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Clearwater History Essay Sample

Clearwater History Pages
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John Risley had a clear objective when he co-founded Clearwater Seafoods with his brother-in-law, Colin MacDonald, back in 1976: He wanted to make money and put food on the table. “That was the driving force,” says Mr. Risley, the company’s former chief executive officer and current chairman. His family’s tough financial times while growing up in Nova Scotia made him determined not to be poor. “We started Clearwater Seafoods with a pickup truck and lots of ambition,” he says. Mr. Risley and Mr. MacDonald took the business from a small lobster distribution company, in a low-tech industry, to about $300-million in annual seafood sales by 2002, the same year that Mr. Risley was named one of Canada’s top entrepreneurs by Profit magazine. Mr. Risley’s strategy was to foster innovation by investing in the latest and best technology to improve the product and keep costs down, for example, something as simple as replacing Captain’s logbooks with notebook computers, while GPS tracks vessels and maps the ocean floor. Clearwater is the largest shellfish company in North America and its chairman believes integrated technology and innovation is what has given Clearwater an edge over the competition in the global seafood market.

The company, has ships around the world and has cashed in on growing demand for its shellfish. It has also devised new ways of shipping fresh seafood to global customers, creating new markets for its products, which we will discuss with you in the below analysis. The company primarily sells its products in Canada and exports to more than 30 countries, inclusively to the US, the UK, China, Japan and other countries. The company also holds a subsidiary in Argentina and 11 (plus) factory freezer vessels. Clearwater and the company is headquartered in Bedford, Nova Scotia, Canada. They have the bulk of their brick inIn late 2003 Clearwater Fine Foods announced the planned divestiture of its sizeable Lunenburg NS at Lunenburg Real Holdings which consist of eight wharves, 24 buildings and approximately 14 acres, taking up the majority of Lunenburg’s historic waterfront.

http://www.thetelegram.com/Business/Economy/2007-11-15/article-1440827/Clearwater-likely-to-be-bought-back/1

Risley and MacDonald took the seafood company public in 2002 at $10 per unit, at a time when income trusts were a popular vehicle for tax savings. Clearwater’s products include scallops, lobster, clams, coldwater shrimp, crab and other fishes. The company sources its assortment of seafood items from Canadian fresh water, North Atlantic regions and a few African regions. (http://www.food-business-review.com/companies/clearwater_seafoods_limited_partnership) Clearwater Seafoods is a leader in the global seafood industry recognized for its consistent quality, wide diversity and reliable delivery of premium seafood. Since its founding in 1976 Clearwater has invested in science, people, technology, resource ownership and resource management to sustain and grow its seafood resource. This commitment has allowed it to remain a leader in the North American seafood industry. (www.clearwater.ca)

External Analysis:
Clearwater has consistent growing demand in the UK, Japan and North America and proven that they are secure and understand these growing markets. It is China, a.k.a “The Sleeping Giant” that we are going to focus on in the below analysis. China is a developing country in the world. In recent years, more and more foreign countries have recognized that China’s economy is growing. China’s economy grew at an average rate of 10% per year during the period 1990–2004, the highest growth rate in the world.

http://en.wikipedia.org/wiki/Economy_of_the_People’s_Republic_of_China

In order to improve on people’s living standards, the import demand of foreign food is growing and China is imposing less regulations, tariffs and barriers (especially since its induction into the WTO in 2001.) For example, when local seafood does not satisfy the appetites of citizens in the country with the highest population in the world, a lot of import and export companies increasingly try to satisfy this huge consumer demand. And so, China is increasingly importing special foods like Clearwater’s list of seafoods.

As the case said:
“We have reinforced and reorganized [their] sales efforts in China to tap the significant growth opportunities that we believe exist in the world’s most populous country.” (Textbook, page 199)

Clearwater Seafood Company knew that China’s market had huge potential, and noticed a lot of people showing big interest in importing Canadian seafood, especially lobster, which is one of most expensive shell fish in China. Lobsters are very rare in China, and they rely mainly on imports from Austria to satisfy demand. Clearwater made a judicious choice to increase their market share in Chinese as they noticed the very hungry sleeping giant wake from a 500 year nap. Currently, Clearwater Seafood Company has built three offices in China, in Beijing, Shanghai and Guangzhou which are three of China’s biggest cities. In addition, Clearwater Seafood carries over and markets the same mission and vision across nations.

