OBJECTIVES
A large paper company was looking for a comprehensive business case study to determine whether a viable business case existed to enter the paper straw manufacturing industry. The assessment investigated the potential benefits, challenges, and financial implications associated with manufacturing paper straws for this client. Key considerations were capital investment for a paper straw production line, overall segment profitability, technical challenges and regulatory considerations as well as alignment with the company’s values and future goals.
KEY ANALYSES
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Market Analysis
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Examined competitive landscape, including key players & their market shares.
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Analyzed the market structure, growth potential, and regulatory impacts of plastic straw restrictions.
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Cost Analysis
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Compared production line options from five equipment providers, assessing each by capability and fit with existing facilities.
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Analyzed material, equipment, labor, and overhead costs, as well as facility modifications and quality control expenses.
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Production Capacity & Efficiency
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Assessed the proposed production line’s capacity, reliability, and ability to meet projected demand within required lead times.
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Environmental Impact
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Evaluated sustainability benefits of paper over plastic straws, including potential certifications and eco-initiatives.
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Financial Analysis
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Developed pricing and revenue models, determining the breakeven point based on fixed and variable costs.
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Conducted ROI analysis, factoring in market demand and low-cost competition from Chinese manufacturers
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FINDINGS
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Market Demand - Growing due to environmental concerns and plastic reduction regulations.
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Competitive Landscape - Market gap identified for durable, high-quality paper straws that avoid sogginess and flavor issues.
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Production Costs - Investment is feasible, though margins were slim.
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Production Capacity - Sufficient capacity with reliable machinery, pending process optimization.
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Financial Viability - Profitability is achievable by positioning as a premium, high-performing paper straw provider.
RESULTS
Despite the growing demand for paper straws, the financial assessment and overall market saturation of less expensive paper straws, lead the team to a data driven decision not to proceed.
