Monforte Dairy Case

Monforte Dairy

Critical Issues

1) Inability to raise capital- Ruth needs cash to grow her business. Monforte Dairy is currently highly leveraged so it makes it difficult for her to obtain the cash she needs to explore further business opportunities.

2) Power of buyers –Artisan cheese is a niche product. Survival of Monforte Dairy is based on consumer demand for their products. The buyers are in complete power.

3) Power of suppliers- Due to Ruth’s pricing structure; supplier prices greatly influence her price to market. Providers of her raw materials are scarce and influence everything in her pricing system including employee wages and costs to consumers

4) Lack of product differentiation- There are months at a time where there is Monforte is not producing. There are also government quotas on cow-milk cheeses which limit Monforte’s capacity. Monforte only has milk products to offer, without differentiation they have nothing to offer during the months where milk production is ceased.

Analysis

In order to understand what is happening at Monforte Dairy, it is vital that Ruth Klahsen is analyzed (Exhibit XXX). The end goal is to have Monforte Dairy earning $10m in revenues when Ruth retires in 10-15 years. Ruth has gained a group of strong followers since she has opened her business. Her strong ethics and morals are the backbone for her company and she makes business decisions based on these values. These strong values make her a vital part of the community in Stratford, Ontario and are why she has such strong support in the community. Ruth is currently considering expanding her business. In order to expand her business and pursue further business opportunities, Ruth will need proper funding. Monforte’s current debt-to-equity ratio is 11.5 which will drastically affect her possibilities of acquiring further debt funding. If she were to acquire a loan it would undoubtedly be at a much higher interest rate than average and would only further...