Clearwater Seafood Company is dedicated to always keeping high quality standards, and remains one of the leaders in social corporate responsibilty in the seafood industry. They are constantly communicating and labelling their products with the guarantee that their products come from: all natural fishing, non-farming, pollution free and health and hygiene certified fisheries, which adds to their popularity in Asia, Europe, North America and other countries around the world.

Clearwater Seafood Company has a lot of advantages in China, such as a long history, stable development and international goodwill. Those factors are all helpful reasons to push the company toward success in the biggest seafood market in the world.

Key Success Factors

1. Chinese Seafood Quality and Pollution Problems- China’s seafood industry is highly fragmented. Therefore the regulations and inspections that the Chinese government imposes are not implemented very well. And due to dramatic development, polluted sea water has been a serious problem. Clearwater Seafoods are certified and carry the logo of the MSC (Marine Stewardship Council) an independent, global, non-profit organization. People around the world have increasing interest in products from well-managed and sustainable fishery efforts. The logo is evidence that the fishery meets the strict environmental standards set by the MSC and the product originates from a sustainable and well-managed fishing resource.

http://www.clearwater.ca/en/home/aboutclearwater/sustainability/mscsocialsustainability.aspx

Clearwater’s communication of this to its Chinese consumers is one of its key success factors.

2. Tariffs, Inspection and Regulations- Positive news for Clearwater Seafoods is that import tariffs, inspections and regulations are decreasing, as stated above. Though import tarrifs are still at 47.2% in 2004 China has communicated through the WTO that these rates will continue to decrease. This is a key success factor for Clearwater Seafoods.

3. Exchange Rate and Buying Power- Until 2009, Chinese currency Renminbi had almost no exposure to the international currency market due to government controls and it was artificially set at a low value. Now that Chinese government has allowed fluctuations to take place, Renminbi has been increasing its value against most of the developed countries except Japan. Obviously this phenomenon is favorable to Clearwater since it means Chinese people have more buying power. And Chinese people’s incomes have been increasing dramatically. In 1989 the average income was 2,277 yuan ($339 CAD). Within 20 years it has increased to 42,789 ($6371 CAD). http://www.china-b-japan.org/archives/271 The day China joined the G8 may not be so far. Right now there are not many people who can afford Canadian Lobster, but to be a first mover is worthwhile investment in long run.

4. Culture and Trend: Chinese people traditionally prefer live fish. However, due to the modernization of life style; people are turning their head towards supermarkets rather than traditional markets. Also the demand for processed product has been increasing which is a positive trend for Clearwater Seafood since many of their products are processed. This trend is another key success factor for them.

Competitor Analysis

* Within Canada
Agriculture and Agri-Food Canada has listed Pan Fish Ltd, Cooper International.co and ClearWater Seafood as major Canadian exporter to East China. (East China owns most of the wealth in China, and are the most relevant competitors at this time because the majority of imports land in East China and are then distributed to the poorer areas of China.) And the fact that Pan Fish Ltd and Cooper international do not have well established websites, we can assume that these are smaller companies and most likely they are not big threat to Clear Water Seafood. REFERENCE

* International competitors
The major seafood exporter to China is Alaska. Alaska accounts 9-12% of Chinese import of seafood. CONTRADICTION The second biggest exporter is Russia. However, these exporters mainly export relatively cheap fish such as whitefish, flat fish, salmon and herring as these fishes account for the largest percentage of seafood sold in China INCERT QUOTE. Therefore they are not direct competitors of Clearwater Seafood.? * Within China

Local producers are the biggest threat to Clearwater Seafoods. Although they still need improvement in quality, due to the increasing demand for high quality and safe seafood, if they aren’t already, they will soon have to seriously reconsider their practices. And when that day arrives, Clearwater Seafoods will be way ahead of them.

Some of the major East Chinese producers and distributers are as follows:

1. Siam Canadian (China) Ltd – Founded in Thailand and has 6 offices in Asia, including one in China. They supply a wide range of products: scallops, salmon, crab, shrimp, cod etc….. They mainly sell frozen food. And they import and export their products.

