Wildwood Lake Canoe Company Casse Study
Wildwood Lake Canoe Company In January 2010, Allan Monroe was preparing for the April opening of the Wildwood Lake Canoe Company (WLC), a canoe manufacturing shop in St. Mary’s, Ontario. Monroe planned to build 30 canoes per year and he wondered what strategy and tactics would maximize his profits. The initiative for WLC evolved from Monroe’s canoeing and woodworking hobbies. Monroe had canoed recreationally for more than 20 years and had built three canoes, which he sold after using them each for a season. Last spring, when Monroe decided to purchase a canoe for the first time, he suffered what he described as “sticker shock. He could not believe the price and poor quality of retail canoes. Monroe saw an opportunity to build handcrafted cedar canoes, which he would sell for a premium. Monroe wanted assistance starting his company, so he enrolled in a 12-week business program in St. Mary’s. He didn’t find much value in the classwork itself, but after completing the course and creating a business plan, students could enroll in a start-up and mentoring phase conducted on-site. WLC would rent space there for $351 per month, starting in April 2010.
The shared facility gave Monroe access to a wide range of business resources, including instructors and a woodworking shop. Monroe hoped these resources would give WLC a competitive advantage. WLC was going to specialize in 16-foot Peterborough canoes, which were a classic Canadian design. These canoes were popular worldwide and had gained a reputation as agile, fast, and stable. The canoes would be made from long, thin strips of cedar and constructed with epoxy (a type of glue that binds when heated). Monroe described building canoes as “relatively easy,” although it took time and woodworking skill.
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Canoes produced at WLC would have exclusive features that included walnut decks, brass fasteners and cane seats. The finish would be hand-sanded, rubbed with epoxy and treated with Carnauba wax, which was a standard technique. In addition, customers would receive a certificate of authenticity with each canoe, and canoes would be marked by serial numbers, similar to an art print. Monroe planned to produce 30 canoes in the first year and average one canoe every ten days, which would leave 65 days to buffer any unforeseen production delays.
Monroe would have to work seven days a week to maintain the production pace; however, he felt that he could handle a seven-day schedule for two to three years. Although the first canoes were scheduled to take almost 12 days to build, manufacturing time would gradually decrease. Monroe knew that he would have to invest in some equipment which would include an estimated $5,530 for power equipment and accessories; hand tools at $835; cutters, blades and bits at $800; benches, stands and cabinets for $1,600; forms and jigs for $160; and office equipment for $3,055.
Monroe projected that variable costs would total $1,161 per canoe and annual operating expenses would total $8,644. The market for canoes followed the business cycle. In recessions, canoe sales suffered as many prospective customers stopped recreational spending. Sales of premium-priced canoes were especially vulnerable. The statistics showed that many companies were unable to survive the recent recession that began in 2008; however, industry sales had been strong and improving over the past year or so.
Monroe was optimistic that growth would continue in the immediate future. Promotion would consist of a website, advertisements in canoeing magazines and press releases to industry and recreational associations. The Internet would be the company’s primary means of promotion and sale, and Monroe planned on establishing a web page complete with photographs, diagrams, and interactive order forms. Selling on the web gave WLC access to thousands of prospective clients at virtually no cost.
The company was also going to place advertisements in the “buyer’s market” sections of the two most popular canoeing magazines, Canoe & Kayak and Kanawa, which were published in the U. S and Canada, respectively. Canoe & Kayak had a monthly circulation of about 100,000. A one-inch advertisement cost US$140 per month. Kanawa, on the other hand, had a quarterly circulation of about 120,000. An equivalent one-inch advertisement cost CDN$340 per year. Monroe calculated that he would only have to sell one canoe per 67,000 dvertisement exposures if he produced 30 canoes per year. Finally, Monroe was going to issue press releases to Industry and Recreational Associations with the introduction of every new type of canoe at a cost of $300 per year. Based on the promotion strategy, most sales would be direct from the shop to the customers. Professionals with above-average incomes, who canoed as a hobby, would be targeted. Canoeing for these professionals might be the hobby itself or part of another hobby such as fishing, hunting, and camping.
Although Monroe did not include an estimate of this market segment, he cited statistics from Statistics Canada that Canadians own over two million boats, including approximately 640,000 canoes. According to Monroe, “It would be difficult to find a Canadian who had not owned, ridden in or admired a cedar canoe. ” Indeed, the potential market was very large, but Monroe wondered if there was any way to narrow it down more to those people who would be most interested. In addition to the 11 leading competitors Monroe had listed in his business plan, there were many other small manufacturers listed on the Internet.
The price range of handcrafted canoes sold on these websites ranged from under US$2,000 to over US$10,000. Most sites claimed to sell canoes made from cedar, comparable to the ones made at WLC. The competition also included mass-produced canoes sold by well-known manufacturers such as Coleman and Alumicraft. Mass-produced canoes were lower quality and retailed between $750 and $3000, depending on the make, model, and size. Other types of watercraft, such as windsurfers, sailboats and motorboats also competed with canoes for sales.
Prices for small boats and watercraft started at under $1,000 for low-end windsurfers. Monroe planned to price his canoes at around $3000 to start, though he might change that figure depending on market response. In all, the prices of products competing with canoes ranged widely. Monroe knew that canoes made by WLC would sell at a premium; however, he was unsure if he had the optimal price. He also wondered if his promotions were right. Mostly, though, he wondered how he would make WLC stand out from the rest of the handcrafted canoe companies.
Then there were other questions that Monroe was sure were out there, but he didn’t even know enough about business to ask. He wanted to make sure his marketing strategy was strong and in place prior to opening, but beyond basic decisions like what price to charge and how to advertise he was at a loss. ———————–  An experienced craftsman could build 25-30 canoes per year.  The first canoes would cost more, and variable costs would decrease as time went on.  These included telephone and internet charges, supplies, insurance, and maintenance.