What is the main important problem Peter Jones is faced with?

The main problem is of the machinery that must be elucidated as soon as possible. Machinery is
not only outdated and old but it also leads to other major issues that may reduce the sales
turnover such as quality problems and low production capacity. Moreover if Peter Jones wanted
to establish the new factory it is impossible for him to use this machinery because to carry and
install this machinery would be risky. Moreover, the company don’t have such a man power to
look after the machinery for maintenance and handling.

Should the firm go ahead and build a factory with more production capacity?

The present condition of the firm implies that Peter Jones should build a factory. There were
several reasons why there is a dire need to expand the production capacity. Firstly, the demand of
the product especially ice cream sticks was increasing 20% annually and the current production
capacity and supply is lower than the increasing demand. Secondly, company earned 65% of the
sales from the production of sticks. Thirdly, the current production capacity is due to the
outdated machinery. When a poor stick was produced and not rectified; it lead to machine
breakdown which took several hours and workers remain idle until the problem was resolved.
Another benefit Peter Jones could get from building a new factory is to go on with the plan of
diversifying its product range. He already researched the market and had a list of possible
business opportunities. He could start producing a product that he anticipated would be profitable
in the upcoming years.

Should Peter continue to spend his time and resources trying to find out or develop better
machinery and equipment?

It is obvious in the case that Peter is trying in vain to locate equipment and machinery for two
years. At the moment, there are two offers from a German and a Canadian company which Peter
should take in consideration. He can consider the appropriate offer and buy the machinery for the
new factory. However, he may keep on improving or developing the machines as he does earlier
but the main problem to find machinery should be discontinued by now.

What can be done about the quality problems?

As it is discussed that new machinery will address the quality problem. If Peter Jones opts for the
Canadian company, the machinery produces high quality sticks. Though the production capacity
is lower than the required but production capacity will be increased if the machinery is installed
in addition to the previous one till a better option is available.

What is the future for the business facing new competitors from the large North Island
company?

Wood Veneer has the competitive advantage over other firms to be first and leading company in
New Zealand. It provides quality products at cheaper rates. The market share of the company is
high. Further, it has been seen that the major buyers of the company are loyal customers. They
say that sometimes the sticks are split or of low quality but overall they are satisfied with the
quality and prices. But if there is a better quality cheaper stick in the market, they will carefully
consider the option. The competitor from North Island has its major business with Australian
company. Only the 25% of which will be supplied to the local market. If the Wood Veneer
produces quality products maintaining its cheaper rates, there is very low possibility that it may
lose its market share because of its first mover advantage and loyal buyers.

Produce a plan which would enable a company to overcome the difficulties you have
identified?

The core problem is of machinery and maintaining the quality at a cheaper rate which can be
resolved by installing new machinery. Secondly, Peter Jones must diversify its product range in
order to cope up with the competition. Moreover, the demand of ice cream spoons is decreasing
so either he may cease the production of ice cream spoons or lower its production. He must put
his efforts towards the products which has high sales turnover including ice cream sticks and
toothpicks (which had high demand and low supply previous year).