Tilapia Farming in Recirculating Aquaculture Systems NettlesAndrew - Spring2013

Tilapia Farming in Recirculating Aquaculture Systems
Presented to:
Professor Dr. Martin J. Gannon
Submitted by:
Nick DeKeyzer
Dustin Hanson
Andrew Nettles
Issue Date:
April 27,2013
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Contents
1. Hitts seven external segments of the general environment affecting the industry ................................ 3
a.
Economic (2) ..................................................................................................................................... 3
b.
Demographic (2) ............................................................................................................................... 4
c.
Political / Legal (3)............................................................................................................................. 4
d.
Technological (1) ............................................................................................................................... 5
e.
Global (3)........................................................................................................................................... 6
f.
Sociocultural (1) ................................................................................................................................ 6
g.
Physical (2) ........................................................................................................................................ 7
2. Five forces of competitive strategy in the industry .................................................................................. 7
a.
Rivalry among competing firms (2) ................................................................................................... 7
b.
Threat of new entrants (2) ................................................................................................................ 8
c.
Bargaining power of suppliers (1) ..................................................................................................... 9
d.
Bargaining power of buyers (2)....................................................................................................... 10
e.
Threat of substitute products (3) .................................................................................................... 11
3. Two-dimensional strategic group map for the industry ......................................................................... 12
4. Specific competitors in the industry ....................................................................................................... 14
a.
Competitive Environment ............................................................................................................... 14
b.
Immediate Competitors .................................................................................................................. 15
c.
Impending Competitors .................................................................................................................. 19
d.
Invisible Competitors ...................................................................................................................... 22
5. Major Competitors and their market share............................................................................................ 25
6. Why is our startup a good idea? ............................................................................................................. 26
a.
Macro Economics and Competition................................................................................................ 27
b.
Tilapia itself ..................................................................................................................................... 28
c.
Tank Design and Technology .......................................................................................................... 29
d.
Organic, Halal, Kosher and Made in America ................................................................................. 31
e.
Production method: inexpensive energy ........................................................................................ 32
f.
Production method: inexpensive organic feed............................................................................... 33
7. Our current and projected strategy ........................................................................................................ 34
BA-690 Strategic Management Thesis: Tilapia Farming in Recirculating Aquaculture Systems
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8. An update on your selected competitor since the case ended. ............................................................. 35
9. Competitors current and projected strategy ......................................................................................... 37
10a. Izumi Dai Growth-Share Matrix .......................................................................................................... 38
10b. Our competitors growth-share matrix............................................................................................... 39
11. Critical resources, strengths, core capabilities, core competencies, and weaknesses......................... 40
12. External threats and opportunities in this industry .............................................................................. 41
a.
Opportunity - Changes in consumer habits (2): .............................................................................. 41
b.
Opportunity - Natural fish stocks decreasing (1): ........................................................................... 42
c.
Opportunity - Technology reducing labor (3): ................................................................................ 42
d.
External Threat - Regulation and labeling (1): ................................................................................ 43
e.
External Threat - Adjacent aquaponic industry (3): ........................................................................ 43
f.
External Threat - Distribution channels (2): .................................................................................... 43
13. Strategy canvas and strategy curves..................................................................................................... 44
14. Suggested changes to current strategic plan........................................................................................ 47
a.
Create a certified healthy source of fish protein (1):...................................................................... 47
b.
Raise supply availability to year-round operation (1):.................................................................... 48
c.
Eliminate seasonal fluctuations in supply (2): ................................................................................ 48
d.
Reduce harmful ecological impacts (3): .......................................................................................... 48
15. Concrete and specific strategic and major tactical actions .................................................................. 49
b.
Win all without fighting: Prioritize markets and determine competitor focus .............................. 51
16. Implementation plan and time line ...................................................................................................... 53
17. What do you expect the competitor to do? ......................................................................................... 54
Implication Wheel ................................................................................................................................... 58
18. Business Startup Scenario ..................................................................................................................... 59
a.
Phase 2: Pilot stage, proof of concept: ........................................................................................... 59
b.
Phase 3&4: Acquisition and Production ......................................................................................... 60
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Tilapia Farming in Recirculating Aquaculture Systems

1. Hitts seven external segments of the general environment affecting the
industry
a. Economic (2)
This section will cover key items only, as the economic environment is covered in great
detail in other sections of this report. The tilapia industry in the United States relies primarily
on inexpensive imports from South East Asia and Latin America where labor costs are much
lower compared to the United States. The fish are bred in rivers and ponds that are often
polluted with nitrates, heavy metals, pesticides and other carcinogens (The State of World
Fisheries and Aquaculture, 2012). Our research also indicates that overseas producers are
finding it increasingly difficult to supply tilapia in sufficient amounts to satisfy U.S. demand.
Local competition is minimal and consists mostly of small aquaponics companies with
limited reach. Aquaponics is the combination of aquaculture and hydroponics (cultivating
plants without soil) in a symbiotic environment. Often these companies have multi-product
strategies that dilute their focus from breeding tilapia.
In closing, demand for animal protein in general and for healthy animal protein in particular
is rising quickly in the United States. According to the USDA, organic products are now
available in nearly 20,000 natural food stores and at nearly 75% conventional grocery stores
(United States Department of Agriculture). The trend is anticipated to persist well into the
future.
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b. Demographic (2)
Izumi Dais (our startup company name in this thesis) customer demographics are
segmented across two groups: 1/ African-Americans, Asian-Americans and Hispanics with
incomes above $25,000 and with minimal education, and 2/ Caucasian consumers with
bachelor degrees and higher incomes (Dettmann, July 2008). Research has also indicated that
households with graduate degrees were less likely to buy organic foods, while households with
children under 18 were most likely to buy organic foods. Consumers with 3 or more children or
older than 50 years old are less likely to become Izumi Dais customers.
c. Political / Legal (3)
According to Karen Mitchell, Staff Environmental Scientist for the California Department of
Fish & Game in Sacramento, with whom we conducted a phone interview on 11/5/2012, tilapia
farming in recirculating aquaculture systems does not require an aquaculture registration if
meant for personal use or for proof of concept. In other words, it is not required for an
operation devoted to the propagation, cultivation, maintenance, and harvesting of aquatic
plants and animals for non-commercial purposes. Izumi Dai must register its operation with the
Department of Fish and Game the moment the operation converts to a commercial business.
