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Case Study Analysis Meakin Enterprises

Introduction

Meakin enterprises is a Canadian based agricultural corporation that focuses its synergies in providing quality food items. The company was founded by Daved Meakin in 2005 and is located in Langham, Saskatchewan (Case and Kalesnikoff 1). The founder of the organization had a strong passion for agriculture that was entrenched to his farming family background. Meakin’s grandparents had massive acres of agricultural land where they grew different crops such as wheat and canola. Unfortunately, the family lost the vast prime agricultural land, thus forcing Meakin to start farming operations from scratch. Meakin first acquired 160 acres of land in 2005 that he later increased through purchasing of additional 3,840 acres of land in 2015 (Case and Kalesnikoff 1). Meakin used the land effectively to increase the production of various farm products such as canola, peas, barley, among others. The farmer’s exemplary performance in agriculture was attributed to the application of viable farming approaches adopted, professionalism employed, proper supply chain management, use of new agriculture techniques, and accessibility of farm inputs. The company’s diversification strategy is also instrumental in operating both agricultural and trucking or industrial business segments (Case and Kalesnikoff 1). Despite the leverage advantage that the firm enjoying, the company also faces numerous issues such as labor concerns, cash flow, weather conditions, input sourcing criteria, marketing, and structural concerns that were mitigated to guarantee positive performance emerged. Although Meakin enterprises can sustain its performance strength and competitiveness by maintaining the current business level or reducing the trucking business, the best strategy is to expand the farm to 1,684 hectares or expand the trucking business and reduce the farm to 907 hectares.

Internal Analysis

SWOT Analysis

Strengths

One of the main advantages of the Meakin farm is crop diversification. Meakin farms produce a variety of crops, including field peas, wheat, and canola. The practice of crop rotation helped the company reduce the impact of pests, weeds, and diseases. Field peas and canola are the most beneficial plants in the Meakin farm (Case and Kalesnikoff 3). Field peas play an import role in fixing nitrogen into the soil while canola had the highest price in the market and incurred the lowest operational cost. Likewise, the forward contracting tool that fosters risk management helped Meakin Company to cut on its expenses.

Weaknesses

The primary weakness of both the agricultural and trucking industries is the lack of skilled labor. In 2002, the average age of farmers in Saskatchewan rose from 50.5. By 2011, the age had risen to 54.2. The young age group, which is supposed to supply the largest workforce, pursue other careers in the oil and gas sectors. Maintaining drivers who are loyal and long-standing in the trucking industry was often a challenge, as competitors would offer higher wages to porch them. For the hauling business, employing drivers over a cyclical year was a challenge where demand kept on fluctuating. Another problem for the trucking business was the scheduling of deliveries. The company encountered a delivery scheduling difficulty owing to the use of backhauls that was to avoid empty miles on the road. The decreasing value of farmland and the use of older farm equipment due to the introduction of modern tools was also a challenge for the firm.

Opportunities

The most significant opportunity for the Meakin Industrials is the emergence of new markets locally and internationally for the canola, peas, and wheat. The demand for canola and other crops in the US and other nations is encouraging as it gives farmers a promising future (Case and Kalesnikoff 3). Statistics from the Canadian bureau reveals that a significant percentage of all the canola produced in the nation is exported. Critical markets for canola include the European Union, Mexico, and the United States that uses the product to develop biodiesel. Other export destinations include Japan and China. Countries such as China, Bangladesh, and India required and still need peas for human consumption. Wheat was in high demand in countries along the Western Hemisphere, just as it is today.

Threats

The main threat in the agricultural sector that is also affecting the firm is the uncertainty in weather condition. The farm sector is primarily affected by climate change and global warming. The other threat is the fluctuation of the prices for the agricultural produce. The market for agricultural produce in the Saskatchewan relied on the market forces of supply and demand. Such a market leaves the farmers with little bargaining power resulting in lower prices for their agricultural produce.

