Pencil Manufacturing Company

Vision To become a $100 million company by 2025

Mission Providing school children with a smooth writing experience

Established 2012, Current Head Office Dallas, TX; Factory Sherman, TX (10,000 Sq. ft)

Currently served markets DFW Metroplex, Amarillo, Lubbock all Texas; Oklahoma City, Tulsa - OK (Total of 500 school supplies outlets)

Total Workforce 100 (30 at HO and 70 in factory), Current Annual Revenue is $20 million and Profit is $2 M (Dec 2019). 40% revenue from wooden pencils (No.2 pencils), 20% from plastic pencils, 20% from recycled material pencils, 10% from erasers (not manufactured by you), 10% from sharpeners (not manufactured by you). Erasers and sharpeners both imported from Vietnam, rebranded and sold. You have an investor friend of the founders son who Is willing to invest $10 million over 2 years.

Company is headed by Founder-Owner President (NSU Alumna/ Alumnus) and assisted by Executive Vice President (son of founder Duke University Alumnus); VP-Finance, Supply Chain and IT (OSU Alumnus); VP-Operations (Factory Head); VP-Marketing & Sales. President directly controls HR function through the recently promoted Asst. Vice President HR (OU Alumna). VP-Ops and VP-Mktg & Sales are both OSU Alumni.

Competitor Name (Founded)	HO	Factory	Revenue (2019)	Profit	Workforce	Market Spread	Products (% share of co. revenues)
Crayools (1985)	San Jose, CA	San Jose, CA	$500 M	$40 M	2000	40 states	Black leaded Wooden (10%) and Mechanical Pencils (20%), Erasers (5%), Sharpeners (15%), paper (40%), glue (10%)
Tulsa Writing Materials (2008)	Tulsa	Broken Arrow	$120 M	$15 M	550	OK, MO, AR, CO for pencils	Wooden Pencils (20%), Pencil Leads (80%) (black - all diameters, all number types)
YellowNBlack Writers (1999)	Atlanta	Atlanta	$150 M	$20 M	650	GA, AL, MS, LA, TX	Multi-colored lead pencils (12 color packs 40%), 24 color packs 60%) made of wood
OD Supplies (2015)	Little Rock	Little Rock	$20 M	$5 M	125	AR, OK, TX	Black Wooden pencils (25%), environment-friendly recycled material pencils (75%)
School Equippers (1970)	Maryland	Maryland	$750 M	$15 M	2250	45 States	Different types of pencil-specific wood (85%), all varieties of artistic pencils (15%)

Some Additional Information (Macro- Environment):

1. The Covid-19 crisis is expected to continue right through Spring 2021. With the vaccination on, situation may become close to normal by the start of next academic year.
2. Quarter-on-quarter GDP growth rates for March 2020, June 2020, September 2020, and Dec 2020 were -5%, -31%, +33.4%, and +4%. The annual GDP growth YoY for 2020 was -3.5% over 2019. GDP growth for 2021 is projected at +3%
3. Unemployment rates for July, Aug, Sept, Oct, Nov, and Dec 2020 were 10.2, 8.4, 7.9, 6.9, 6.7, and 6.7 percent respectively
4. Total size of school supplies market is $2 Billion, out of which wooden pencils category comprises of $300 Million in 2020. Projected growth during 2021 to 2026 is 4% CAGR
5. Current Governor of Texas owns 10 wood-processing mills in Texas, California and Virginia
6. California has banned lumberjacking due to the huge forest fires destroying millions of hectares of soft wood trees
7. Last 1-2 years, Texas and Oklahoma have showing sharp increase in incoming, i.e. immigrating population, mostly fleeing the high tax regime of California. Most of these new migrants are settling in Eastern Texas and Central Oklahoma.
8. A machine supplier company has offered the company a machine on which pencil manufacturing can happen in a single machine you put in the large wood logs on one end and it gives out finished pencils from the other end. Only 10 people required to run it. But each of these machines costs $15 million. Also, this is a totally new invention, untested.
9. Due to forest fires in the Amazon in Brazil, environmental activists all over America had aggressively campaigning in schools about the effects of climate change, especially deforestation.
10. Before Covid19 crisis hit us, tariff war with China had already adversely impacted recycling business. Earlier, 80% of recyclable waste from US was sent to China. Till Dec 31^st, 2019 it was only 50%. Since the COVID crisis began, there huge noises on Capitol Hill about completely reducing the dependency on China for all kinds of trade activities.
11. As on Dec 31^st, 2019 US has increased the import duty on all graphite, coal and lead products from 10% to 75% of the import value as an anti-dumping measure to protect local producers. No change in current federal regime is expected

Some Additional Information (Competitive Environment):

1. Currently, the only suppliers of pencil-worthy wood are School Equippers and Cray Inc., a sister company of Crayools. Black lead (actually graphite) for No. 2 pencils is supplied by only one company to everyone Tulsa Writing Materials. All other varieties including colored lead are imported from China
2. YellowNBlack and Tulsa Writing Materials, in addition to traditional sales channels of stationery supplies outlets like Staples and Office Depot, also sell through online presence (their own websites as well as Amazon). OD Supplies only sells through Amazon and Ebay. Crayools and School Equippers sell only through traditional channels office supplies stores, grocery stores.
3. OD Supplies had initiated an aggressive campaign across few school districts in AR and TX for promoting their environment-friendly pencils. They visited school to school and conducted events in collaboration with the local Parks & Recreation Departments until few months back.

QUESTION: PLEASE HELP WITH THIS CASE STUDY: SUPPLIER BARGAINING POWER

The Assignment (Total 300 points): Considerations while carrying out this exercise-

1. Look at key data points to build the foundation for your analysis. These data-points may either be quantitative (in the form of numbers) or qualitative (in the form of descriptive information)
2. For anything which is not clear from the case you must make reasonable assumptions which must be clearly noted in your report
3. The Deliverables will be evaluated through 2 main criteria content of report and structure of report
4. The Content of the Report (Total 200 points)
5. Modify the vision and mission if required based on our learnings in class (10 points)
6. Perform an evaluation of your companys external environment. It should include answers to all the following questions from chapter 3 that assess the macro-environmental industry factors and competitive factors:
   1. To what extent are factors in the broad macro-environment acting to make the outlook for the industry and the company more or less attractive? (PESTERD Analysis 10 points)
   2. What kinds of competitive forces are industry members facing, and how strong is each force? (5-forces analysis 50 points)
   3. What forces are driving changes in the industry, and what impact will these changes have on competitive intensity and industry profitability? (Driving forces analysis 10 points)
   4. What market positions do industry rivals occupywho is strongly positioned and who is not? (Strategy group mapping 20 points)
   5. What are the key factors for future competitive success? (Identify industry KSFs 10 points)
   6. Is the industry outlook conducive to future growth? (Factors determining industry profitability 10 points)
7. Perform a Resource & Capability Analysis (40 points) and SWOT Analysis (40 points) of your company in line with its vision and mission (Total 80 points)
8. Structure of the report (100 points)

The final outcome is a professionally written report which must be in the following format:

• Title page with name of group and name of group members (10 points)
• Brief Summary of the contents and key take-aways (20 points)
• Purpose/ Objective of the report or the analysis (10 points)
• Assumptions for anything that is not clear from the information (10 points)
• Clearly distinguishable sections describing each of the above tasks. You must number your paragraphs based on the serial numbers for each of those actions. (40 points)
• Aesthetics and creativity (10 points)