Leaflet No. 35 of the States Department of Fish and Game provides the specific information
required to register the aquaculture (California Department of Fish and Wildlife, 2013).
In addition, restrictions exist with regards to breeding tilapia in California due to the
resilient, invasive nature of the species itself. Leaflet No. 35 states the following: tilapia will be
approved only in San Bernardino, Los Angeles, Orange, Riverside, San Diego, and Imperial
counties. It may be stocked there only in waters approved by the Department of Fish and
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Game. Only tilapia mossambica and tilapia hornorum may be stocked and recipient waters
must be approved by the Department. No tilapia may be imported until the genetic integrity of
the stock has been certified. This certification may be required for every shipment.
No additional legal requirements exist outside of the various certifications that Izumi Dai
would like to pursue.
d. Technological (1)
As described in great detail a bit later in this document, Izumi Dai does not plan to compete
on price. Instead, we want to adopt a differentiation strategy that will render competition
irrelevant in the short run, thus allowing us to operate in a Blue Ocean. We have identified two
main categories of competitors: aquacultures and aquaponics.
Research has indicated that nearby aquaculture companies are very low tech.
Their
seasonal operation relies extensively on manual labor as well as on the physical environment.
Tanks are located in inland desert areas where the summer heat warms the water free of cost.
These harsh areas hold few employment opportunities for the local population. Thus the
aquaculture companies have access to minimum wage workers. As a result, the aquaculture
owners have few reasons to leverage expensive technology given this context.
Our interview with Richard Foxx, a local aquaponics company owner, on 10/4/2012
confirmed that aquaponics operations are usually very high tech (Farming with Fish
Aquaponics, 2013). Owners use technology to help with all aspects of the business such as
managing pumps and filters, monitoring water quality, oxygenation and flow as well as
dispensing nutrients and medication. Technology also helps with fine tuning the parameters of
the operation to maximize yields. Aquaponics are mostly geared towards fruits and vegetables
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with fish as a necessary element to process and fertilize the water. These high tech breeders
sell tilapia in relatively small quantities to the local organic grocery stores and fish markets.
Izumi Dais smaller separate closed loop tanks and modular equipment design approach is
highly conducive for the implementation of heterotrophic technology. Such design greatly
mitigates costly disease spread, complex maintenance and repair, and total kill scenarios. Our
technology strategy also reduces energy consumption by capturing biogas that originates from
farm detritus and horse manure. In addition, Izumi Dai plans to minimize costly manual labor
through the implementation of automated supervisory control and data acquisition
(SCADA) systems (Daneels & W.Salter, 2012).
e. Global (3)
According to the FAOs The State of World Fisheries and Aquaculture 2012, global
demand for fish has increased 3.2% year over year. World per capita fish supply increased from
9.9 kg in the 1960s to 18.6 kg in 2010. Per capita consumption in the U.S. is 24.1 kg per year.
The rate of growth with regards to fish supply from capture fisheries and aquaculture is
outpacing the increase in the world population by a factor of 2.
In recent years climate change vulnerabilities and extreme weather events have particularly
affected fish production in underdeveloped areas. These areas produce most of the tilapia that
is currently consumed in the United States.
f. Sociocultural (1)
Izumi Dais initial findings regarding psychographics about tilapia farming in recirculating
aquaculture systems were confirmed during an interview with Sage Hospitalitys Corporate
Senior Vice President of Operations David Marsh (Sage Hospitality, 2010). He deepened our
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belief that tilapia is currently a commodity item that is used as filler when fish is not the
issue. In his experience, demand for higher quality tilapia is extremely limited in restaurants,
and organically bred fish will be a really tough sell in the restaurant arena because tilapia is
seen as one step above junk. Patrons would order halibut, sole, salmon; not tilapia. David
suggested that if Izumi Dai wanted to sell to restaurants, it had to become a price leader to
compete against imported fish. Restaurants just wont pay more for this low end product
said Marsh. The fact that it is known as a Chinese fish does not help either. In addition he
mentioned that we would have to overcome the distrust for farm raised fish. People that
want higher quality fish want wild fish as opposed to farm bred. David strongly suggested
differentiating ourselves in terms of branding and quality to cater to a growing demographic of
health conscious consumers that would prepare and consume the fish at home.
g. Physical (2)
The external environment in Southern California is close to ideal for the production of
tilapia in recirculating aquaculture systems thanks to the ubiquitous availability of inexpensive
desert land, the warm climate, utilities and transportation infrastructure, as well as the
proximity of 37 million potential consumers.
2. Five forces of competitive strategy in the industry

a. Rivalry among competing firms (2)
Small scale competing tilapia farms appear to be dispersed in Southern California
without an established major player. As demand for fresh tilapia filets in the various local
markets outpaces seasonal production, the local market does not appear to be characterized by
major visible rivalry. Rivalry from tilapia imports are a concern because of their low cost and
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high supply. In a coastal region within a days transport from a major shipping port, Izumi Dai
may be targeted as a competitor by importers. However, the production levels at Izumi Dai will
most likely not create a disruption in the local industry until a strong brand is created and
distribution channels are established.
b. Threat of new entrants (2)
Barriers to entry for an aquaculture operation focused on farming tilapia in a
recirculating system are medium to high. Large initial startup costs including facilities and
equipment are substantial. Tilapia feed is a major recurring cost and critical supply chain
component. According to a 2002 report from the North Carolina Department of Aquaculture
and Consumer Services, a recirculating tilapia farm with approximately 114,000lb production
capacity would require $301,000 in initial construction and equipment costs and $78,000 in first
year operating costs (Tilapia Aquaculture in North Carolina, 2002).