2. Dalian Marine Products Corp – A state owned corporation (Dalian State is located north east of China, close to North Korea) that provides all kinds of seafood. They own processing plants which are approved by the EU and import and export their products.

3. Shanghai Ocean Food Trading Company Ltd- Are a local importer of Canadian seafood. MORE

4. Shanghai New Fishport Company Ltd – Are a local importer of various seafoods including Canadian seafood. MORE

It is too tedious to mention all the competitors since 352,815 of them are very small companies with less than 10 employees. Clearwater Seafood has huge opportunity for growth because not many Chinese companies emphasize quality or the standards (yet) Clearwater swears by. Most likely they are competing on price due to the average annual income stated above. And compete with the other companies who sell high end seafood to hotels and high end restaurants. And many of the producers that put importance on quality also export their high quality products to foreign countries such as the EU and Japan. Which means that they are international competitors of Clearwater Seafoods. At this time, the most direct and big threat to Clearwater seafood is other Canadian seafood importers.

Canada’s excellent reputation of their non-polluted natural environment and strict food inspection regulations has helped Canada’s seafood to be recognised by Chinese consumers, amoung the rest of the world, as clean, nutritious, delicious and healthy. Putting Clearwater head to head with its Canadian competitors. http://www.ats.agr.gc.ca/asi/4668-eng.htm These competitors already have access to local markets and know how they work and pose as a real threat to Clearwater Seafoods unless complete differentiation is achieved. Or , if Clear Water Seafood changes its strategy and outsource distributers, local importers could become partners instead of threats.

http://researchwikis.com/Fish_Products_Marketing_Research_-_China

Internal Analysis

a) Clearwater has developed a threefold strategy to achieve their corporate vision to be “dedicated to sustainable seafood excellence”. The first described is innovation, by being a leader in adopting and creating technologies and practices that will provide for top and bottom line growth. This push for improvement has also led to Clearwater developing a new raw lobster product in the 2004 fiscal year, which management believes will increase the uses of lobster because of the consistency and convenience attributed to the product. (TALK IN 2005-2011ABOUT BRANDED IN REFERENCE) This is all in an effort to ensure the sustainability of the resources they harvest. The second strategy Clearwater Seafoods employs is vertical integration, in order to ensure assurance and reduce costs to customers. The final strategy that Clearwater demonstrates is their commitment to diversity in both their product lines and in the markets they sell their products in. As an organization, this hedges against declines in the supply and lowered demand in the markets. (Clearwater Seafoods Income Fund, 2005) Management also emphasizes the resource ownership of management, through large investments in quota ownership.

This allows the organization to create a stable supply and also increases the importance of sustainable fishing. Market and customer focus is also an important part of the strategy that Clearwater uses; they are focused on expanding to meet the market for premium seafood as it grows across the globe. They believe that their greatest growth opportunity is increasing sales to existing customers.WEAKNESS This seems to be an apparent conflict with their commitment to mitigate risk through small customer total sales percentages, i.e. the loss of any single customer only reflects a maximum of 5% of their total sales. Finally, Clearwater stresses the importance of their employees. They attempt to empower them through decentralized decision making and personal accountability to enhance innovation and improve the efficiency of the organization. (Clearwater Seafoods Income Fund, 2005) “You don’t have to be an expert in everything yourself,” says John Risley of Clearwater Seafoods. “That’s why you hire experts.” The Globe and Mail

The falling value of the US dollar has Clearwater management looking to further diversify their market and increase sales beyond North America. Their marketing strategy makes heavy use of a sales forces that visit restaurants and grocers, at this time their marketing strategy does not place a heavy focus on marketing directly to the consumer. And Clearwater Seafood still heavily focuses on Traditional Marketing Strategies. LATER ON SWOT

Strengths * Large quota ownership allows for high revenue * Vertical integration chain allows for quality assurance * Global presence in market * Investments in sustainability allow for long-term growth * Product diversity and innovation * Employee investment * Large size allows company to survive short-term supply fluctuations. * Broad diversity of products offered allows company to survive short-term species availability and price fluctuations. * Investment in sustainable technology sends a clear long-term commitment to investors. * Strong reputation for high quality standards * Production capacity and quota ownership seem adequate for meeting current customer demands. Management is looking to expand both to reach more customers. * Investment to workers as part of corporate vision and strategic plan stresses management’s commitment to keep employees healthy and productive in a potentially dangerous environment. * High product quality strategy * Investments in product quality through improved technology increases efficiencies. | Weaknesses * Poor cash position * Saw a decline in net earnings between 2003 and 2004.