Porter’s Diamond Model

Porter’s diamond model provides six elements that help in understanding Meakin’s internal state of affairs. The components include factor condition, demand condition, and related and supporting industries (Claessens 1). Other features include firm strategy, structure, and rivalry, chance and government. According to the model, factor conditions are the various types of resources such as human, physical, knowledge, farm inputs, capital, and infrastructure that may be present or absent in a company. From the case study, Meakin was not deficient of farm inputs, infrastructure, and knowledge. The company mainly faced short supply of the human resource, capital or cash flow crisis and the physical support system to improve the value of farmland in the region.

Concerning demand conditions, the company operated in an environment where the need for wheat, canola, peas, and barley, both locally and internationally was increasing (Case and Kalesnikoff 2). The market size and buyer numbers of the products have been growing day by day since 2014. Likewise, Meakin continues to benefit from the impactful related and supporting industries, including companies. Trucking business segment is one important unit that supports the company with quality farm inputs. Similarly, companies including DuPont, Bayer Inc., and Syngenta Canada, support the enterprise by providing the necessary retail and logistical systems. The element of the structure, rivalry, and firm strategy remain under consideration in Canada just as it was in 2015. Most companies, including Meakin, were organized and managed responsibly. However, they had structural gaps that hindered innovation and brand success. For instance, Meakin industry could not break even as expected owing to structural complications that affected crop planting and harvesting. Besides, industry rivalry and competition were intense (Claessens 1). Porters also affirmed the role of government in ensuring success in all economic sectors. The government of Canada promoted farming business, and it continues to do so through policy interventions and provision of relevant farm inputs. The final element is the chance, which revolves around the opportunities that companies have. Meakin Company has had excellent chances of progress and success, just like other industry players.

VRIO Framework

Resources

Valuable?

Rare?

Imitable?

Organized?

Professional Engineering skills

Yes

Yes

Yes

Yes

Long term competitive advantage

Land

Yes

Yes

Temporally competitive advantage

Marketing Strategy

Yes

No

Competitive parity

Human Capital

Yes

Yes

No

Temporally competitive advantage

Meakin used his professional engineering skills to modify, repair, and service various agricultural equipment. The skill was rare, and many farmers were sourcing it at a cost. This process enabled Meakin make profits out of it, which he used to expand his farming operations. The skills were not easily imitable since they required one to attend engineering classes. The Meakin organization was ready to utilize Meakin’s professional engineering skills since there were machinery and equipment that needed repairs, servicing, maintenance, and modifications. As such, it can be concluded that professional engineering experience has a long term competitive advantage for the Meakin businesses.

Land was a valuable resource because of its support to all agricultural activities. Meakin used the land he purchased from his grandmother and the one he leased to carry out the farming activities and the trucking business. Getting land in Saskatchewan is very expensive. The amount of money one has to use to purchase an acre piece of land is what makes the asset a rare resource. Although it is a rare resource, the land is easily imitable. One can observe what another farmer is doing and replicate the same on his farm. Moreover, the land in the region has particular soil characteristics including soil texture, structure, and PH that make farmers in Saskatchewan grow similar varieties of wheat, canola, and peas. Therefore, the land has a temporary competitive advantage to Meakin businesses.

The human capital is variable for both Meakin farm and Meakin Industrials although both operate in the agricultural sector. Meakin will require a lot of semi-skilled workers to operate his Meakin Farm and skilled workers for his trucking business. However, get adequate human capital in Saskatchewan is rare since the majority of the youths are looking for employment in the oil and gas sector. Nevertheless, the skills that workers require to operate in both the Meakin businesses are not rare as anyone can acquire them. The human capital provided a temporally competitive advantage to Daved Meakin.

Meakin sales his agricultural produce through a co-operative made by farmers within Saskatchewan. The marketing strategy adopted by Meakin is valuable as it maximizes the revenue for the outputs from the Meakin Farm. However, it is not rare and is easily imitable since other farmers in other regions have taken similar marketing path to sale their farm outputs. Therefore, the marketing strategy adopted by Meakin has a competitive parity.

