Seminar: Transnational Strategic Management (IBA 6020)Instructor: Louise Kelly, PhDStudent: Christian-H. KnauerDate: October 9, 2007

OutlineI. Introduction to IndustryII. Business SegmentationIII. Strategy

Mission Statement

Raising high quality bluefin tuna with the latest most advanced technologyto ensure the highest degree of customer

satisfaction.

I. Introduction to IndustryAquaculture:Cultivation of aquatic populations under controlled conditions.

Aquaculture vs Captures Fisheries: Million tons

Mariculture:Cultivation of marine organisms in the open ocean.

Now supplies nearly 50 percent of available seafood.

Growth rate worldwide: 7%/year

2. Business Segmentation

Four main questions:

1. What need does Bluefin Inc. serve?2. Who are our customers?3. What technology are we using to satisfy customer needs?4. In which geographic area does Bluefin Inc. want to do business in?

1. What need does Bluefin Inc. serve?

Consumption of high quality bluefin tuna meat.

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography

Bluefin tuna

“The Porsche of the Oceans”

Size of a Porsche (10 feet)Fast as a Porsche (0-60 in 5

seconds)Value of a Porsche (160,000

USD)

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography

Bluefin tunaTypes of bluefin tuna:1. Northern bluefin tuna (Atlantic)

2. Southern bluefin tuna (southern waters)

3. Pacific bluefin tuna

Name: tuna (Greek) = rushSpeed: up to 60 mphLength: 70 inches, max 12 feetWeight: 200 pounds, max 1,200 poundsAmount of food: 5% of bodyweight per dayDiet: fish, krill, pelagic red crab, squid, pilchardAge: up to 40 yrsHighest price paid in Japan: 160.000USD

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography

Pacific bluefin

Bluefin tunaMigration: 1) Spawning in the Sea of Japan

2) Remaining in the area for 1-3 years

3) Offspring migrate

east & remain for an unknown time

Bluefin Inc. catches the fish at this time 4) Eventually return

west

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography

Reasons for selecting Baja California as the farming location

Migration of blue fin tuna to the area (easy catch)Governmental regulations are more sympathetic and pro-industry (than e.g. the US)Cheap laborProximity to LA airport (with 19 flights per day directly to Tokyo)

2. Who are our customers?Wholesalers /Importers (which sell our tuna at Japanese fish markets)

Later forward vertical integration possible (after using wholesalers for making our high quality fish well known)

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography

3. What technology are we using to satisfy customer needs?

Catching:Our boats catch the tuna 20-30 miles offshore between Magdalena Bay (south Baja California) and Monterey Bay (south of San Francisco).Between June - AugustTuna is slowly (< 2 mph) towed in the water to our farm in Baja California.Then carefully put into the circular pens/sea cages

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography

Pens in front of Baja California:

3. What technology are we using to satisfy customer needs?

Cages: Circular30-40 meter diameter rings Made from high density black polyethylene plasticRings float on the water’s surface and are held apart by stanchionsHandrails are attached approximately 1 meter above the water surface

Two nets are attached to the floating ringsThe inner net, which contains the tuna, ranges from 60mm to 90mm mesh and has sides which drop twelve to twenty metersWhere an outer, or predator net is used, it serves to keep sharks and seals away from the tunaPrice range: $80,000 to $200,000A standard cage holds up to 2,000 tuna

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography

3. What technology are we using to satisfy customer needs?

Diet:All you can eatSardines3 times a day6 days a week4 to 8 month

Purpose of diet:Gaining weight (up to 190 pounds)Building fat

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography

Our Japanese customers

3. What technology are we using to satisfy customer needs?

Transportation/Infrastructure:

By shipTruck and/or ship to LA airportAirplane to Tokyo

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography

4. In which geographic area does Bluefin Inc. want to do business in?

Japan

4.1 Growth4.2 Profitability4.3 Turbulence4.4 Success factors

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography4.1 Growth4.2 Profitability4.4 Success factors

4.1 GrowthDemand stages

Emergence (industry is born)Accelerating growth (demand > supply)Decelerating growth (signs of saturation)Maturity (supply < demand)Decline (very low to zero demand)

Question: What will be the length of the demand cycle to the arrival of saturation?

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography4.1 Growth4.2 Profitability4.4 Success factors

Demand stage: Accelerating growth (demand > supply)

Following several tuna management programs and fishing restrictions worldwide, global tuna landings have started to shrink but import values are moving up.

January-March 2007:Total tuna (fresh and frozen) imports during this time fell by nearly 20% in quantity to 69 505 MT compared to 86 430 MT last year same period. Import value on the other hand, increased by 11.5% to ¥70 billion during this period. Fresh tuna imports were record low at 10 334 MT.