Knowledge of tilapia aquaculture processes and fish biology is also needed. Academics
in the fishery sciences typically focus on species studies, with fishery students working at
established operations.
New entrants into the local market from outside established
aquaculture operations may occur if a high demand for live fish is discovered in Southern
California. However, as will be described in Section 5, Major Competitors, existing firms use
very large scale operations. Therefore, opening a new aquaculture farm in a new region would
be risky.
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c. Bargaining power of suppliers (1)

Aquaculture farms are dependent on several supplier inputs, without which the fish
growing operations would cease. Tilapia fry, specialized filter equipment and tanks, control
systems, and, most importantly, feed are typically supplied to aquaculture firms.
Feed usually represents over 50% of total intensive recirculating aquaculture costs
(Gjedrem, Robinson, & Rye, 2012). The growing rate of tilapia is directly related to the feeding
rate and high quality protein rich feed will grow fish to market size in approximately 6 months.
With fishmeal and feed ingredients becoming more expensive, as well as regulated for
ecological reasons, fish producers will need to look into alternative feeds to sustain fish
production demand (The State of World Fisheries and Aquaculture, 2012). Feed suppliers have
a high bargaining power and demand large bulk shipments with lead times for discounts which
enable aquaculture farms to remain profitable.
Purchasing fingerlings or fry from breeders is a common practice in aquaculture.
Hatcheries hold brood stock mating pairs which produce desired characteristics of fish. Tilapia
hatcheries have high bargaining power over farms with no internal breeding. Hatcheries could
convert from supplier to competitor by opening a grow out farm or partnering exclusively with
an aquaculture farm.
To lessen the power of Suppliers Izumi Dai will be employing a vertical supply chain
strategy to cultivate feed and breed the supply of fish, thereby eliminating feed and hatchery
suppliers. As a result of this strategy, additional labor and infrastructure will be required.
However, the long term feed independence will be a defining strength of Izumi Dai.
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Cultivating feed will allow a sustainable food source and possibly provide excess feed to
sell to agriculture firms. Specialized hatcheries are a requirement for some fish species with
complex breeding habits. However, tilapia are aggressive breeders when provided the correct
conditions. By breeding tilapia internally in dedicated hatcheries, Izumi Dai will not only cut
supplier power but also decrease fish transportation stress, disease introduction and
acclimation difficulties, and maintain a consistent proprietary genetic strain within Izumi Dai
products.
d. Bargaining power of buyers (2)
Buyers for tilapia will be defined as live fish markets, fish processors, fish distributors,
and local consumers. Izumi Dai anticipates the chokepoint of distributors to produce the
highest competitor rivalry. Distributors are the second tier of three between fish supplier and
customer retail, and take a markup between the supplier and retail price. Distributors that
control access to a large book of restaurants, hotels, and supermarkets have a high bargaining
power.
Live fish markets allow fish trade and business relations for a small fee. Fish market and
farmers market buyers have a moderate power due to the lower lot size and low sales pressure.
Moving customers from fish markets sales to recurring sales will be the key to sustained sales.
After initial local distribution is established, Izumi Dai will attempt to focus on associating
quality to branding and become a recognizable niche brand. Pull marketing would then be used
to increase customer points of sale and restaurants at grocery stores.
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e. Threat of substitute products (3)

Substitutes to organic tilapia exist in the forms of other lean organic animal proteins
including fish and poultry. However, as populations of wild fish continue to dwindle and global
demand continues to grow, fish substitutes will inevitably decrease. Izumi Dai will market the
fish as a healthy alternative to wild caught fish, which is at a higher risk of containing pollutants,
and imported fish farmed in unknown conditions. By focusing on these differences Izumi Dai
will distance itself from fish substitutes.
In summary, the combination of an apparent low level of visible rivals, the medium to
high barriers to entry, Izumi Dais vertical integration strategy and the reduced threat of
substitute products renders tilapia farming in recirculating aquaculture systems a viable
business opportunity in Southern California.
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3. Two-dimensional strategic group map for the industry

Figure 1: Strategic Group Map for the Industry
The two factors evaluated in the strategic group map are output and quality. Output refers
to the amount of tilapia the farm produces and sells on the market. Quality deals with the
tilapia product itself. A high quality product is defined as a tilapia fish which was farmed
without growth or gender reversal hormones, antibiotics, or other harmful chemicals or
substances. Also taken into account are the overall farming conditions in which the fish is
raised. A high quality product is raised in a clean, controlled environment in water which is free
of contaminants or pollutants.
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The strategic group map reveals five distinct groups into which the selected competitors
fall. Group 1 is characterized by high output and low quality. In this group are the fresh and
frozen tilapia imports, which primarily come from Latin American and Asian countries. As will
be further examined in this report, such countries, while an economical choice for lower labor
costs, also have lax standards regarding food and safety regulation. This has led to various
health concerns regarding the seafood products they produce.
Group 2 is characterized by moderately high levels of output and similarly high levels of
quality. Even though the companies in this group are categorized by a moderately high level of
output, their total yield is really quite small, as low as 1%, when compared to the amount of
tilapia imported into the US by companies in group 1. Companies in group 2 are local US
companies which boast of a certified organic product grown in a clean, controlled environment.
It is important to note here that Premier Foods Farms is actually located in Texas and, based on
market research, presumably does not sell its tilapia in the California market.
Group 3 is characterized by moderate output and above average quality. Although these
products are not certified organic, they are produced in a controlled environment which is
monitored and kept clean of contaminants and pollutants. Another factor which may preclude
these producers from receiving certification is the type of feed which they give to the fish.
Organic feed is more costly and, as such, is probably cost prohibitive for farms operating in this
group.