External Analysis

PESTEL Analysis

Political Factors

The political condition in Canada is favorable for the agricultural industry. The country has been enjoying relative peace and mutual coexistence between different groups of people. Furthermore, the government has formed agricultural boards such as the Wheat Board, which purchases and sells agricultural outputs on behalf of the farmers.

Economic Factors

In recent years, changes in the microeconomic factors had made the market for the two crucial inputs, fuel and fertilizer experience price variability. Apart from the volatility of commodity prices, crop selection also made the prices for harvest inputs unstable. For instance, the crops that fetched the highest prices in the market failed to sustain the exemplary returns due to the high costs of chemicals, fertilizer, and seeds. The increasing value of farmland was another economic factor that affected Meakin Industrials (Case and Kalesnikoff 4). The immense capital expenditure that an organization had to spend to maintain a reasonable acreage of land affected the viability of modern farms. Land prices were influenced by numerous factors, including competitive pressure from the expanding farms, foreign investment, proximity to urban centers, and the land’s proneness to flooding or drought.

Social Factors

The social factors also play an important role in the growth of both the agricultural and industrial sectors. Due to the stiff competition and discrepancies in the brokerage agencies, farmers had to develop progressive customer relationship management and innovative client service skills to attract more clientele. These social skills helped the farmers realize more value for their agricultural produce in a market that remains very competitive.

Technological Factors

Technological advancements and innovations contributed immensely to the growth of the agricultural sector. Farmers adopted a farming technology called zero-till in recent years courtesy of innovative ideas. The zero-till approach is more beneficial when compared to the traditional tillage as it capitalizes on valuable nutrients and soil moisture released into the atmosphere. The farmers also embraced the use of modern herbicides, which led to fewer safety and health concerns and at the same time fulfilling their role of controlling pests effectively.

Environmental Factors

The Meakin enterprise was profoundly affected by pets and weather conditions. The organization had to contend with weather-related factors such as extremes in temperature (heat and frost), hail, damaging winds, and rain or drought. Although Meakin and other farmers tried to mitigate the weather risks through planting different plant variety, practicing crop rotation, taking insurance covers and production contracts, uncertainty persisted (Case and Kalesnikoff 4). These conditions were triggered by the influence of global climate change. Moreover, farmers were faced with extreme weather conditions that diminished crop yields. A consistent outbreak of pests that stagnated the growth of many crops also affected farmers.

Legal Factors

The farmers worked actively to ensure that business ethics are upheld. The stakeholders also laid down a framework that facilitated diligent adherence to labor laws and other standard regulations that guide operations and transactions in the agricultural industry. As such, the agriculture industry complied with the environmental and international trade laws, which influence the success of importation and exportation of the farming products. Acquiescence with all these laws has steadily increased the reputation of the agricultural sector in Canada.

Porter’s Five Forces

Customers Bargaining Power. The bargaining power of customers is the medium in the agricultural industry when they shop individually. The existence of independent intermediaries and some farmer-owned co-operatives that negotiated prices on behalf of the farmers reduced the customer bargaining power, particularly the selling price of lentils and peas in Canada. Moreover, farmers attempted to lock in rates using intermediary brokerage agents to make forward contracting for a specified amount of crop at a specified price and minimal quality level. Although discrepancies mired the forward contracting, the inconsistencies restrained individual customers from becoming an influential force in the market.

Suppliers Bargaining Power. Independent retailers are the leading suppliers of agricultural inputs to the farmers. The retailers sell crop inputs such as chemicals, fertilizer, and seeds to Saskatchewan farmers. The retailers source the crop inputs from multinational biotechnological and agrochemical organizations. The companies include Dow AgroScience LLC, DuPont, Syngenta Canada Inc., Bayer Inc., and Monsanto. The farmers, on the other hand, had consolidated much of the retailing of agricultural inputs and product. As a result, retailers do not have a significant influence on the agriculture industry. Majority of the retailers of crop inputs follow the regulations set by the Saskatchewan farmers. This provision gives farmers the power to switch from one retailer to another. Therefore, the bargaining power of suppliers in the agriculture sector is insignificant since they have very little control.