Supply & Demand high

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography4.1 Growth4.2 Profitability4.4 Success factors

Demand stage: Accelerating growth (demand > supply)

Market size:

Japanese imports of fresh/chilled tuna (MT)

Japanese imports of frozen tuna (MT)

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography4.1 Growth4.2 Profitability4.4 Success factors

Species

January - March Annual

2007 2006 2005 2004 2003

2006

Blue fin

1803 2110 3715 3690 1880

9196

Species

January - March Annual

2007 2006 2005 2004 2003

2006

Blue fin

4099 2450

3185 3690 5698

13208

4.2 ProfitabilityBuying habits:

Main season between October and MarchDemand peaks around Christmas

Competitive structure (global):Tuna sea farmers (Mexico, Australia, Africa, Mediterranean sea)Tuna fishersFish farmers of substitute fishFishers of substitute fish

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography4.1 Growth4.2 Profitability4.4 Success factors

4.2 ProfitabilityDistribution:

Use of Japanese based agents (wholesalers)

Located at the Tokyo’s fish market Tsukiji

Process:Agent orders an specific amount of bluefin (e.g. Monday)Fish is killed fast and immediately frozen (no stress hormones which negatively impact quality of fish!)Fish is shipped immediately to LAVia airplane to Tokyo Japan (e.g. bluefin arrives customer on Wednesday)

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography4.1 Growth4.2 Profitability4.4 Success factors

4.3 Success factors 2 major factors which will determine strategies of top competitors:

Quality of tunaConsistency of availability ( competitive advantage, since we are able to deliver whenever the customer orders)

Segmentation:

1. Need

2. Customer type

3. Technology

4. Geography4.1 Growth4.2 Profitability4.3 Success factors

Start-up Cost (in USD)

Materials and Requirements

Concession (2 pen): 3,000,000

Fishing nets: 500,000

Cages/Pens (2): 3,000,000

Equipment: 800,000

Total: 7,300,000

Available capital = 10,000,000USD

Costs (in USD)

Monthly cost (fishing season): 625,000 Labor: 45,000

Consultant: 12,000Diver: 3,0003 fisher men: 20,0002 ranch workers: 10,000

Fish food: 400,000Insurance: 20,000Operational cost: 50,000 (electricity, work cloth, transportation, gasoline, car etc.)Boat lease: 110,000

Vessel: 90,000Transportation: 20,000

Income Statement1 2 3 4 5 6 7 8 9 10 11 12

Sales 0 0 0 0 0 0 50,000 100,000 150,000 1,000,000

2,100,000

4,200,000

Labor 25,000 25,000 25,000 25,000 25,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000

Fish Food 0 0 0 0 0 400,000 400,000 400,000 400,000 400,000 400,000 400,000

Insurance 5,000 5,000 5,000 5,000 5,000 20,000 20,000 20,000 20,000 20,000 20,000 20,000

Operational cost

10,000 10,000 10,000 10,000 10,000 50,000 50,000 50,000 50,000 50,000 50,000 50,000

Boat leasing

5,000 5,000 5,000 5,000 5,000 110,000 110,000 110,000 110,000 110,000 110,000 110,000

Pretax Income

45,000 45,000 45,000 45,000 45,000 625,000 575,000 525,000 475,000 375,000 1,475,000

3,575,000

III. Strategy

Optimization of ROI by reaching for two major objectives:1) Matching aggressiveness of Bluefin Inc.

strategic behavior to turbulence of its environment.

2) Matching responsiveness of the firm’s capability to the aggressiveness of its strategy.

Future turbulence level of bluefin tuna industry

Complexity: Global (5)Familiarity of events: Discontinuous familiar (4)Rapidity of change: Comparable to response (3)Visibility of future: Partially predictable (4)

Environmental truculence: Discontinuous (4)

Occurring changes could be:Increase in supplyStricter import regulations for tuna in JapanChanges in technology which allow tuna to be farmed completely in captivityMarket saturationStricter global regulations which pressure Mexico to change farming regulationsCatastrophes (pollution of sea)Activist such as Greenpeace attack/damagefarm

Strategic Aggressiveness of Bluefin Inc.Entrepreneurial (Based on expected future)

Bluefin Inc. continuously scan its environment in order to identify future economic, competitive, technological, social, and political discontinuities.

Responsiveness of Bluefin Inc. capabilityStrategic (Environment driven, We seek new change)

Bluefin Inc. continuously challenges the future validity of historical success strategies and the future attractiveness of historically attractive markets.

Thanks for listening!

ReferencesImplanting Strategic Management, 2nd edition, H.I. Ansoff & E. McDonnell, Prentice Hall, 1990

www.baja-web.com/punta-banda/tuna.htmlhttp://casamarintl.com/CrowsNest/1999/apr_CrowsNest.htmlwww.encyclopedia.com/doc/1G1-107524526.htmlhttp://findarticles.com/p/articles/mi_m0FDG/is_2_103/ai_n13801781http://govdocs.aquake.org/cgi/reprint/2004/802/8020800.pdfwww.infofish.org/marketreports/tuna0607.htmlwww.investopedia.com/articles/04/022504.asphttp://marinebio.org/species.asp?id=236www.montereybayaquarium.org/efc/living_species/default.asp?hOri=0&inhab=433&hab=3http://mt.essortment.com/bluefintuna_raem.htmhttp://news.mongabay.com/2007/0806-tuna.htmlwww.oceansalive.org/eat.cfm?subnav=fishpage&fish=154www.sargo.net/aquaculture.htmwww.spc.int/coastfish/News/Fish_News/99/NIAR_99_2.htmwww.smh.com.au/news/national/12-million-thatsa-four-tuna/2006/10/25/1161699385987.html