Neptune Seafood Case Study

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Neptune Gourmet Seafood Company faces a challenging situation. The company has excess inventory of fish and is not sure what needs to be done. Strategists within the firm have suggested involving price cuts and introduction of a second less expensive line of fish products.

Company Analysis

Neptune gourmet seafood is a vertically integrated firm and fits the categories of an oligopoly. There are several firms already within the fishing industry. There are high barriers of entry to enter the fishing industry. Fixed costs include investments in fishing vessels, processing plants and salaries of its employees. Variable costs to the firm include delivery costs, cost of goods sold and costs of direct material, e.g. the cost of buying tin for packaging its cans. Shipping firms have these high barriers of entries to start a fishing firm.

Porter’s Five Competitive Forces

1)      Threat of New Entrants – The easier it is for new companies to enter the industry, the more cutthroat competition there will be. For Neptune Gourmet Seafood, its industry possesses high barriers to entry with high fixed costs and government restrictions to fish by granting licenses to operate.

2)      Power of Suppliers – This is how much pressure suppliers can place on a business. Neptune being vertically integrated utilizes its own supply division and logistics processes to facilitate delivery of its products.

3)      Power of Buyers – This is how much pressure customers can place on a business. Neptune’s customers include restaurants and store customers. Neptune thus must focus on its large volume sales to restaurants and its low volume sales to store customers. Combining the power that exists between these two buyers results in a much larger impact that affect the company’s margins and volumes.

4)      Availability of Substitutes – What is the likelihood that someone will switch to a competitive product or service? Substitutes within this industry are plentiful. However Neptune uses its pricing strategy to set itself apart and positioning itself as a firm that produces premium products for sale.

5)      Competitive Rivalry – This describes the intensity of competition between existing firms in an industry. The number of firms that exist within the seafood firm is limited but not few. This industry has reached its maturity with very little potential growth available. Thus, Neptune Gourmet positions itself as a high end firm and prides itself on high quality and a superior product that sets it apart from its competitors.


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Given the predicament Neptune Gourmet Seafood is facing, it should focus on short term objectives and take a cautious approach. Neptune Gourmet Seafood has spent a lot of resources in branding, product placement, distribution, patenting its fish freezing process and becoming “The Best Seafood on the Water Planet.” Price cutting will endanger these achievements. Price discrimination for its restaurants and store customers can cause a loss in market share in either of its customers. Introduction of a second, more affordable line of product will cause internal cannibalization thus reducing sales. If Neptune Gourmet seafood focuses on long term goals such as increasing its capacity, it maybe gambling too much and may overestimate its current market. Having more inventory does not mean it will generate an equal return on investment.

After having analyzed this article, I propose implementing a customer appreciation sale. This sale will involve a promotion of its products, where customers can buy two (pounds, number of cans, crates etc.) and get one free. This will tempt its customers to buy two products and getting one free thus availing of the promotion. Sales will increase, the firm will not have to incur additional channel costs and inventory will not perish or lay on the table. Customers will feel they are the reason this sale has occurred and this is a way of giving back to them. This is a great opportunity as customers from other competitors may switch to Neptune, seeing a company that is customer centric.


Class Or Mass Case Analysis

Class- or Mass?: Case QuestionsNeptune Gourmet is facing the problem of an inventory pileup. The company needs a way to sell the excess inventory. At the same time many new ships were purchased and expected to operate, which increases supply. Rita Sanchez proposes a cut in prices of the product by fifty percent. This price cut poses a problem due to the fact the Neptune Seafood is a premium product and usually sells for a higher price than the competition. In order to maintain the premium product image Sanchez proposes starting a mass market brand to decrease inventory. There are many variables but some of the bigger ones include; creating the separate brand at all and whether or not the new brand would be associated or separate from the current Neptune brand. Some executives agree with Sanchez while others take the side of Jim Hargrove in disagreement of the proposal.

The dilemma is whether the company should start a new brand and price it at fifty percent of the Neptune Gold brand in order to increase sales and decrease inventory. The executives have many conflicting opinions about the effects on the image of the Neptune brand if this method of inventory reduction is carried out. The goal of research for Neptune is to determine the effects on the consumer's views if a new brand is implemented.

How well would a new brand perform entering the current market? Is there already a popular brand on the market that has the low cost segment secured? Neptune should look into what their competition would be in an almost new market. This new brand would likely be seen as lower quality due to the price. With the Neptune name associated the quality image would be strengthened for the lower price product. As mentioned in the case would the grocers fail to stock the product for fear of competition with the stores own private label product?Should the brand be associated with the current Neptune Gold brand or would that hurt the current premium product image. If the name of the new less expensive brand was Neptune Silver, as suggested, but had the quality of Neptune Gold would customers be lost to the lower priced product. Would the lower priced product increase the market size into a lower income bracket? Again, what is the market currently like for low priced seafood? One of the important strengths of Neptune is the fact that all of their products have the Association of Seafood Processors and Distributors "Gold Seal of Approval". If this new brand didn't have that seal would that also affect the company image?If this is a feasible investment what effects would flooding the market with a low priced product cause. Will other companies with inventory pile-ups respond and cause a price war? The other companies in the market are bound to do something in response to the low prices. If Neptune chooses to do nothing with the stockpiled inventory another company is likely to sell at a very low price to decrease inventory first. Is it a good idea to be a...

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