The companies in group 4 have a mild level of output and a high level of quality. This is the
group in which Izumi Dai will compete. It is important to note that, even though it is classified
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in the same group below, Blue Ridge Aquaponics currently operates solely out of Virginia and
presumably does not have any tilapia coming into the California market.
The companies in group 5 are characterized by very low levels of output and a high level of
quality. The reason for the lower levels of output is emphasis or specialization. Some of these
companies may be aquaponics operations whose primary focus is produce, and they only use
the tilapia to complete the symbiotic environment. Others, like Sarasota below, are hatcheries
who do not focus on fish to market operations, rather they breed and raise their tilapia to sell
as fry and fingerlings.
4. Specific competitors in the industry

a. Competitive Environment
The competitive environment in the aquaculture industry is highly fragmented with
numerous individual companies operating in various countries around the world. For the
purposes of this report, only companies with a relevant focus in tilapia production will be
considered and analyzed as competitors. The global competition presents itself in the form of
imports. America holds the title of the second-largest seafood importer in the world, with
tilapia being the third most imported seafood product in the United States. Most of these
imports come from Latin American and South-East Asian countries where labor costs are low
and food-safety regulations are mostly inexistent. However, incidences in recent years have
spurred concerns from US consumers regarding the safety and quality of such products.
Additionally, demand for fish in these countries local markets is increasing due to rapid
population growth. As a result, there is an increasing demand in the US for safer, higherquality, locally farmed seafood products.
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Because of increasing seafood demand and low yields from wild fishery resources,
aquaculture products in the US market have significant growth potential over the coming five
years (McBee, 2012). This is where local competition comes into play. Our research shows
that tilapia, however, has yet to become a fish of choice for the larger-scale, US-based
aquaculture farmers. Some aquaculture farmers raise tilapia seasonally during the summer
months, but have yet to specialize exclusively in tilapia. The most significant competition on US
territory comes from smaller-scale aquaculture farms and aquaponics operations.
The
distribution reach of these operations tends to be more limited, thus restricting the tilapia
farmed by these entities to be sold and distributed within a closer vicinity of the farms
operations.
A growing threat comes from the increasing popularity of local aquaponics operations.
The threat from this growing trend is twofold. First, although raising tilapia is not the emphasis
of such operations, some of these operations may have a large enough tilapia output to meet a
portion of our target segments needs. Secondly, some firms are selling aquaponics setups
which would allow our prospective customers to reach protein independence by growing their
own tilapia as opposed to buying ours.
With this competitive landscape in mind, competitors have been categorized into three
categories: immediate competitors, impending competitors, and invisible competitors.
b. Immediate Competitors
Foreign Importer (1)
The US is a net importer of seafood and has a small aquaculture industry compared to other
countries. Consequently, imports of farm-produced seafood into the US are large. According to
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the National Oceanic and Atmospheric Administration (NOAA), Americans consume between 6
million and 7 million tons of wild and farmed seafood annually, and about 84% of that total
comes from imports, half of which is farmed. Total US seafood production only accounts for
about 2% of the countrys consumption.
Tilapia is imported into the US either frozen or fresh. Both the fresh and frozen products
are imported as either a whole fish product or a fillet product. The perishable nature of fresh
fish makes countries closer to the United States more suited for operating with fresh fish
products, Hence, the majority of fresh tilapia imports are sourced from Latin America, while
Asian countries, specifically China, continue to dominate the frozen tilapia import market
(United States Department of Agriculture, 2013). With the growing health concerns discussed
earlier and the increasing trend of organic products, it is possible that a foreign competitor
could diversify into the organic tilapia market and directly compete with Izumi Dai.
Such a competitor is classified as a very threatening level 1 competitor because of their
established distribution and supply chain operations and economies of scale. Competing
against such a competitor would be difficult for Izumi Dai. However, Izumi Dai intends to
position itself not only as an organic tilapia farmer, but as a local farmer with environmentally
friendly farming operations raising tilapia in the US, a differentiation strategy that the foreign
competitor would not be able to duplicate.
Grow Foods Inc (1)
Grow Foods offices are located in San Marcos, California. It is composed of four
different divisions: Grow Foods Aquaponic Systems, Grow Foods Farms, Grow Foods Gardens,
and Grow Foods Water Management Systems. In addition to producing its own produce and
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seafood for market, Grow Foods also acts as a consulting agency, designing and manufacturing
a variety of garden and aquaponic systems for homes, businesses, resorts, and municipalities.
Unfortunately, little is known about Grow Foods Inc. Although attempts have been
made to acquire additional information regarding their operations and tilapia output, none has
been provided. In spite of the lack of information available regarding Grow Foods, it has been
classified as an immediate, very threatening competitor.
Grow Foods Farms, a division of Grow Foods Inc, grows seafood in land, river, and
ocean based farms which it sells to individuals, restaurants, and super markets (Grow Foods,
2012). With its headquarters in San Marcos, California, the assumption is that these farms are
operating in California and, even more threatening, in Southern California. With the possibility
of a large, commercial-scale competitor operating within Izumi Dais target market location,
and with little information regarding the specifics of this competitors operations, Izumi Dai
should consider the threat significant until additional information can be acquired.
Future Foods Farms (2)
Future Foods Farms (FFF) is one of the largest aquaponic farms in the State of California
(Future Food Farms, 2013). Located on 25 acres in Brea, California, FFF produces organically
grown produce and tilapia, which is used by FFF creator and Chef Adam Navidi in his
restaurants and catered events. Some of FFFs output is also sold at the local farmers markets.
FFF has been categorized as an immediate, threatening competitor because of its
geographic location in Southern California and its strategic alliances with key players in the
aquaponics industry.
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FFF is classified as a threatening competitor primarily because its focus is aquaponics

and not aquaculture and, as such, it has yet to reach a tilapia output level that presents a
significant threat. However, with FFF operating in the heart of Izumi Dais target market, it still
poses significant threats which have contributed to its immediate competitor classification.
