Carleton University

Sprott School of Business

Assignment: Case Solution for “Medicine Hat Meat Traders: Beefing Up A

Family Business “

Submitted by,
Shuvo Raj Bhatta
Carleton ID :101286817

Submitted to,
Professor Frank Jiang

Date of Submission :2nd October 2022

Table of contents Page number

Executive Summary 1

Introduction 2

Current Situation 2-3

Analysis & Interpretations 3-4

Strategic Alternatives & Evaluations 4-5

Conclusion 5

Recommendations 5-6

Exhibit 1: Financial Ratio Analysis 7

Exhibit 2: 5 C’s 8-9

Exhibit 3: PESTEL 10-11

References 12
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Executive Summary:

Medicine Hat Meat Traders, being a family-owned enterprise, has been in the local
market for a several decades, providing the people in its region with several meat-
oriented meals; among them the beef jerky is the most famous and a huge part of
the profit pool. Now, the business is thinking about maintaining the status quo or
pursue other options such as expanding its market share by penetrating new
provinces all over Canada or even international market. Upon PESTEL, 5 C’s and
financial computation done from the high-quality information in the case we could
come to a decision that is highly feasible and profitable for the business to go beyond
and pursue goals such as increasing its market share beyond its current region. There
is a tendency to maintain the status quo of the business, however, doing so can cause
MHMT to lose its local market share in the coming years. A quick glance in the
financial statement shows us good revenue and profits, but even to maintain this we
must be prepare for the ongoing trends: rising demand of snacks and meat products.
As demand and revenue from beef and other snacks are predicted to grow at
compound rate, there is a chance the current competitors will grab the opportunity
or even new competitors may arise. Therefore, after all the analysis, we have found
that Medicine Hat Meat Traders have the potential to grab market share, brand image
and profit maximization from the demand of meat products all over Canada. Hence,
Option 2 has been selected the best to give more benefits than costs in the long run,
with some adjustments. By selecting Option 2 (with some adjustments), that is:
Partial expansion of current land at an approximate cost of $1.5 million, purchase of
new packaging equipment and larger smokers : MHMT will eventually produce more
good quality units of beef jerky to meet the market demand , lower unnecessary
expenses such as wages , get endorsement form regulatory authorities and export
to markets through out Canada satisfying the needs of customers in terms of
nutrition, tastes and overall standards. International market will be taken into
consideration after three years; upon capturing much of the markets in Canada and
having adequate cash flow required to do so. A thorough market research, funding
from financial institutions, running our head quarter office highly effectively, a market
development strategy and being incorporated while reaching new markets (new
provinces) is what MHMT should tend to follow for accomplishment of its goals.

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Introduction:

Medicine Hat Meat Traders is a family-owned enterprise, which sells meat products,
but among them beef jerky is its main source of revenue. MHMT produces industry
quality beef jerky and distributes it to local stores – who sell it to final consumers.

Currently, MHMT highlighted three strategic paths for its business. Each option has
its own benefits and risk, which needs to be analyzed before implementing. The
options are to MHMT are:

1.Maintain the current meat shop and just maintain the current status quo.

2.Implement a partial expansion on current land at an approximate cost of $1.5

million, allowing production capacity to increase to 17,000 units /week

3.Buy or lease a new facility at an approx. cost $3 million, allowing production

capacity to increase to 35,000 units/week

MHMT wants to implement one of the three options above; or even formulate any
other better feasible options.

Current situation:

Internal environments:

Being a family-owned enterprise, many decisions of the business is taken by Pahl and
his immediate family members. It is also a Canadian company; and so, they
accustomed with Canadian culture and tastes in terms of food; which makes it easier
for them to target local customers with ease.

Things such as delivery to local retailers is currently handled by family-owned van. A

large portion of the manufacturing process is handled by labours. Currently, MHMT
has equipment such as smokers, grinders extruders to aid the manufacturing process
of beef jerky.

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Currently, MHMT is running at full capacity & additional facility is required to increase
production. The three main production input costs to MHMT are beef, packaging
supplier and labour.

Sales, Profit & equity looks healthy as per financial statements.

External environments:
Several external environmental factors affecting the meat and snacks industry are
illustrated in Exhibit 1 and Exhibit 3 through PESTAL and 5 C’s model.

