project strategic
Comfort Systems USA, Inc. (NYSE:FIX) provides heating, ventilation and air conditioning (HVAC) installation, maintenance, repair and replacement services within the mechanical services industry.
The Company has 38 operating units in 72 cities and 86 locations throughout the United States.
The Company operates primarily in the commercial, industrial and institutional HVAC markets. In addition to standard HVAC services, it also provides specialized applications, such as building automation control systems, fire protection, process cooling, electronic monitoring and process piping.
The company is publicly traded on the New York Stock Exchange under the symbol ‘FIX’.
3.1.1.General Environmental (PESTEL) Analysis (2-4 pages): This section needs to include a
complete analysis of the general external environment. Please refer to figure 3.1 and Table 3.1 on pages 38-39 of your textbook (5th Ed.). You should explicitly analyze how any trend you identify in each of the segments in the external environment may affect the industry. You need to explicitly state the implications. For example, if the industry you are analyzing is personal computers and you see an expanding economy in some emerging economies, but a recession and declining disposable incomes in other economies, your analysis should include how these trends are likely to influence the personal computer industry. Do not discuss specific companies in this section. At the end of this section, you need to identify the industry top two driving forces (DFs). A driving force is an external environment change (e.g. change in a governmental policy or emergence of a new breakthrough technology) which may significantly change the rule of the game in the industry competition. Please refer to Table 3.2 and pages 52-54 of your textbook (5th Ed.).
* Political Segment
* Economic Segment
* Socio-Cultural and Demographic Segment.
Part Iincludes an analysis of thegeneral environment, theindustryand the assigned firmscompetitors. You are expected to provide a specific definition of the industry and an in-depth analysis of the industrys current and future outlook. Your focus inPart Iis theexternal environment.
RUNNING HEAD: OMEGA PROTEIN 1
Strategic Case Analysis
University of Houston Victoria
School of Business
MGMT 4309 Strategic Management
2 Team 2: Castellon, Josan, Price, Shah
Table of Contents
1.0 Executive Summary ……………………………………………………………………………………………………………. 5
2.0 Company History ……………………………………………………………………………………………………………….. 7
2.1 Background. …………………………………………………………………………………………………………… 7
2.2 Products and Services. …………………………………………………………………………………………….. 7
Part I: External Environmental Analysis ………………………………………………………………………………………… 8
3.0 External Analysis ……………………………………………………………………………………………………………….. 8
3.1 General Environmental Analysis. ……………………………………………………………………………… 8
3.1.1 Political segment. ……………………………………………………………………………………… 8
3.1.2 Economic segment. …………………………………………………………………………………… 8
3.1.3 Socio-cultural and demographic segment. ……………………………………………………. 9
3.1.4 Technological segment. …………………………………………………………………………… 10
3.1.5. Environmental segment. ………………………………………………………………………….. 10
3.1.6 Legal and regulatory factors. ……………………………………………………………………. 11
3.1.7 External Environment Driving Factors ………………………………………………………. 11
3.2 Industry Dominant Economic Features. ……………………………………………………………………. 12
3.3 Five Force Analysis and Industry Attractiveness……………………………………………………….. 14
3.3.1 Threat of new entrants. ……………………………………………………………………………. 14
3.3.2 Power of suppliers. …………………………………………………………………………………. 15
3.3.3. Power of buyers. …………………………………………………………………………………….. 16
3.3.4. The power of substitutes. …………………………………………………………………………. 17
3.3.5 Intensity of rivalry. …………………………………………………………………………………. 18
3.3.6. Summary of five force analysis. ……………………………………………………………….. 19
3.4. Industry Competitors Analysis and their Anticipated Strategic Moves ……………………………. 19
3.5 Key Success Factors ………………………………………………………………………………………………. 22
Part II: Internal Analysis …………………………………………………………………………………………………………….. 24
4.0 Internal Analysis ………………………………………………………………………………………………………………. 24
4.1 Organizational Strategy Analysis…………………………………………………………………………….. 24
4.1.1 Corporate mission. ………………………………………………………………………………….. 24
4.1.2 Strategy (corporate level and business level). ……………………………………………… 25
4.1.3 Organizational culture and core values. ……………………………………………………… 28
4.1.4 Leadership. …………………………………………………………………………………………….. 28
4.2 Financial Analysis …………………………………………………………………………………………………. 28
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4.2.1. Valuation analysis…………………………………………………………………………………… 29
4.2.2. Growth analysis. …………………………………………………………………………………….. 29