The Threat of New Entrants. Similar to the bargaining power of suppliers, new entrants have a weak force in the agriculture industry. The main barrier to new entrants into the agriculture industry is the huge investment required. An aspiring farmer must prepare to deal with the hiking prices of land, the changing prices of farm inputs, volatile weather patterns, labor crisis, and new sophisticated farming techniques. Nevertheless, farmers can acquire land at a reasonable price in remote areas, and far from natural gas wells. The threat of new entrants in the UK fashion retail industry is insignificant since they have very little control over the market.

Competition from Existing Players. A large number of global players such as Next, Bhs, Matalan, Arcadia, and Marks and Spencer’s characterizes the fashion retail industry in the UK. All of these retail companies have an impressive product line and formidable brand image to target consumers. Competition is witnessed in nearly all the segments of the target market. As such, the existing players in the fashion industry have fierce competition among themselves. The leaders in the market have come up with policies and regulations that tend to favor their brands in winning more customers.

The Threat of Substitutes. Substitutes are products that enable consumers to get the same nutritional value as the original items or products. The risk of alternatives in the industry is very intense and comes from within; for instance, brands like Zara can be used as a substitute for those who cannot afford luxury products produced. 

Financial Analysis

A financial analysis entails the statement of earnings for both farming and industrial or trucking business segments.

Industrial/Tracking Business Segment

Particulars

2016

2015

2014

Revenue amounts

269,859

230,287

245,111

Expenses

228,523

214,731

215,147

Earnings from operations

41,336

15,556

29,964

Net earnings

31002

11667

22473

Farming Segment

Particulars

2016

2015

2014

Revenue amounts

823,277

1,134,355

856,714

Expenses

818,557

992,441

680,425

Earnings from operations

4,720

141,914

176,289

Net earnings

3,540

106,436

132,216

Financial analysis of Meakin enterprises provides reliable insights relating to the company’s performance from 2014 to 2016. The evaluation helps in identifying the primary factors that affect or influence performance to craft lasting solutions. Meakin Company did not report the outright loss or negative figure in its net income from 2014 to 2016. The situation was similar in both agricultural and industrial segments of the company. For instance, the industrial wing of the business reported net earnings of $22473, $11667 and $31002 for the three years (Case and Kalesnikoff 12). On the other hand, farming section reported $132216, $106436 and $3540 net earnings from 2014 to 2016. Nonetheless, the figures depict that something was wrong during the years, especially for the agricultural sector that reported a steady decline in performance. A drop of earnings from $132216 to $3540 signify an entrenched problem that may have been systemic or structural.

According to Case and Kalesnikoff, factors associated with the low performance during the period include poor management of expenditure account, an increase in land prices, reduced farming acreages, and decline in the production averages (12). Other causes are inadequate accessibility to farm inputs, extreme weather conditions, and stiff market rivalry. The factors compromised the production and sale of various crops such as canola, wheat, and field peas. Interestingly, the industrial section recorded an increase in earnings during the period.

Meakin Company’s agriculture section reported a decline from $1,134,355 in 2015 to $823277 in 2016; however, the industrial business segment reported an increase in revenue from $230287 in 2015 to $269859 in 2016 (Case and Kalesnikoff 13). These figures show that farm inputs, including auto bin, was higher as compared to the crops sold. For instance, the farming section recorded an expenditure rate of $992441 in 2015 and $818557 in 2016 while the industrial section reported $214731 in 2015 and $228523 in 2016. The figures compromised the viability of the company since they were nearly three quarters of the total income or revenues, which is not recommended. The high expenditure rates directly affected the earnings from operations figures.

Recommendation and Conclusion

Going into 2017, Meakin had three options to choose from, maintain the current business level, reduce the trucking business and expand the farm to 1,684 hectares or expand the trucking business and reduce the farm to 907 hectares.