Analysis & Interpretations:

To make a feasible and effective decision, we have to analyze and interpret the
current internal factors, external factors in depth as shown below:

1.From Exhibit, financial ratio analysis, we can see MHMT’s operating expense to
revenue ratio is 34.7 % (3 years average), which is excellent, as it way below the
threshold level of 65 % in the agriculture industry (2022). This ratio tells us that
MHMT is using its inputs, overheads, finance, and machinery costs of $0.347 to
generate $1 of revenue, which is excellent and means that MHMT is very good at
using its productive capacities to generate revenue. So, ratio supports the purchase
of new packaging equipment, expansion of the shop; and it’s strengthened the
decision to choose option 2.

The debt to assets ratio of the firm is 20 % (3 years average); which tells that if
MHMT has the good ability to pay off long term debts. This gives the confidence to
borrow money from financial institutions for further growth of the company such
purchase of larger smokers, packaging equipment, and any other costs that may
incur due to the provincial or international expansion of the business. and it’s fits the
decision to choose option 2.

The firm’s net profit margin is reducing since 2016, when it was 37.1 %; and in the
latest year of 2018 it has fallen to 20.30 %. Therefore, it supports that firm should
increase its production capacity and sell it to new Canadian provinces and export
internationally also, and it’s fitting the decision to choose option 2.

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2.In Exhibit :5 C’s, we have analyzed: customers, context, company, collaborators &
competitors. From the analysis and, several interpretations can be drawn. Locally,
MHMT has been very skilled in managing its customers demand of right tasty beefy
jerky with the aid of skilled labor, economical distribution channels/stores such as
grocery stores, independent, fundraising, cash sales and online sales. As all provinces
of Canada (except Quebec) shares almost the same laws, regulations, and culture;
we can suppose that MHMT will be able to market its beef jerky all over Canada,
gradually within the next few years, with confidence. MHMT also knows it’s potential
competitors all over Canada and USA. MHMT can also seek price stabilization for its
product to avoid price wars and maintain a moderate but stable level of profit in the
next 3 years, while capturing market shares. This allow us to choose option 2, where
MHMT will expand all over Canada, without with ease due to the knowledge about
customers, distributors, competitors: which is assumed to be very similar compared
to the current market where MHMT is currently operating with a good profits and
brand image.

3.In Exhibit: we have analyzed PESTEL (political, economical, social, technological,

environmental & legal factors), based on the results, we have interpreted that option
2 would be most suitable for Medicine Hat Meat Traders. The tax rate for small
business in federal is flat rate and the provincial rate varies very minimally. Revenue
is expected to grow at a compound rate of 4 % due to increasing demand all over
Canada, labour costs are increasing provincially (supports automation, part of option
2), people all over Canada prefer delicious, healthy food. Hence, if we choose option
2, it will lead us to take advantage of the growing demand of meat products among
consumers all over Canada. We can also gain consumer trust by getting certified by
Canadian Food Inspection Agency, branding MHMT as a company which produces
healthy beef jerky according to Canadian standards.

Strategic Alternative & Evaluation:

Our strategic alternative would be a slight modification of option 2. As understood

from the case, we know that MHMT needs larger smokers to significantly increase
production and cope with the ongoing increasing demand of our products in the
Canadian market. So beside implementing option 2 we will purchase/restructure our

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shop to add 1800/2000 square feet of shop and a higher roof, which will allow us to
add larger smokers. We will not introduce any new products; as beef jerky has been
proven to be reliable source in the profit pool.

Conclusion:

The decision is to proceed with strategic alternative: to choose option 2 with slight
modifications of the proposal.

Recommendations:

As we implement Option 2 with slight modifications, MHMT’s short term goal in the
next 3 years would be to maintain stable profits, while expanding all over Canadian
provinces.

The results of our decisions will probable be:

 Cut increasing labour costs

 Increase production
 Increase market share
 Increase brand value
 Maintain a healthy profit

Action & factors plan to be considered for the decision:

 Follow market development strategy to send our products to the consumers

all over Canada.
 Loan from financial institutions to fund our project, that is expansion of the
shop and the purchase of new packaging equipment, purchase of larger
smokers
 Avoid international market in the next 3 years as it requires more market
research and investment
 Follow the same pattern of marketing, distribution, strategy in the local market
where MHMT’s has been doing business while expanding all over Canada.
Minimal adjustment may have to be made; but mostly it will be same as all
Canadian markets follow the same culture and rules

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 Do market research to get information such as which provinces require how

many units of beef jerky packages; or to avoid any areas where the
demographics is mostly vegan
 Build relationships with current retailers to penetrate new provinces
 Advertise in “common source “of media for the Canadian market, may be
national TV or new paper to reach maximum potential consumers
 Collaborate with other meat snacks sellers, to bundle MHMT’s product together
 Track feedback from the market
 As we gain more insights and customer loyalty, we can differentiate our
products more through packaging quality, advertisement and increase price
margin to gain more profits
 If MHMT’s beef jerky can provide a unique likable taste to the consumers; that
can be a competitive advantage and kept as a trade secret; as many renowned
companies such as Coca-Cola does
 In-corporate MHMT to shield from higher/varying tax rates all over Canada
(2020)