FFF has an ambitious vision and a strategic marketing strategy. In its mission statement,
FFF states that it is their mission to create a sustainable farm concept that will change both
agriculture and the restaurant industry forever and provide our customers with the ultimate
food experience (Future Food Farms, 2013). With their evangelical approach, FFF proselytizes
the benefits and advantages of its sustainable farming practices and high quality products.
Farm tours and tastings hosted by the Chef himself are available to the public and can be
booked online via FFFs website. More of their marketing prowess is evidenced in their specialty
line of products that certain grocers and restaurants will soon carry.
FFFs founder established a strategic alliance early on with aquaponic guru, Eden
Aquaponics, which is discussed later in this section as a competitor. An additional strategic
alliance was formed with aquaponic powerhouse, Aquaplanet. In addition to these strategic
alliances, FFF boasts of several scientists who consult at their aquaponic garden along with
several college professors and interns who maintain and study the garden on a daily basis
(Future Food Farms, 2013). These alliances and partnerships give FFF a competitive advantage
by providing FFF with valuable knowledge and input from leading industry experts and
academics.
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c. Impending Competitors
Blue Ridge Aquaculture (1)
Blue Ridge Aquaculture is located in Martinsville, Virginia and operates out of a 100,000
square foot facility. It was founded in 1993 and boasts of being the worlds largest producer of
tilapia using indoor recirculating aquaculture systems (RAS) (About us, 2013). Each year, Blue
Ridge Aquaculture produces 4 million pounds of tilapia, shipping between 10,000 and 20,000
pounds of live tilapia every day. These fish are raised without the use of antibiotics or
hormones, and are free of mercury (undetectable levels from independent studies) and other
industrial pollutants (About us, 2013).
Blue Ridge Aquaculture is classified as a very threatening competitor because of its
ambitious strategic growth plans. Currently, Blue Ridge ships an estimated 75,000 pounds of
live tilapia per week from the facility to distributers in major metropolitan markets in New York,
Boston, Toronto, and Washington D.C. Since Blue Ridge is located on the East Coast, it would be
costly to transport live tilapia to markets in California, Izumi Dais target market. However, Blue
Ridge is keeping no secrets when it comes to its desire to grow.
According to the Blue Ridges website, Blue Ridges vision is to become the leading
domestic producer of high quality seafood using indoor recirculating aquaculture systems
(RAS). The company plans to accomplish this goal by 1) sequentially expanding its tilapia
production capacity to 10 million pounds (phase I), then to 100 million pounds (phase II), 2)
developing a fresh fillet product which will provide access to larger markets, and 3) developing
the production of other species in similar systems (Strategic growth plans, 2013).
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The threats posed by Blue Ridges strategic expansion plans are twofold. First, although
specifics are not given regarding the markets into which they wish to expand, Blue Ridge does
mention that its primary customer base is Asian and Hispanic individuals (About us, 2013). With
this information in mind and considering that it has a strong presence on the East Coast, there
is substantial risk that Blue Ridge could expand into Izumi Dais target market in California.
However, even if Blue Ridge does not expand its physical operations into California, it still
has plans to develop a fresh tilapia fillet product. The purpose of developing a fillet product is
to provide access to larger markets. Distributing fresh fillets is less capital intensive than
distributing a live product. Thus, without ever setting foot in California, Blue Ridge could
potentially penetrate Izumi Dais California market with its fillet product.
In either of these scenarios, Izumi Dai strategic advantages would be significantly
undermined. It would be difficult for Izumi Dai to compete with the economies of scale
achieved by Blue Ridge. Additionally, Blue Ridge Boasts of 20 years of experience in the
aquaculture arena. They have had the time to fine tune their operations as a result of their
extensive industry experience. Izumi Dais strategy to differentiate from foreign imports is
closely aligned to Blue Ridges strategy. This means that Izumi Dai would differentiate solely
based on organic certification, something presently not touted by Blue Ridge.
Premier Farms (2)
Located in Dallas, Texas, Premier Farms is an aquaponics farming enterprise that
combines organic growing practices in controlled ecological environments (Home, 2011). The
mission statement of Premier farms is to grow organic tilapia, organic Butter/Boston lettuce,
and organic herbs through the utilization of environmental and ecologically balanced farming
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practices (About our tilapia, 2011). In 2009, Premier became the largest organic tilapia
producer in the US, producing a half-million pounds of organic tilapia per week.
Premier has been categorized as an impending, threatening competitor because of the
possibility that some of its tilapia output may be entering into Izumi Dais California target
market and that it could possibly expand its operations into California. Additional threat comes
from its business model, which shares a close resemblance to Izumi Dais model. The only
factor limiting Premiers ranking to only a level 2 competitor is its geographical location. Had
Premier been located in California, its ranking would be a very threatening competitor.
Premier sells a fresh tilapia product, harvesting the fish after six months of growth at an
average weight of 1-1/4 to 2 pounds. The fish are harvested into tanker trucks and are then
transported fresh off the boat to market (Operations, 2011). Selling a fresh product limits
Premiers distribution reach. However, the extent of their distribution reach remains unknown.
Although efforts were made to acquire this information, Premier did not share it. At this point,
it can be assumed that cost efficiency would preclude Premier from distributing a fresh product
in the southern California market.
Regardless of whether they have a large distribution reach or not, California is a popular
state for tilapia farming, and there is a risk that Premier could expand its current operations
into California soil. While the largest number of tilapia farms were located in Hawaii (19 farms)
and Florida (18 farms), California (15 farms) ranked first in sales (over $8.1 million) (tilapia
profile, 2013). This fact, along with the growing number of specialty and health food markets in
the area, increases the desirability of the California market and the probability that Premier
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may use their current operations as a template for expansion into the California market, putting
them in direct competition with Izumi Dai.