4.2.3. Profitability Analysis: ………………………………………………………………………………… 30
4.2.4. Financial strength analysis……………………………………………………………………….. 30
4.2.5. Management efficiency analysis……………………………………………………………….. 31
4.2.6. Summary of financial analysis. …………………………………………………………………. 31
4.3 Value Chain Analysis …………………………………………………………………………………………….. 31
4.3.1 Support activities. ………………………………………………………………………………………………….. 32
4.3.1.1. Structure. ……………………………………………………………………………………………….. 32
4.3.1.2. Design, Research & Development. ……………………………………………………………. 33
4.3.2 Primary Activities. ………………………………………………………………………………………………… 35
4.3.2.1. Input. …………………………………………………………………………………………………….. 35
4.3.2.2 Operation processes. ……………………………………………………………………………….. 38
4.3.2.3. Marketing and customer service. ………………………………………………………………. 40
Part III: Strategic Fit Analysis …………………………………………………………………………………………………….. 41
5.0 SWOT Analysis ……………………………………………………………………………………………………………….. 41
5.1 Strategic Challenges: Opportunities and Threats ……………………………………………………….. 41
5.2 Core Competencies: Strengths and Weaknesses ………………………………………………………… 43
5.3 Strategic Fit Analysis (SWOT Matrix) …………………………………………………………………….. 46
Part IV: Recommendations …………………………………………………………………………………………………………. 50
6.0 Recommendations …………………………………………………………………………………………………………….. 50
6.1 Selection and Justification of the Top Two Recommendations ……………………………………. 50
6.2 Implementation of the Top Recommendation ……………………………………………………………. 53
6.2.1. Action Plans, Deliverables, and Milestones ……………………………………………….. 53
6.2.2. Resources, Technical Requirements, and Budgeting ……………………………………. 55
Appendices ……………………………………………………………………………………………………………………………….. 59
Appendix A Industry Growth Rates Graph 3.2 …………………………………………………………… 59
Appendix B Summary of the Five Forces ………………………………………………………………….. 60
Appendix C Strategic Map ………………………………………………………………………………………. 61
Appendix D Omega 3 Advertising and Marketing Example ………………………………………… 62
Appendix E Price to Earnings Ratio Graph 4.2.1. ………………………………………………………. 63
Appendix F Profitability Ratios Table no. 4.2.3……………………………………………………….. 64
Appendix G Valuation Ratios Table 4.2.1. ……………………………………………………………….. 65
4 Team 2: Castellon, Josan, Price, Shah
Appendix H Omega Protein Sales Growth Chart no. 4.2.2a. ………………………………………… 66
Appendix I Omega Cost Breakdown Chart 4.2.2b. ……………………………………………………. 67
Appendix J Growth Ratios Table 4.2.2…………………………………………………………………… 68
Appendix K Net Profit Chart 4.2.3. ………………………………………………………………………….. 69
Appendix L Profitability ratios Table 4.2.3. ……………………………………………………………… 70
Appendix M Financial Strength Ratios Table 4.2.4. …………………………………………………… 71
Appendix N Management Efficiency Ratios Table no. 4.2.5……………………………………….. 72
Appendix O Organizational Charts …………………………………………………………………………… 73
Appendix P: SWOT Summary Table ………………………………………………………………………… 74
Appendix Q: SWOT Matrix Table: Strategic Decisions ……………………………………………….. 75
Appendix R: New Product Launch Timeline ………………………………………………………………. 76
Appendix S: Use of Fishmeal for Aquafeed ……………………………………………………………….. 77
Appendix T: Cost Structure of Meal Replacement Shakes……………………………………………. 78
Appendix U: Cost Structure of Animal Feed ………………………………………………………………. 79
References ………………………………………………………………………………………………………………………………… 80
5 Team 2: Castellon, Josan, Price, Shah
1.0 Executive Summary
The following report is a strategic analysis of Omega Protein Corp. The report utilizes
various tools to analyze the organization and their markets. Furthermore, utilizing the
information gathered from the analytical tools, strategic recommendations have been created for
Omega Protein to undertake for their future strategy to enhance competitiveness and market
share in those industries.
Initially, our report covers the external industry environments. Omega Protein operates in
two main industries, Animal Feed and Human Nutrition. To facilitate the evaluation of each
industry, a PESTEL analysis was performed as well as Five Forces analysis, both are important
to understanding their competitive environments and to make sure profits are likely to be made
in them. Lastly, we identify the key success factors in these industries that are needed by all
companies competing in them to hold market share and remain competitive.
An internal analysis of Omega Protein Corp and its competitors was also performed. This
includes a review the organizational strategy, mission, vision, organizational culture, and
leadership of the firm. Additionally we analyze the firms financial standing, this includes an in
depth ratio analysis which compares Omega Proteins financial health to that of other competing
firms in the industries. We also analyzed the value chain based on its primary and support
activities for Omega Protein and its competition.
