Laurentian Bakery Case
Executive Summary
This report is written by Knowles. This report is written for project review team of Laurentian Bakeries Inc. This report projects a new expansion strategy for the Winnipeg plant to meet the demand of the new deal. Founded in 1984 Laurentian Bakeries Inc. operates in the industry of manufacturing a vast variety of frozen baked products within their three operating plants in Montreal, Winnipeg and Toronto. The operating plants produce items such as frozen pizza in Winnipeg, Manitoba, pies in Montreal, Quebec and Cakes in Toronto, Ontario - with each representing 30%, 30% and 40% of the total revenue stream respectively. The buyers for this company include large institutional clients such domino’s pizza, etc. which have a significantly higher level of power whereas the seller of the products consists of several food producers which have a relatively low level of power. With the cost of setting up a plant of this scale being high, substitute products will also remain high in the market causing the overall profit margin to be low. With the company’s ongoing effort for continuous improvement Danielle Knowles (VP of operations) proposed to expand one of the operating plants in Winnipeg - which was based on the opportunity if the company expanded into the U.S. market.
We have analyzed the project in terms of NPV based on the expected sales and cost figures. The NPV calculation is done to determine if undertaking the project would bring profit or loss to the firm. Various scenarios were taken to project the NPV at those cases. This report also covers the Quantitative risks associated with exchange rate as Laurentian will be exporting to US grocery chain and will earn in dollars. The tools to mitigate those risks are also mentioned. We have identified risks related to variance in units sold. Any decrease in number of units sold can affect the profitability of project. We have devised tools to mitigate those risks also. We have also analyzed the
This report is written by Knowles. This report is written for project review team of Laurentian Bakeries Inc. This report projects a new expansion strategy for the Winnipeg plant to meet the demand of the new deal. Founded in 1984 Laurentian Bakeries Inc. operates in the industry of manufacturing a vast variety of frozen baked products within their three operating plants in Montreal, Winnipeg and Toronto. The operating plants produce items such as frozen pizza in Winnipeg, Manitoba, pies in Montreal, Quebec and Cakes in Toronto, Ontario - with each representing 30%, 30% and 40% of the total revenue stream respectively. The buyers for this company include large institutional clients such domino’s pizza, etc. which have a significantly higher level of power whereas the seller of the products consists of several food producers which have a relatively low level of power. With the cost of setting up a plant of this scale being high, substitute products will also remain high in the market causing the overall profit margin to be low. With the company’s ongoing effort for continuous improvement Danielle Knowles (VP of operations) proposed to expand one of the operating plants in Winnipeg - which was based on the opportunity if the company expanded into the U.S. market.
We have analyzed the project in terms of NPV based on the expected sales and cost figures. The NPV calculation is done to determine if undertaking the project would bring profit or loss to the firm. Various scenarios were taken to project the NPV at those cases. This report also covers the Quantitative risks associated with exchange rate as Laurentian will be exporting to US grocery chain and will earn in dollars. The tools to mitigate those risks are also mentioned. We have identified risks related to variance in units sold. Any decrease in number of units sold can affect the profitability of project. We have devised tools to mitigate those risks also. We have also analyzed the