If Premier did expand into the California market, its current business model would
significantly inhibit Izumi Dai from competing with a differentiation strategy. Currently, Premier
incorporates integral elements of Izumi Dais business model like automated technologies and
remote management, organic certification and quality, and a fresh tilapia product rather than a
processed fillet, be it frozen or unfrozen. Furthermore, Premier promotes its tilapia product as
farmed in the US, boasting strict control and quality standards, another strategy adopted and
employed by Izumi Dai.
d. Invisible Competitors
Eden Aquaponics (2)
Eden Aquaponics is an aquaponics farm located in Vista, California. They specialize in
custom system design, fabrication, and installation for residential and commercial applications.
They also offer instructional classes that teach participants how to use and maintain an
aquaponic system.
Currently, Eden Aquaponics focus is not to farm tilapia for market, but rather to equip
individuals and businesses with their own aquaponic systems in order to meet their specific
production needs. As is, this business model does not directly compete with Izumi Dais focus of
tilapia farming, but it could possibly pose potential threats.
Eden Aquaponics is classified as an invisible competitor because of its current position as a
manufacturer of custom aquaponic systems and not as a farm focused on tilapia output. It is
classified as a threatening competitor because of its potential to compete on a commercial
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scale in tilapia production in Southern California and because its service allows individuals in
Izumi Dais target segment to become protein independent.
If Eden Aquaponics decided to move into large-scale tilapia farming with its aquaponics
systems, it could possibly have an advantage over Izumi Dai because of its extensive industry
experience. As an example, Tim Eden, co-founder, brings over 16 years of farming experience,
over nine years of construction contracting, and over three years of hydroponic gardening to
the company (Who are we?, 2013). Additionally, Eden Aquaponics has market presence, brand
recognition, and goodwill that could work in its favor if it were ever to diversify from its current
position into a position focused on tilapia production.
Eden Aquaponics current offerings indirectly compete with Izumi Dai by providing
individuals within Izumi Dais target segment the means to farm their own organic tilapia. Their
aquaponics systems appeal to the same health conscious consumers that Izumi Dai is targeting.
Realizing the increasing trend of DIY (do it yourself), this threat might continue to increase.
Although not every individual in Izumi Dais segment has the means or desire to purchase,
operate, and maintain an aquaponics system, some may, which would nullify their need to
purchase such a product from a grocery store.
Sarasota Organic Tilapia Farms (3)
Sarasota Organic tilapia Farms is an organic tilapia farm located in Sarasota, Florida.
Sarasota operates a tilapia hatchery, which produces tilapia fry and tilapia fingerlings available
for fish farms worldwide, and a grow out section, where tilapia are raised to market size,
available locally in the Sarasota, Florida area (About us, 2013). Sarasota boasts of the best
tilapia available anywhere. They attribute their high quality to using organic, low intensity
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methods and feeding them organically with a natural diet high in omega3 fatty acids (About
us, 2013).
Sarasota is classified as a competitor because of its working knowledge of tilapia
aquaculture operations and its potential to expand into other markets, specifically California.
However, it is regarded as a less threatening, invisible competitor due to its distant geographic
location and because its primary focus is as a hatchery and not as a distributor of consumablegrade tilapia.
Californias health conscious segment is a desirable market for anyone in the health foods
or organic foods industry. A CNN article states that Californians in general tend to have
healthier habits, ranking 10th for physical activity, fourth for healthy blood pressure and fifth
for a diet high in fruits and vegetables compared with other states, according to America's
Health Rankings (Park, 2012). As mentioned earlier, California was number one in sales with
regards to aquaculture tilapia output. Sarasotas experience in the aquaculture industry gives it
a strategic advantage over Izumi Dai if it were to expand into California. Additional threat
comes from their expert tilapia breeding knowledge.
With their primary focus as a tilapia hatchery, Sarasota prides itself on breeding three
different tilapia species. Their tilapia are selectively bred for body form, color, and growth
rates. Consequently, Sarasota would have a significant advantage in breeding and stocking
tilapia that were only of the highest quality.
Although its focus is as a hatchery and not as a distributor, Sarasota does offer wholesale
purchases of its tilapia for local restaurants. With such orders, the purchaser is responsible for
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pickup of the live, unprocessed fish from Sarasotas grow out facility. Minimum order size is
50lbs (Wholesale farm pickup, 2013).
Escondido Tilapia Farm (3)
Little is known about the Escondido tilapia farm. An insightful commentary regarding
one individuals visit to the farm is given on an internet blog site and, other than that, no
additional information can be found (Coburn, 2011).
From the blog post, it appears that the Escondido tilapia farm is a newer operation with
plans to grow and expand. Some of its operations are rather innovative. For example, in order
to heat the water used in its tanks, the farm uses a two story high pile of compost whose
internal temperature stays around 140 degrees Fahrenheit. Through the center of the compost
pile is coiled a plastic irrigation hose. Water from the fish tanks is pumped through this hose
which then renters the fish tanks around 80 degrees.
They are classified as a less threatening level 3 competitor because their focus,
according to the blog entry, is as a hatchery and not a fish to market farm. With their current
assets and industry knowledge, Escondido tilapia Farm could possibly diversify into a fish to
market position. At this point, however, it is decided that they are more of a hobbyist,
backyard operation rather than a commercial operator.
5. Major Competitors and their market share

According to the IBISWorld Industry Report of Fish and Seafood Aquaculture in the US,
there are no major domestic players in the aquaculture industry. Consequently, concentration
in the Fish and Seafood Aquaculture industry is minimal. Many small operations compete for
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the total market share, with no sole operator cornering more than 5.0% of the total market in
2012 (McBee, 2012, p. 24).
To illustrate this concept, consider the example of Southern Pride Catfish, a subsidiary of
American Seafoods Group LLC. Southern Pride Catfish operates a substantial aquaculture
operation, employing about 775 people and processing more than 80 million pounds of farmraised catfish each year. However, it is estimated that Southern Pride Catfish has a market
share of less than 1% (McBee, 2012).