The findings have been summarized in a SWOT analysis which identifies Omega
Proteins strengths and weaknesses and further identifies how they can use these to develop a
strategy to either take advantage of the opportunities in the market or to construct a defense to
maintain their current market standing. The industry opportunities that have been found include
the addition of new product offerings in the human nutrition segment and the innovation of
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existing products. Industry threats involve the strength of substitutes in the market, fierce
competition in the industry, and rapidly changing consumer preferences. Taking into
consideration Omega Protein, their internal strengths include their vertically integrated supply
chain, good financial position, and their ability and capacity to innovate. The identified
weaknesses are excess property and facilities, low brand recognition, and heavy dependence on
one raw material.
Taking into consideration these impacts, our team found several strategic options for
Omega Protein. Of these options, two recommendations that we feel would make the best
strategic fit. The first is the creation of additional products in the human nutrition market,
specifically in the growing segment of meal replacement shakes for weight loss and sports
nutrition. The second is to diversify the aquaculture feed offering in animal nutrition by also
producing plant based feed in addition to its fishmeal. Finally, our strategies are offered with a
timeline for a quick completion of the new products to market as well as an action plan on how
to implement the strategy.
7 Team 2: Castellon, Josan, Price, Shah
2.0 Company History
2.1 Background.
Omega Protein started from humble beginnings when founders John and Thomas Haynie
installed fish processing devices on their property in Reedville, Virginia in 1878. This was an
investment to take advantage of the increased demand for fish meal and oils processed from the
abundant menhaden fish that were local to Reedville (History, 2015). As more applications for
fish byproducts became evident, the Haynies merged their business with other organizations to
include additional resources. Advances in technology gave way to expanding the operations to
the Gulf of Mexico in 1966 which allowed for an increased fishing season and the subsequent
processing of menhaden fish. Omega Protein as we know it today, was formed officially in 1998
and became publically traded on the New York Stock Exchange (Who We Are, 2014).
2.2 Products and Services.
Omega Protein produces fish meal, fish solubles, and fish oil. These raw materials are
incorporated into a number of end uses. The two primary markets for these products are in the
Animal Feed and Human Nutrition industries. In the animal feed market, fish meal is a high-
protein ingredient that is produced by Omega Protein and sold to manufacturers of livestock and
companion animal feed (Omega, 2017). Some major customers in this area include Cargill,
Nuscience, Purina, Iams, and Science Diet. Fish solubles are additives in fish meal that
are primarily sold to bait manufacturers (Omega, 2017). For human nutritional products, Omega
Protein produces food additives and supplements to manufacturers; these include protein
products, specialty oils (such as Omega-3) and other nutraceutical ingredients (Omega, 2017).
Key customers in this target market include Swanson, GNC, Natures Way, and Carrington
Farms (Who We Are, 2014).
8 Team 2: Castellon, Josan, Price, Shah
Part I: External Environmental Analysis
3.0 External Analysis
3.1 General Environmental Analysis.
In analyzing the macro-economic influences of the industry, a PESTEL analysis was
performed evaluating the relevant factors.
3.1.1 Political segment.
The primary raw material that is used during the production of animal fats and oils for
nutritional supplements is fish. Fish is a global commodity, so other manufacturers can easily
access fish in the world market. Currently, foreign producers have dominated the industry supply
of fish (DCosta, 2017). In the United States, the change in administration in 2017 has begun to
embrace protectionist and anti-free trade agendas (Knowler, 2017). An expected result of this
agenda is a shift from raw material imports to relying on domestic producers. The actual impacts
have still not been officially realized, but import taxes or caps will increase the demand for local
sources of fish and fish meal which will allow for a higher overall price that can be charged. In
addition to raw materials, any derived fishmeal and oils that are produced domestically we also
expect to be preferred over global competitors.
The end products in vitamin and nutritional supplements currently operate in a trade
deficit however that deficit has been steadily declining (Yucel, 2017). The amount of imports
falling in conjunction with the same anti-trade policies that affect the seafood market will
increase demand from local suppliers in the industry.
3.1.2 Economic segment.
The general economic climate affects the industry as a whole. Although nutrition is a key
priority, the higher cost of healthy food and supplements make them susceptible to economic
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fluctuations that result changes in ultimate consumers income. IBISWorld reported in their
Vitamin and Supplement Manufacturing Industry report that, As per capita disposable income
rises, more consumers will be able to trade up to premium vitamin brands and purchase a greater
variety of supplements, helping sustain industry revenue growth (2016).