* Large % of sales come from US, which is experiencing an economic downturn * Income trust structure may be putting too much pressure on the organization to distribute cash to unit-holders instead of keeping to reinvest in the organization * Target markets of grocers could experience consumer pressure to supply different brands of seafood. * Target markets of restaurants and food processors could switch from a quality focus to a cost focus in periods of economic decline. * Demands past quotas cannot be met. * Cultural considerations related to greater market saturation in China are not discussed by management

* Management and board of directors does not reflect the diversity of the new target markets they are trying to reach * location of fishing catches is very far from the market they are trying the Chinese market they are trying to target * the target market in China, i.e. middle classs, may not be willing to buy seafood coming from a different continent.| Opportunities- Chinese market – | Use strengths to take advantage of opportunities | #6 Overcome weaknesses by taking advantage of opportunities| Threats * Cheaper seafood improves safety, removing the importance of “premium seafood” * Devalued US currency was blamed for all loses in 2004, vs 2003; management may be too heavily concerned with the bottom line. * Competition from other producers, especially low cost Chinese producers could endanger progress into Asian markets. * Lack of relationships in Chinese market could | #8 Use strengths to avoid threats| #9 Minimize weaknesses and avoid threats.

c) Financial Analysis – (Income statement and Balance sheet should be included in appendix)

Although Clearwater Foods appears to be in an appropriate financial position, the lack of cash at December 31, 2004 is troublesome. This is generally attributable to the large investments in capital that Clearwater made during the year and the cyclical nature of the business. The majority of these investments were funded with debt, and although they are still within all of the debt agreements, this may not be the best strategy considering the state of the American economy, which contains the majority of their customer base. The poor cash position is also due to the nature of the corporate structure and the importance of the distribution of revenue to unitholder’s in the income trust arrangement that Clearwater operates under. We can see that the accounts receivable turnover ratio is falling, underlying a potential for future collectability issues. The net profit margin also fell during 2004, partially attributable to tax incentives Clearwater was able to take advantage of during 2003. Considering all of the potential challenges they face. Clearwater management will have to take precautions to ensure they stay liquid.

Alternatives:
Entering the Chinese market can provide for Clearwater Seafoods a variety of advantages. In order to enter the Chinese market, Clearwater Seafoods can follow a variety of routes: 1. FDI: Clearwater Seafoods can enter the Chinese market by investing into this market. However, China is a huge nation and is characterized by a variety of cultures that are different from the western cultures. In addition, the rules and regulations in China are not similar to those dominant in the western world, especially Canada. Thus, investing in the Chinese market would pose a variety of challenges and risks for Clearwater Seafoods. There is a huge potential for success but also for failure.

2. Mergers: This is reasonable and a more practical way of entering the Chinese market. Clearwater Seafoods needs to acquire the knowledge about the Chinese market characteristics and the Chinese consumer preferences. Merging with a local firm would enable Clearwater Seafoods to acquire some necessary knowledge about the Chinese market. Such knowledge would enable the firm to market and sell its products more successfully in the Chinese market despite the fact that the profits are not the same as if the firm was just operating independently. STARBUCKS REFERENCE + CANADIAN MERGERS +BUYOUTS

3. Licensing: This is another important method that can be used to enter the Chinese market. Through this method, Clearwater Seafoods would be able to provide a Chinese seller and marketer with the necessary products and know-how to sell the products of the company to the right markets and the right customers in the Chinese market. (LESS CONTROL)

Action Plan:
It is very important for Clearwater Seafoods to heavily invest in market research to better study and understand the characteristics of the Chinese market(SENDING THEIR WORKERS THEIR IN TURNS LOOK UP TERMINOLOGY), culture and customer preferences. It is also essential to look at the possible segmentation of the Chinese market that has the biggest potential (EAST CHINA CAN ONLY AFFORD QUALITY RIGHT NOW). Some segments could have more potential for the products of Clearwater Seafoods. After studying the Chinese market, it would be important to study the possible strategic partners and the competition in the market. Then, the proper strategy would be chosen. We believe that Merging or licensing could be of the most potential.

