Pleasure Craft Inc Research Paper

Qg3Pleasure Craft Inc.

Management Team

Rosemary Rikal, Nicole Daniel, Rashanda Kelly

Executive Summary

Pleasure Craft Inc. has been active in the marketplace for decades and is currently looking to expand the company for further growth in the industry. The two products snowmobile and personal watercraft that Pleasure Craft (PC) has been manufacturing have become mature in the market and they are looking to expanding in the industry. The company has established relationships with many other businesses in the previous sales and strives to produce high quality products being a known brand internationally and domestically. Pleasure Craft will continue to deal in the same market but offer a new line of products while staying familiar in the industry. The first option of starting a production on outboard motors is an opportunity to stay relevant in the market but still familiarized to business partners. This option would give Pleasure Craft the chance to grow in this segment of the market. Pleasure Craft was looking into a second option of manufacturing front-end loaders. This option was bring about new tasks to accomplish since Pleasure Craft was in small engines but not in the sales market. Personal watercraft (PW) had growing concerns from the cities, towns, and near by neighborhoods of continued use of the watercrafts due to the riverbank erosion, noise complaints and safety concerns.

          There were two options that would keep the company current in the sales market. The expansion of either one of these options is going to be expensive just from constructing a building and equipment alone.  To consider the financial impact taken on this type of venture would highly considered.

The front-loader project would take building a facility, purchasing property and, equipment while running a risk of taxing the company’s capital budget. The main structure of the building property would cost $7 million. The machines would end up being about $10 million with the life span of 15 years over time materials will become worn from the years of constant use.

The outboard motor project would last slightly longer than the front loader if a new building were purchased at $6.25 million and land costing $1.2 million.  The building would depreciate and the land would appreciate. The equipment would have no salvage value for the company. Just as front-end loader the outboard building would be subject to taxes and CCA rates. When producing outboard motor they would be sold through the same retailers that carried similar product.  

Since the company seen a potential to expand due to reaching their market peak, expanding Pleasure Craft in these two sectors will help the company grow financially in the direction the company is seeking. When expanding into these sectors, profitability is the key. With the market having high barriers to entry, looking at projected financial success these recommendations have helped Pleasure Craft decide which project is best for them.  There are no discounts considered yet for the outboard motor project, since it has lower initial cost. Our calculation shows that both projects have positive net present value and could possibly both be accepted. The NPV of the front-end loader project is $29,47,367 and the NPV of the out-board motor project is $60,986,352.   The outboard motor would be the best option for the expansion of Pleasure Craft. When considering any expansion, the object is to take the project that poses the least risk, while generating the most profit. 

About Pleasure Craft

The Pleasure Craft Inc. is in the market of currently manufacturing personal watercraft and snowmobiles as Canadian based company for the last 40 years. Pleasure Craft Inc. has been active in the marketplace for decades and is currently looking to expand the company for further growth in the industry. The two products snowmobile and personal watercraft that Pleasure Craft (PC) has been manufacturing have become mature in the market and they are looking to expanding in the industry. The company has established relationships with many other businesses in the previous sales and strives to produce high quality products being a known brand internationally and domestically. Pleasure Craft will continue to deal in the same market but offer a new line of products while staying familiar in the industry. The first option of starting a production on outboard motors is an opportunity to stay relevant in the market but still familiarized to business partners. This option would give Pleasure Craft the chance to grow in this segment of the market. Pleasure Craft was looking into a second option of manufacturing front-end loaders. This option was bring about new tasks to accomplish since Pleasure Craft was in small engines but not in the sales market. Personal watercraft (PW) had growing concerns from the cities, towns, and near by neighborhoods of continued use of the watercrafts due to the riverbank erosion, noise complaints and safety concerns.

         There were two options that would keep the company current in the sales market. The expansion of either one of these options is going to be expensive just from constructing a building and equipment alone.  To consider the financial impact taken on this type of venture would highly considered.

To complete both projects would be ideal but, could put a strain on management or possible tax the company’s capitol budget.

The front-loader project would take building a facility, purchasing property and, equipment while running a risk of taxing the company’s capitol budget. The main structure of the building property would cost $7 million. The machines would end up being about $10 million with the life span of 15 years over time materials will become worn from the years of constant use. The projects life span would bring about many costs due to the minimal salvage value with land appreciating and the building and equipment depreciating.  Farmers, construction companies, ranchers, military and municipal governments would be buying the front-loaders through local heavy equipment retailers who would then buy the units through Pleasure Craft.  PC would then sell the front-end loaders to retailers for purposes of the construction, farming and ranching markets. Selling directly to the military and municipal governments would also be an option. Many factors would come into play with seasonal sales and capitol cost allowance among many other expenses.  A national sales manager, several general managers, and wide variety of sales staff members would have to be hired for the product sales of the front-end loaders.

The outboard motor project would last slightly longer than the front loader if a new building were purchased at $6.25 million and land costing $1.2 million.  The building would depreciate and the land would appreciate. The equipment would have no salvage value for the company. Just as front-end loader the outboard building would be subject to taxes and CCA rates. When producing outboard motor they would be sold through the same retailers that carried similar product.  Since a net working cost (NWC) would be mandatory for this project with a turnover ratio expected to be 6:1. With the company being optimistic in general sale growth in the industry the felt the sales of outboard motors could be increased to as much as $35,000 units improving work methods.

Industry & Competitive Analysis

Pleasure craft is a snowmobile and personal watercraft manufacturer company.” In 2015 there were 150,713 snowmobiles sold worldwide; 58,299 were sold in the U.S. and 50,752 were sold in Canada.” (ISMA) The snowmobile industry is a worldwide industry with many company all over the globe. There are four major snowboard manufacturers “Arctic Cat - headquartered in Plymouth, MN; BRP - headquartered in Valcourt, Quebec; Polaris Industries - headquartered in Medina, MN; and Yamaha Motor Corporation - headquartered in Cypress, CA.”  (ISMA) the market has many competitors such as BRP, Polaris, and Yamaha that make many types of snowmobiles customers are able to choose to customize and buy water mobiles based on size, color, and features such as seat type and steering. Suppliers In this market are a very important factor, manufacturing companies need raw materials to build the products so it’s very important for these companies to find the best suppliers with the lowest prices to ensure the cost of the snowmobiles can remain at a low price margin. With so many options within the market customers all have a high buying power customers are able to choose the company that can offer them the lowest price when it comes to snowmobiles.  The strength of competition is very strong within the snowmobile industry. With so many competitors selling the same product market competition can be very high. Customers within this market are looking to purchase a product that fits their personal needs and offers the features that fit them. Customers in this market tend to be to be middle aged to Older. “The average age of a snowmobiler is 44 years old” (ISMA)

The threat of mew entry is low within this market, the costs to make these products can be at a higher cost margin making it harder for a newer company to compete with existing companies in the industry, also customers within this market tend to be very brand loyal they have bought snowmobiles before and tend to be familiar with the older more name brand companies within the industry.

The pleasure craft company is looking to expand their business by moving into the waterfront manufacturing business or manufacturing outboard motors. It’s important ‘for any company that looks to expand their business into a new market that is new for them to analysis the industry and competitors within that market. These factors can determine rather the company can be successful within the mew market and most importantly if the expansion will be worth the cost they will need to incur.