A Situational Strategic Management Approach of Chateau des Charmes Wines Ltd.

Chris Lukeman
200753317
Strategic Management 1
BUSI 4050
Prof. Peggy Ann Coady
July 5th, 2015

1) Situation Orientation
1. Date of the situation to be analyzed, and the date(s) of the latest financial statements and other information
This case takes place in May 1991 with financial statements ranging from 1987 until 1991.

2. The analyst's perspective
As an analyst of the case, Chateau Des Charmes Wines Ltd.(CdC), my perspective is that of an outsider or consultant to the company in this case situation. This approach is most often recommended due to objectivity and the ability to take multiple stakeholders points of views.

3. The initial strategic consideration, i.e., problem/opportunity or decision that indicates why the situation needs further study.
Management at Chateau des Charmes must decide if they should move forward with building a new winery. The CEO, Paul Sr., has an emotional stake in this decision as this is his lifelong dream. His son, the vice president of marketing, Paul Jr., must balance his father’s dreams with what is best for the company.

4. Why is the company or the decision-maker(s) facing this opportunity, problem, or decision here and now?
The decision makers are facing this opportunity now because Paul Sr. feels that CdC has run of out space in its current facilities. The Ontario Development Corporation has also already granted a $2.2 million forgivable loan to go towards the project.

5. Where is the decision-maker or group of decision makers coming from?
The decision makers have the authority to make this decision as they (the Bocs family) control the company with 55% of common stock. This situation brings a unique challenge as this is a family run business. The CEO of the company, Paul Sr., has dreamt of building a new winery for many years. His age (55) may also be playing a role in his judgement as he would like to see his dream realized while he is still around. His son, Paul Jr., the vice president of marketing, is trying to analyse the situation through a business lenses to make sure this is the right move for the company.

6. Sketching a strategic gap:
The main objective for CdC is to remain profitable. Management lists no other concrete objectives.
Objectives inferred from other information:
Increase market segment and brand identification (sales persons)
Sell more wine in own stores (more profitable)
Steam line inventory, shipping (current problems)
Make organizational structure more functional (current problems)
Attract more visitors to winery to be more in line with competition.
Continue promotion of VAQ
Be more competitive with other established boutiques
There are no projected company finances listed or given. Management has not provided an indication of where they would like to see the company in the future, financially speaking, other than profitable.
Financial Projections:
Sales ($):
Projected
1991 : 2,012,500
1995 : 1,671,300
2000 : 1,244,800
Gross Profit ($):
Projected
1991 : 962,500
1995 : 1,077,300
2000 : 1,220,800
Net Income ($):
Projected
1991 : 478,000
1995 : 744,000
2000 : 1,076,500
Net Income before extra ordinary income ($):
Projected
1991 : 10,490
1995 : -164,322
2000 : -382,837
From Exhibit 1 of spreadsheet we can see a downward projection of sales, operating income as well as a negative net income before extra ordinary income. We also see that at the same time, gross profit and net income continue to climb. This is not an accurate projection for three reasons. There are not enough years of data for the income statements, there is not enough information on the payment plan or the ending date for the compensation paid for the pipeline easement, and some of the figures vary sporadically. For example, operating income shows an 82% drop from 1987 to 1988, but then a 336% climb from 1988 to 1989. There is little consistency which means a pattern is difficult to develop.
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