Significant changes in disposable income are not expected in the United States in the
immediate future according to multiple economic sources. The International Monetary Fund
gave only a slightly increasing forecast of economic growth in 2017 at 2.2% (International
Monetary Fund, 2016). Likewise, the Indiana Business Review also forecasted output growth in
2017 to average only slightly above 2% in 2017, citing a pattern that has been in place for the
last several years (Witte, 2016). As a result, there should be not significant economic factors that
change the demand for products in the industry.
3.1.3 Sociocultural and demographic segment.
Ultimate consumers dietary and lifestyle preferences drive both the market for both
animal nutrition and human supplements, but both in different ways. For vitamins and
supplements that are added to end used foods, one key demographic affected is the aging
population. Consumers who are older have a higher preference for healthy options more often
because of the increased health complications. This trend is expected to continue, in the
IBISWorld Industry Report, it was noted that As overall healthcare expenditure increases, the
number of Americans that use dietary supplements as a preventative measure against illness,
fatigue and general poor health will continue to grow, driving demand for industry goods (Yucel
2016).
For the industry focus on animal nutrition, the key demographics are slightly different.
Marketers have found that consumers who are buying pet food for their companion animals are
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generally very concerned with the health of the ingredients. In fact, they found that most
consumers buying for their dogs are more serious about buying healthy dog food than they are in
buying healthy food for themselves (Tesfom & Birch, 2010). This mindset drives the need for
animal food producers to produce healthy food because pet owners are emotionally attached to
their pets and are willing to pay the money for it (McCormack, 2016).
3.1.4 Technological segment.
Some new technologies have affected the fish oil production portion of supplements.
Most notably, the ability to add Omega 3 to food without leaving an aftertaste has expanded the
possibility for product additives that were previously nonexistent. Up until then, if a producer
wanted to add Omega-3 to their food, they had to use plants based products that didnt have an
aftertaste. The plant based products do not have the same proven health benefits as the EPA and
DHA that is only found in Omega 3 proteins from fish (Uhland, 2005). Innovations such as this
open up new opportunities for the products offered. Continuing research and development to find
and incorporate new ways to utilize products for consumer use will be necessary to gain
competitive advantage in the industry.
Technology in the industry will also help develop innovative strategies along the supply
chain. According to the industry report for Vitamin and Nutritional supplements, one of the key
drivers of demand is new scientific research and breakthroughs (Yucel, 2016). We see this is an
indication that players in the industry must keep up with new technologies to continue to serve
their market completely.
3.1.5. Environmental segment.
Fish production is subject to a number of environmental factors that can cause the fish
population to decline. Any adverse condition can greatly affect the supply of fish. Some recent
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examples are the BP oil spill and Hurricane Katrina in the Gulf Coast. When the supply of fish is
limited, revenue is expected to decrease due to inability to meet demand (DCosta, 2017).
Additionally, fish is susceptible to over processing and which can endanger the supply for future
seasons.
3.1.6 Legal and regulatory factors.
Dietary Supplements do not currently face drug approval requirements by the Food and
Drug Administration; therefore, political factors are not as restrictive to nutraceutical products as
they are to pure pharmaceutical products. However, there has been an increasing level of
regulation from both Federal and state agencies (Yucel, 2016). All players in the industry will be
affected by increasing regulation regarding their final product, leading to a financial burden and
adding barriers to entry.
In addition to final product regulations, any processing facility will be regulated by the
Environmental Protection Agency (EPA) and must also dispose of waste in an environmentally
sustainable way to comply with the Clean Water Act (McCormack, 2016). These compliances
affect all domestic producers in the industry and may therefore be more costly for purchasers to
buy domestic rather than import from a country that is not subject to the same restrictions.
3.1.7 External Environment Driving Factors
In the Vitamin and Supplement Industry, a driving factor is from changing consumer
preferences and its resulting manufacturing process innovations to bring specialized products to
the market. The demand for these products depends on who is producing the best and newest
products. Scientific breakthroughs can sway demand. Additionally, the highest growth
opportunity in this industry is from diet and sports nutrition, both which are highly influenced by
new trends (Yucel, 2016).
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For the Animal Nutrition segment, a driving external factor is the buyers preferences for
differentiated products. Livestock farmers, for example, will want customized feed options that
meet the nutritional needs of a specific breed or species in a way that will enhance the output of
their livestock (McCormack, 2016).
