A Case Study On Fraser River Plastics Ltd.

RAB 8 Barisal

Fraser River Plastics Ltd.

The Canadian plastics processing industry:

  •  In 1993 there were over 1,400 firms in Canada.
  • Most of them located in Ontario and Quebec.
  •  Majority had sales of less than $2 million
  • Meeting Canadian demands

 Free Trade agreement between Canada, the US and Mexico result in significant downward presuree on world prices

Corporate History

In the fall of 1984, two Vancouver, British Columbia, businessman, Herber Rudd and Oliver Farthingham, visited Portland, Oregon, on a tour sponsored by the Vancouver Board of Trade.

They visited Damian Plastics Inc.

Cause of drawing attention:

 They used advanced techinques to minimize the raw material weight in the large products it produced, while retaining, through unique design, the essential rigidity and toughness.

They felt that there was a ready market in Canada, Because:

  1. They would have a competitive edge over comparable but more expensive plastic products and they could be used instead of their metal counterparts.

Result:

Tentative licensing agreement for technical assistance from Damian and access to all mould designs.

Raising the fund

First facing problem was to raise the$160,000 equity needed to build a plant and get into operation.

On December, 1984 the company was incorporated under the name of Fraser River Plastics Ltd.

Its three major Share holders were:

  • Farthingham ( 20 percent) à President
  •  Wickham-Jones ( 18 percent ) à Vice President
  •  Rudd ( 13 percent ) à secretary-treasurer

Site allocation and facility set up

Rudd located 2-acre site in Chillwack, British Columbia
  • Tenders were called on the building’s construction in Feb 1985.
  • Manufacturing equipment was ordered.
  • Three officers hired on a part-time basis to run the company.
  •  Gunther Heinzman was hired as general manager of Fraser River.

Starting Production

In August 1985, production began.at Chilliwack.

Consequences of Production:

There was a ready and substantial demand for the products.

  •  The price, although high, was accepted.
  • Through 1986, the company’s operations expanded dramatically.
  •  To cut transportation costs, Fraser River purchased an empty  plant in Calgary, orderd equipment, and hired a general manager to take charge there.

Competitive Threats

In 1987, another group of entrepreneurs set up a facility to produce similar injection moulding products in Prince Rupert.
 Products and processes were poorly protected by the patents
few cosmetic design differences to differ products of Fraser from that of Prince Rupert.

Franser River’s Response:

 purchase offer was accepted in November, 1987, and old major sharholders were retained as general manager, but they follow their own way and set up another firm.

Re-structuring

By 1988,  Limitation of the three-person board of Fraser company was notified as the it was rising to grow.
Need of  broader representation of views at the board level.
Three new members were added to Fraser River’s board: Owen Palmer, Joanna Young, Michelle O’Reilly
Upto this point, the org of the company had been loosely structured.
§ Each plants has its own managers and field sales force reporting to the GM
§ Wickham-Jones, Farthingham, and Rudd were considered the overall management committee for major decisions such as site selection, price, expansion, and capital investments.

Management Structure

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Reorganization of Marketing

Need for greater continuity, consistency and detail in the top supervision of overall operation.

Responsibilities among the company’s executives should be focused in the hands of a single chief executive.
He would be responsible for all operations and initiating and implementing policy changes with the concurrence of the board.
§Gunther Heinzman was made manufacturing vice president.
ØHe had not enough time needed to run the sales organizaition
ØHe didn’t like the pressure at the top.
ØHe was strong in manufacturing.

Lucas Feed was hired for the position of marketing vice president.

He claimed that

There was no stiff competition from new entrants.

  • The company needs more structure and policies in the administration.
  • At Calgary, there was a need the price list, so no one in the marketplace-including our customers-knew what the prices of the products were from one day to the next.
  • There was no collectio policy for the company and there was a high turnover in sales personnel.

He give the solution:

  • He restructured the sales organization.
  • He set up the company’s first sales forecast and budgets for each territory  and established a reporting system so that salespeople knew how they and their region were doing on a monthly basis.
  • He even instituted an advertising budget.

Acquisition of new plant

Throughout 1989, the company continued to grow. Demand was strong and prices were reasonable.

In this year two acquisitions took place:

1.Beaver Plastics in Vancouver and
2.Simcoe Plastics of Kamloops.