Southern Pride Catfishs operations are much more sizable compared to the competitors
analyzed in this report. The reason for this is because the competitors analyzed in this report
focus solely on tilapia farming. Thus, with tilapia production being much smaller in terms of
output and volume compared to that of catfish, it is reasonable to conclude that the market
share held by the tilapia farming competitors is even smaller than Southern Prides, which is still
less than 1%. Therefore, a market share pie chart or other graphical depiction would be
extremely difficult to produce and would add little to no insights into competitor or strategic
analysis.
6. Why is our startup a good idea?

From a progress point of view, we have completed our research and we are now in prestartup mode. If all goes as planned, we believe to be able to produce our first fish 12 to 18
months from now. For additional information, please refer to our implementation plan and
timeline in section 12 of this document. Currently we are extending efforts towards the
engineering components of the initiative.
We are documenting processes, establishing
flowcharts and engineering designs to facilitate construction. We are also designing a small
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scale trial as a proof of concept. At the same time we are meeting with potential buyers such
as specialized organic distributors, other aquacultures in the area as well as potential investors
to cautiously validate some of our ideas. When these action items have been taken care of,
well be sufficiently informed to calculate break-even point, cost object pricing, and to establish
a viable implementation strategy.
We believe that starting a tilapia aquaculture in San Diego is a worthwhile business for the
reasons below:
a. Macro Economics and Competition
Humanity currently faces numerous interconnected challenges that range from the impacts
of the ongoing economic crisis, climate change and extreme weather events, population
growth, armed conflicts and pollution. All of these challenges impact food production in
general and fish and seafood aquaculture in particular. According to the Food and Agriculture
Organization of the United Nations, in 2012 the aquaculture industry supplied the world with
154 million tons of fish of which 131 million tons (18.4kg per capita) was destined as food.
While capture fisheries production remains stable, aquaculture production continues to
develop. Aquaculture is one of the fastest-growing animal food-producing sectors and, in the
next decade, total production from both capture and aquaculture will exceed that of beef, pork
or poultry.
US aquaculture generated $1.2B in revenues with profits of $59M. Because of increasing
seafood demand and falling harvests from wild fishery resources due to overfishing,
aquaculture products in the US market have significant growth potential over the coming five
years.
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Izumi Dais analysis of its competitive environment revealed global and regional
competition. The global competition comes in the form of imports. Most of these imports
come from Latin American and South-East Asian countries where labor costs are low and foodsafety regulations are mostly inexistent. However, incidences in recent years have spurred
concerns regarding the safety and quality of such products. Additionally, demand for fish in
those local markets is increasing rapidly due to quick population growth. As a result, in the US
there is a growing demand for safer, higher-quality, locally farmed seafood products. This trend
is further confirmed by the rise of retailers such as Whole Foods, Henrys, Trader Joes, Sprouts
and others that have emerged and expanded substantially during the past 5 years.
Following key insights from blue ocean strategy (Kim & Mauborgne, 2005), by looking across
time, Izumi Dai has recognized the market growth, the demand for healthier fish, and the
increasingly limited imports as an opportunity to develop a blue ocean strategy and to win the
market space without much fighting (McNeilly, 2013).
b. Tilapia itself
Most tilapia in the U.S. market originate with one of three species: Blue, Mozambique and
Nile. These species have been cross-bred for many years by farmers trying to maximize fish
size, cold tolerance, desirability of color variations for the market place, retention (fillet yield is
30 to 35% of the whole body weight) as well as to reduce cycle times and disease risks. The
differences between the breeds are minute and along the lines of point of natural origin or
water temperature requirements. Tilapia is a prolific, invasive species that can take over a
pond or lake in short order. If cultured together, females will be half the size of the males (0.75
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lbs vs. 1.5 lbs). Males reach marketable size within 5 to 7 months from birth (Tank Culture of
Tilapia, June 2009).
Tilapia hold certain characteristics that make them suitable for tank culture. They can
tolerate the fish stocking density that is essential to the viability of the business. Their slime
coat protects them better from bacterial infections compared to other fish. Tilapias hardy
nature reduces the need for pesticides, antibiotics, drugs and other added chemicals. They
grow quickly given good water quality and ample food, but can also thrive in water of variable
quality. They are omnivorous, in that they can be fed vegetable matter and/or animal protein.
Fingerlings are produced by the females all year long. This in turn results in the steady
production of new fish which facilitates a year-round tank operation.
From a nutrient point of view, tilapia contains unsaturated fat (1.3 g in 4 oz.), saturated fat
(56 mg in 4 oz.), calcium (11.3% of the daily value), potassium (10% of the daily value) as well as
a large amount of protein (23 g in 4 oz.) (Banna, 2011).
Given the economic, demographic, political, technological, global, sociocultural and physical
criteria that define demand as discussed on pages 3-7, Izumi Dais diversification strategy
hinges greatly on tilapias health and low technology reproduction characteristics.
c. Tank Design and Technology
Izumi Dais modular flow-through tank design allows for scaling to meet demand in local
markets. It also allows for quick expansion to new markets or to scale up production to meet
demand. The design is centered around the concept of intensive tank culture to continuously
produce high yields on small parcels of land. The smaller, separate, closed-loop tanks and
modular equipment design approach is contrary to the current mass production customized
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setups or pond systems. Izumi Dais design greatly mitigates costly disease spread, complex
maintenance and repair, and total kill scenarios.
The companys tank design includes the use of heterotrophic or biofloc technology
(Avnimelech). Through mixing and aeration the nutrients that would otherwise collect at the
bottom of the tank are brought to a state of saltation, which makes them available to the fish
as well as to heterotrophic bacteria. The water exchange is limited to allow organic residues to
accumulate. This creates an ideal environment for these protein-rich bacteria to develop
profusely in the water. Research has indicated that the application of biofloc technology
reduces external feed requirements to up to 70%, which represents substantial cost savings to
the company.