Contingency Plans:
Clearwater Seafoods Limited has three alternatives to enter the Chinese market. I would advise that the firm sticks to the licensing strategy. However, in case of failure, it is best to go for merging or FDI as a last choice. 2004-2011 (THIS SECTION IS INCOMPLETE)

Since then, the company’s units have fallen steadily to current levels of about $4.30 and cash distributions were cancelled for part of last year due to problems with vessels, falling prices for key catches and the decline in value of the American dollar. (http://www.food-business-review.com/companies/clearwater_seafoods_limited_partnership) China is also the largest exporter and second largest importer of goods in the world. China became the world’s top manufacturer in 2011, surpassing the United States. The country’s per capita GDP (PPP) is $7,518 (IMF, 93rd in the world) in 2010. The provinces in the coastal regions of China[7] tend to be more industrialized, while regions in the hinterland are less developed. As China’s economic importance has grown, so has attention to the structure and health of that economy.[8][9]

http://en.wikipedia.org/wiki/Economy_of_the_People’s_Republic_of_China

Foreign Seafood in China:
(Data, will be cited)
In the whole year of 2008, China’s import and exports of seafood products’ total 684.8 million tons, worth around 160.2 billion US dollars, an increase of 4.7% and 10.7% from previous years. But exports have decreased to 296.5 million tons which is about 3.2% less than the previous year. Exports are currently worth 106.1 billion US dollars; an increase of 8.9% even though the weightage has decreased SHOWS HOW PRICES AND INFLATION ARE INCREASING. And imports’ total is 388.4 million tons that valued 54 billion US dollars that were increased to 12.1% and 14%. Compare with last year, still got 1.9 billion US dollars more. () Obviously, China is focus on how to increase seafood’s export output. In addition, concern about among of edible seafood output improved to 112.9 million tons, worth more than 17 billion US dollars which means increased to 31.3% and 50.8%. ()

According to the above data, people can see how huge China’s potential and buying power are. Chinese people also have strong interests to try a variety of different types of foreign seafood. Numerous famous restaurants in China would like to sell the export seafoods, even if the prices are higher than local, consumers seem desperate to try something new. Therefore, the “Sleeping Giant” has woken and China’s people and companies rely on imported seafood to earn more money. The Chinese Government has also found that since China’s inseption into The World Trade Organization in 2001, they are trying to relax many of their policies on imported seafood. And the Canadian Government would like to push the business development. In turn, the Canadian embassies offer their full of support, such as helping seafood companies promote their products and hold exchange events that give Chinese people the opportunity to try Canadian seafood. In April 8th, 2009, Clearwater Seafood Company combined with Canadian embassies held an event called “Canadian Seafood Festival” in Hong Kong. They helped Clearwater Seafood Company have better future development in China where several local famous restaurant groups joined in on the festivities and all showed strong willingness to cooperate with Clearwater Seafood Company.

5. In 2008 Chinese government admitted that 8 percent of Chinese seafood does not meet national standard. As a result, many countries such as the United States, the European Union and Russia have banned importing certain kinds of seafood from China after they found antibiotic contamination. In 2008, Chinese Seafood union recommended not to eat seafood caught or harvested in adjacent sea 6. Tarrifs decreased from 47.2% to 9.9% in 2005. However, trade barrier is not just tariffs, but also inspection by Chinese Quality Supervision, Inspection and Quarantine (AQSIQ). AQSIQ has found heavy metal MRL residues in some Canadian seafood products and rejected some of the seafood WHOSE SEAFOOD? REFERENCE?. Another obstacle Clearwater seafood may face is that frozen seafood cannot be couriered within China and regulations are often localized therefore they have to meet each regions’ regulations. FOR ANOTHER PART-THREAT . China was Canada’s third largest export market ($276 million), accounting for 6.7% of Canada’s total aquatic exports. China’s main aquatic products imported from Canada are crustaceans (including lobster, shrimp and crab, etc), salmon and cod. 7. Table 1 outlines the volume and value of these imports: Table 1: China imports from Canada

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