Beaver Plastics: Reasons for acquisition:

Beaver Plastic was owned by Farthingham which  manufactured plastic pipe  using an extrusion moulding process.
Some of Fraser River’s fittings were made to fit the plastic pipe produced by Beaver.
Fraser River was looking for opportunities to expand its product lines.

Simcoe Plastics: Reasons for acquisition:

Simcoe Plastics was a family-owned operation which manufactured plastic shower curtains and reaincoasts using a manufacturing process known as calendering.
Simcoe would provide Fraser River with instant product diversification and
Capability of producing other items, such as plastic wall coverings and backing for upholstery fabrics.

Results in: The most operational change involved in production of plastic coated wall coverings hoped to take up the apparent slack in Simcoe’s manufacturing.

Problems in recovering compensate

1.The plant manager in the Calagary manufacturing facility was fired because of a failure to reduce inefficiencies and waste in the plant.
2.Simcoe was experimenting with production of new  plastic products thus mounting rapidly the costs that concern to Fraser River. The plant manager, who had remained when Simcoe was acquired by Fraser River, did not have the necessary qualifications to successfully oversee the plant’s experimental word.

Corporate Headquarters Organization Chart

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Fraser River Corporate Structure

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 SWOT Analysis:

Strength:

They used advanced techniques to minimize the raw material weight in the large products it produced, while retaining, through unique design, the essential rigidity and toughness.
They would have a competitive edge over comparable but more expensive plastic products and
 They could be used instead of their metal counterparts.
Three founder member and top-level executives
Herber Rudd, Oliver Farthingham and Wickham Jones were very experienced in business and marketing fields.

Weakness:

At Calgary plant, it had experienced no stiff competition from new entrants.

At the beginning structure and policies in its administration was not well organized. ( Dispersed  nature of responsibilities among the company’s executives should be focused in the hands of a single chief executive.).

At Calgary plant, the sales manager had no fixed sales price and price list. (Customers/ salespeople do not know about..)

There was no fixed collection policy and there was a high turnover in sales personnel.

Opportunity:

There was a ready market in British Columbia for Plastic products of new design with reasonable price.

The plastic product would meet Canadian demand, western market demand as well as seek the opportunity to crate market in lesser developed countries(LDCs) in Asia.

Would have opportunity to form joint venture limited partnership with other company to invest in LDCs.

Injection Moulding Manufacturing

Extrusion Moulding Plastics(pipe)à Beaver Plastics

International Joint venture

Calendering Manufacturing(Rain coat, Shower curtain) à Simcoe Plastics

Threats:

Day by day progress of some plants of Fraser river was becoming sluggish and British Columbia  market for extruded pipe was saturated and extremely competitive.

In the middle of the growth of the business, the firm was engaged in acquisition of new plants without making the proper planning for the overall structure of management.

Controlling and reporting was not centrally controlled, thus causing missing the offset and other  benefits.

Cross functional and cross departmental decision was not well established.

While engaged in acquisition, inefficiency occurred due to the inexperienced managerial role and waste factor.

 EXECUTIVE LOOKS TO FUTURE

Oliver Farthingam: Chairman of the board

•He is a positive thinker, sure not a worrier. He is also a doer and a real strategist. He have an ability to persuade people and inspire confidence.
• According to him “we are not in business to make plastic products- but rather to make profit.”
• The company is not as strong today due to competition, but that’s because the guy they have running the show there has lost his aggressiveness.
•They have to look for new products and new companies, where competition is less and demand is higher.
•He wants to be optimistic. To be an entrepreneur he wants to take guts!, he is risk taker and he knows when the odds are in their favor.
•According to him they have to consider going public. It would enhance their image greatly too.

Eleanor Wickham-Jones: President

•Today not all of their operations are as strong as they would like, but there is still potential in them. For example their Beaver plastic for instance. Sure things are slow right now, but once they establish themselves out east or in other new territories, they will be all right.
•Simcoe Plastic is another example. They have learned a lot from their R&D work at Simcoe- even though it cost them $200,000.
•She would like to grow on an even-keel basis through acquisitions and international expansion. She wants to maintain the profitability to fund other projects as opportunities presents themselves.
•She want to exploit the American market opened through Canada-US free trade agreement, and with a North American free trade agreement soon to be completed, markets in central and south America are becoming available.

 

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