3.2 Industry Dominant Economic Features.
Omega Protein is a producer of food and nutritional supplements. These supplements are
in the form of proteins, specialty oils and fatty acids. Omega Protein sells their product in two
different commercial market segments. First, they are sold to commercial manufacturers of food
products who integrate the nutritional supplements into their foods which provide health benefits
to the ultimate consumers. Second, they are sold to livestock and aquaculture feed producers to
enhance the nutritional value of seafood and pork that is harvested for consumption (Who We
Are, 2014). Hence, the two market segments, both the Vitamin and Supplement market and
Animal food production market, have been analyzed.
The animal food production industry is expected to grow over the next few years mostly
due to a steady, yet small, increase in demand. Part of this demand is due to the increased meat
consumption by consumers which drives the demand for more feed. Additionally, pet ownership
is expected to increase over the next five years at an estimate of 3.1% annualized, this growth is
an integral portion of the industry (McCormack, 2016). These increases in demand expect to
bring more entrants to this industry, but not at a pronounced rate. The market is currently in the
mature stage of the life cycle, which indicates a growth rate approximately the same as the
economy as a whole (McCormack, 2016). Please see attached Appendix A for an industry
growth chart, the Animal Food Industry revenue growth validates that the rate is stabilizing at a
modest rate.
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The animal feed market can be segmented between pet owners and livestock producers.
Both have different requirements for the nutritional supplements of their products. Pet owners
have pushed a significant demand towards healthy pet food, which will encourage those in the
industry to utilize high quality, healthy options. IBISWorld noted that many pet owners are
emotionally attached to their pets and are more willing to endure price hikes for products they
believe will boost their pets health (McCormack, 2016). Livestock farmers, on the other hand,
will likely focus on the health of the livestock and will look for feed that is specifically
formulated to encourage specific outputs. For example, a dairy farmer may purchase feed
specially formulated to increase milk production (McCormack, 2016).
The Vitamin and Supplement manufacturing industry is growing since last five years and
is expected to do so in next five years, but, at a slower rate compared to its past growth
(McCormack, 2016). Reasons for its growth are the steady demand, rise in income and change in
demography. Please see Appendix A for a growth chart of revenues in the Vitamin and
Supplement industry, while still growing, the rates are declining after a large spike in demand
during 2011. This validates the IBISWorld analysis of slowing in industry growth.
Vitamin and Supplement industry is highly segmented due to varying demographics,
however the high number of players makes it highly competitive. Consumers have varied needs
and preferences based on their age and lifestyle which opens many niche segments in the
industry. For instance, population over the age of 65 will grow in the future and some age-related
issues such as osteoporosis and vision loss can be reduced with the use of supplements (Wahl,
2015). As per the National Institute of Aging (NIA), Supplements of calcium and vitamin D can
significantly reduce bone loss and the risk of fractures in older people, according to a new report
from scientists at Tufts University along with fighting osteoporosis (Calcium, 1997). There is
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also a growing awareness of personal fitness among the consumers. Participation in sports has
increased and thus increase in demand for high activity supplements is on rise (Wahl, 2015). The
industry growth rates of the last several years, including their projections have been graphed to
visually indicate the growth of the Animal Nutrition and Vitamin Supplement industries to
visually indicate these points in Appendix A.
Rivalry among industry players vary among different market segments, and FDA
regulations will affect the rivalry. An Americanbar.org publication states in 2015 that (i)n a
recent 16-month period alone, the FDA reportedly took more than 100 actions against the makers
and sellers of dietary supplements. In response to the regulations, companies have made
changes to address consumer and government agencies concerns. GNC, for example, has
proposed the Regulatory Alliance for Industry Supplement Excellence (RAISE) for this purpose
(Wahl, 2015). Brands whose products are FDA approved and thus has better quality will have
more demand compared to its rivals.
3.3 Five Force Analysis and Industry Attractiveness.
3.3.1 Threat of new entrants.
There are medium barriers to entry into the nutrition supplement industry. New entrants
need to invest in creating niche supplements to be successful, however they can easily gain
market share with new specialized products. Moreover, of the agencies regulated by the FDA
there are fewer required standards for the nutraceutical market, which allows for easier
compliance for new entrants. At the same time, many pharmaceutical companies are trying to
also enter the supplement market as well. Existing companies are starting to utilize techniques to
vertically integrate, similar to packaged food companies experienced in their industry. This
increases the chances for outsider companies to enter the market in an effort to provide the
http:Americanbar.org
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products traditionally provided by their suppliers. For instance, according to
Nutraceuticalsworld.com, Herbalife is Committed to becoming more vertically integrated,
securing its supply chain from seed to feed, (Stephens, 2007). According to IBISWorld, the
nutritional supplement industry is at the growth stage of its life cycle, with low level of revenue
volatility. (T)he industry’s value-added (IVA), which measures the industry’s contribution to the
economy, to grow at an average annual rate of 4.2%. Th
