitively priced. This ties directly to pressures from substitute products. Azalea has to work aggressively to develop the revenue to be able to expand its product selection so that it can maintain and expand its customer base. As for the bargaining power of buyers, they have a considerable amount of leverage since their purchases are in such large quantities, and the difficulty of Azalea to sell to individual customers allows buyers to have even more bargaining power.

There are several key success factors (Appendix D) although some are more successful than others. Azalea having its product in over 1,100 supermarket has given it adequate exposure. It needs to keep customers happy through its accurate filling of buyer orders. Its attractive pricing has and taste has been a profitable KSF. They have a competitive advantage against other competitors with their gumbo because it mostly all they produce and they do it well. Most other companies have many other products to focus on rather than worry about trying to out compete Azalea simply in gumbo.

Upon studying the SWOT analysis (Appendix E) it is apparent that the strategy-making efforts must aim at producing a good fit between a company's resource capability and its external situation. One internal strength is Azalea's great-tasting award-winning recipes. Major weaknesses that the company faces are dependence on gumbo sales for the majority of its sales, loss of accounts due to poor quality control, and very low cash to fund future expansion and exploit new market opportunities. Opportunities include product line expansion and better product placement in stores where it is already on shelves. A few of the threats that the company faces are seafood shortages, lower food prices, and the threat of other gumbo producers entering the market with better tasting products at lower prices.

There are two major alternatives that can be taken by Azalea Seafood Gumbo Shoppe. (Appendices F) The first is to implement a plan to help Azalea start to produce much needed capital. Although expansion is necessary, Azalea needs to cut costs in order to produce the revenue needed to expand its production facilities. They should drop etouffee, bisque, and shrimp creole from the product line to reduce costs and focus all efforts on gumbo production since ROE is increasing (Appendices G). This will allow their return on net worth to steadily increase. Catering should be stopped and more time should be spent trying to find ways to upgrade its facilities. Prices should be raised 2%, which will result in an increase in cash flow and profitability, and Azalea needs to develop more appealing and attractive packaging for its product. As cash increases, they need to begin paying off some debt. Once Azalea can afford to broaden their facilities, they will be able to produce needed volumes so that they can capitalize on obtaining larger accounts.

The second option is to try and develop demand for its other products. Azalea needs to increase spending on advertising and product demos in order to boost sales. They should move forward with the boil-in bag for all container sizes. The increased advertising and demos will allow supermarkets to be exposed to your other products so that they can begin to place them on the shelves. There needs to be more emphasis on increasing restaurant sales since they are increasing $178 billion by the year 2010. Greater food service sales are necessary to create a more stable revenue stream. Also they need try to expand their catering and develop more business from it. It will provide Azalea with great advertising through word-of-mouth.

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