Preliminary Analysis of MTI’s Business and Risk:
MTI is a profit-oriented housewares company that sells lamps, cutlery and dinnerware. It is incorporated by Donald around 15 years ago and is run by his buddy Tim Silent who owns 49% of the shares in the company and Bob Springsteen who is the third director of the company. It owns or rents warehouses in Windsor, London, Calgary and Antigonish. Out of its several customers, the Bay contributes the most in terms of sales, which is around $2,500,000 of revenue a year. Recently, sales of MTI have decreased, but major customers still remain. Using the Porter model, MTI’s business risk can be explained in several areas. Since MTI has a hot selling product this is imported, there will be a huge switching cost if the supplier decides not to sell this product to MTI anymore or the demand of this product decreases drastically. Competition in this industry is quite high but the threat of new entrants is still quite low as the other competitors are not that aggressive in the market. Exchange rates fluctuate a lot and that may also affect the suppliers market of MTI as expenses spent on the imported products might differ in great amount due to the exchange rates. The recent plan of MTI to start Internet sales on his website also poses a business risk. Since this is the first time that MTI has ever done internet sales, it might be risky for MTI to do as they do not know exactly the demand of the internet market.
MTI has a new line of marble lamps that are imported from Italy. They pay for them in U.S. dollars via a letter of credit and the terms are 30 days from shipping notification. This might increase the liability of the company especially when MTI has an exclusive arrangement with them in which they would commit to take $1,000,000 of product annually for the next three years. The Canadian Standards Association also has