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Exhibit 1: Financial Ratio

Financial 2016 2017 2018 3 years Comment

Ratio average
Analysis

Net profit 37.10% 22.50% 20.30% Not require Margin reducing

margin

Operating 26% 39.60% 38.50% 34.70% Excellent ability to

expense manage operating
margin inputs , overheads ,
finance , machinery
to generate higher
rate of revenue

Debt to 23.50% 19.50% 17% 20% Excellent ability to

Asset % pay long term
debts

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Exhibit 2: 5 C’s (External factors)

Customers  Locally, MHMT’s final consumers can be anyone who wants to

eat delicious, healthy beef jerky
 Locally, MHMT reached it’s final consumer through retailers ,
farmers’ markets , independent store sales , fundraising sales
and online :MHMT maintained a good relationships with them.
 In international market, customers and their choice may vary.

Context  These are the six external environment that affects the business
which has been outlined in the PESTEL analysis

Company  Beef jerky is the main source of profit pool

 Customers tastes should be fulfilled which will vary according to
markets
 Smart pricing is required to maintain profit and grow market
share
 Locally, MHMT has many competitive advantage such as :
knowledge of supply chain , regulations , customers preferences
, goodwill to sustain customers’ loyalty to the business.
 Entry to international market may require MHMT re-study the
whole business model.

Collaborators  Key collaborators are retailers, farmers, community groups in

the local region
 In international market, they likely to remain the same or may
vary, that need to be studied before entry

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Competitors  Competitors can provide same product: beef jerky or a

substitute snack to retailers or final consumers
 Product quality, pricing, branding and distribution channels is
giving MHMT good results in the local markets; but there is room
for improvement
 Product quality, pricing, branding and distribution channels in
international market may have to be modified
 U.S.A market competitors are Frito-Lay Co. , Cong Agra Foods
Inc. and Link Snacks inc.
 Four largest producers of snacks in Canada ; such as Oberto &
McSweeney
 Priavte labels exists in both USA and Canada

Exhibit 2: 5 C’s (External factors) continued from previous page above

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Exhibit 3: PESTEL factors (External)

Political  Being established in Canada, MHMT, can be certain about

tariffs & quotas in Canada
 Uncertainty may arise around tariffs, quotas and other
restrictions on international trade
 Government stability is big factor in international market
 Protectionist administration in the USA is a further source
of uncertainty for exporting
 To produce beef jerky by adhering to Canadian Food
inspection Agency is crucial
Economical  Cost of beef is fluctuating depending on price of cattle
(national market)
 Meat snack sales and meat snack business is growing
(national market)
 Revenue for meat products is forecast to grow at an
annual compound rate of 4 % (national market)
 Demand for beef jerky is rising (national market)
 Labor cost rising (national market)
 In international market: the above conditions can be
favorable or unfavorable depending on the country

Social  Healthy and meal replacement snacks preferred by

consumers in Canada
 Increasing, aging population, plant-based diet are factors
to be considered in the Canadian market
 Consumers’ food tastes may change
 Tendency of “buy local” trend should be analyzed
 In international market: the above factors will likely be
existing with varying degree depending on the country

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Technological  Distribution in both national and international market will

require efficient mode of transport
 Rapid changes in markets and technology will result in
strategic responses by many firms such as consolidation
and diversification
 Investing in automatic packaging machines can replace
manual labour and increase total production, but it may
incur unwanted costs also

Environmental  Both in national and international markets: adhering to

waste management, green initiatives, location of
warehouse in an environmentally safe place are the factors
that must be considered
 Outbreak of disease, such as mad cow can impact sales
 Drought can eventually increase price of beef jerky and
subsequently lower consumption

Legal  Both in national and international market, company must

follow the quality standard of its meat products

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References:

Agriculture: Province of Manitoba. Province of Manitoba - Agriculture. (n.d.). Retrieved

October 2, 2022, from https://www.manitoba.ca/agriculture/markets-and-
statistics/economic-analysis/index.html

Canada, C. (2020, December 17). Government of Canada. Corporations Canada. Retrieved

October 2, 2022, from https://corporationscanada.ic.gc.ca/eic/site/cd-
dgc.nsf/eng/cs06641.html

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