Option 1

Maintain the Current Business Level

Maintaining the current business level will make Daved Meakin forgo both the opportunities in the bin hauling and land lease. Moreover, the option will mean that the farming business will continue recording decreased returns due to the weather uncertainties and reduction in the canola prices. However, the Meakin Industrial will continually record increased revenues, which can be used to offset the observed decrease in revenue for the Meakin Farm. The current business level, however, can be improved by investing more in the labor market. This process involves the employment of a permanent team of employees who are experts in their roles and can provide exceptional customer service.

Option 2

 Reduce the Trucking Business and Expand the Farm to 1,684 Hectares

Reducing the trucking business and expanding the farm will be a noble move, as it will minimize the challenge that Daved Meakin is facing of lack of enough labor resources and time management. The best way to reduce the trucking business is by eliminating the bin hauling. Out of the three revenue-generating activities in the trucking business, the bin hauling generated the minimum amount of revenue. Moreover, a comparison of the statement of earnings between 2015 and 2016 shows that the bin hauling recorded revenue of 72,357, which is 3.5% lower than the amount recorded in 2015.

Option 3

Expand the Trucking Business and Reduce the Farm to 907 Hectares

Expanding the trucking business and reducing the farm is profitable since the development will act as a cost-cutting measure for the Meakin farm, which appears to make losses as compared to the trucking business. For the trucking business, the only category that is making losses is bin hauling. By piloting trucks to service the new bin-hauling contract and investing $100,000 in the bin hauling trailers, Daved Meakin will boost the Meakin Industrial to be more profitable. Likewise, selling off the exiting seeding and harvesting equipment for $50,000 will have a minimal impact on the Meakin farm since they are rarely used.

Decision Matrix

The decision matrix ranks the three options on a five scale, where one was the best and five the worst rank.

Criteria

Maintain the current business level

Reduce the trucking business and expand the farm to 1,684 hectares

Expand the trucking business and reduce the farm to 907 hectares

Level of risk

3

4

1

Financial implications

2

5

3

Aligns with company mission and vision

4

2

3

Total points

9

11

7

Recommendation

From the above decision matrix, the best option to choose is to expand the trucking business and reduce the farm to 907 hectares. Although the farm generated more revenue than the trucking business in 2016, the net earnings depicts trucking business as the most promising. The business segment had and continues to record positive and steady growth compared to the farming segment whose earnings diminishes massively ever year. Thus, investing in more promising business initiatives like the trucking business is better than directing more funds in the expansion of the farm that is already making losses. The essential aspect that Meakin Company should consider while exploring new opportunities in the trucking business is the marketing model.

Implementation plan

The implementation of the new performance strategy or option 4 requires proper planning and straightforward leadership. From the outset, the implementation process would take approximately seven months, which is reasonable considering the nature of the trucking business. The company should hire more skilled personnel, including software engineers, to facilitate the deliberate restructuring of the organization while ensuring the technology-oriented solutions are provided to customers. The new skilled staff should be 25 in number. Other necessary resources include additional capital and different types of equipment, such as bin-hauling to increase profitability. Meakin can raise funds by selling off part of the Meakin farm that is used for growing wheat and harvesting equipment. Acquisition of a loan also remains a viable option of fund mobilization that the company would explore.

Contingency Plan

Meakin should be ready to implement the first option in the event the third one fails. The option that requires Meakin to maintain the current business level of both farming and trucking should be considered as a contingency plan. This means that Meakin Industrial will continually record increased revenues, which can be used to offset the losses accrued in the farming business. Investment in labour, innovation and technology would help the company to discharge its trucking activities without limitations. With technology, the company would expand without overreliance on the support from the farming segment. An insurance cover is also necessary to protect the business against major uncertainties such as drought, fire and flooding that causes massive losses.

Works Cited

Case, Tyler and Kalesnikoff, Douglass. Meakin Enterprises: Balancing Risks in the Agriculture Industry. Richard Ivey School of Business Foundation. 2017.

Claessens, Maximillan. The Porter Diamond Model – Analysis of National Competitiveness. Marketing Insider, 4 June 2016. https://marketing-insider.eu/porter-diamond-model/

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