Another benefit is the reduction of toxic residues such as sulphides and
ammonia in the water. This translates to energy savings related to pumping, oxygenation, and
filtering compared to a regular system in which the volume of water in the tank is completely
replaced every 90 to 120 minutes. Finally, fish growth and intensification are positively affected
by biofloc technology and so is Izumi Dais bottom line.
Additionally, given the industrys minimal use of technology, Izumi Dais strategy relies on a
competitive advantage that reduces expensive manual labor through the implementation of
automated SCADA systems which would control feeding stations, temperature and water
quality control as well as alarms. The system would be augmented with day/night cameras and
configured to escalate alarm notifications from onsite personnel to offsite stakeholders by
phone, text and/or email.
Control system parameters can be monitored centrally on a
dashboard website. System configuration changes can be implemented on the fly locally or
remotely over the internet.
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d. Organic, Halal, Kosher and Made in America

Research has indicated that psychographics surrounding tilapia and recirculating
aquaculture systems have improved with our target demographic. Product quality and demand
creation are central to our strategy. We aim to reach beyond existing demand (3rd principle of
blue ocean strategy) through finer segmentation by tailoring our offering to better meet
customer preferences for high quality healthy fish. In order to differentiate ourselves from the
cheap, low quality imports, we intend to brand the product with the tag line Made in
America. In addition, research has indicated that organic, local farm fresh products have
gained in popularity within agricultural products in Southern California. Izumi Dais plans to
leverage this new trend by breeding fish without pesticides, herbicides, and artificial additives.
The company will comply with organic production standards regarding breeding, processing,
storing, packaging and shipping to ensure organic certification by the US Department of
Agriculture and CCOF (About CCOF Organic Certification, 2013).
Additionally, we intend to apply for Kosher certification by committing to the Jewish laws of
shechita and nikkur. These laws involve habitat, slaughter practices, and animal feed mostly.
Given that the Jewish laws dont represent a departure from Izumi Dais planned operational
processes, obtaining Kosher certification would be achievable with minimal efforts.
The companys strategic plan also intends to follow Islamic law to achieve Halal, which
means permissible. In this context, Halal relates mostly to the packaging of the fish so that
Muslims are permitted to consume the animal. Since Muslims must eat halal food regardless of
price (unless not available), Izumi Dais fish would have an advantage compared to the less
expensive imported tilapia.
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The organic seal, Hechsher seal, and Halal seal would be applied to the product packaging
to raise customer awareness.
Given Izumi Dais aspirations to certify and label its healthy fish (while avoiding enological
terminology to keep things simple), the company has decided to minimize customers making
trade-offs across less expensive alternative industries by competing largely on feelings as our
appeal to buyers is emotional. This strategy represents a blue ocean in Southern California
because the competition consists of low quality imports from dubious origin (Kim &
Mauborgne, 2005). Compared to whats available on the market today, Izumi Dais offering
represents a leap in value which will rapidly earn brand buzz and a loyal following in the
marketplace (Kim & Mauborgne, 2005). Additionally, this strategy erects barriers to imitation
as well.
e. Production method: inexpensive energy
Izumi Dai intends to go far beyond its competitor Escondido tilapia Farms use of horse
manure and compost to generate inexpensive farm energy. Hansen International is making the
manure available to us ubiquitously at no cost beyond pick-up labor and transportation. We
plan to acquire inexpensive steel shipping containers that are readily available due to the trade
imbalance between the US and Asia. Shipyards sell these for approximately $2,500 each.
These containers would be filled with horse manure (and farm waste) and laced with water
hoses to collect heat. The hermetically sealed containers would be painted black to attract
heat. They would also be transformed to allow for easy access at the top and other surface
areas per our proprietary engineering design. The naturally occurring anaerobic digestion of
the manure by microorganisms would yield energy in the form of heat and methane, also called
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biogas. Biogas consists of 60 percent methane and 40 percent carbon dioxide. It burns cleanly,
thus greatly reducing or eliminating the need at the farm for fossil fuels that produce harmful
greenhouse gases. Biogas would be collected in tanks and used for electricity generation
(Youtube; Frishberg).
In addition, the water from the aquaculture would be recirculated through the containers
for heat exchange purposes as well.
When the manure has decomposed to levels of
diminishing returns with regards to energy creation (the organic nitrogen has been converted
to ammonia) it can be removed from the process and used or sold as fertilizer.
Our startups innovative ideas make the process attractive for waste management
compliance, especially given the strict California laws regulating odor, groundwater
contamination, and greenhouse gases. After some time, we might even become Green
Business Certified by the SBA and/or others so that we can apply the Eco label to our
products (Green certification and ecolabeling). Such action would add to the buyers emotional
perception of Izumi Dai as a better choice.
f. Production method: inexpensive organic feed
In nature tilapia will feed mostly on plankton and detritus. The industrial production of
tilapia in controlled aquaculture environments requires the use of commercial fish feed. The
use of 40-50% protein feeds increases fish growth up to tenfold compared to fish bred in ponds
where no supplement feed was given. At $6 per pound, certified organic pellet fish food for
tilapia that consists of 31% protein is very expensive. Feed cost is especially relevant when
realizing that each fish requires a daily feed intake of 2-5% of its body weight. Tilapias feed
conversion is at about 2 lbs of feed per pound of gain.
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In order to control feed cost, our startup intends to use the decomposed horse manure as
the main ingredient to feed a renewable source of animal protein (red worms) in a closed-loop
system (Rasing earth worms, 2013). The only elements of concern for a red worm habitat are
moisture and temperature. They are very easy to breed and can double their population every
90 days. They eat half their weight each day which further processes the horse manure to a
high quality fertilizer (soil humus) that could be resold at premium pricing (Humus-the
foundation of living soil, 2006). We intend to purchase rice and/or other inexpensive organic
plant-based feeds to balance the tilapias diet to reach maximum yield.
Izumi Dais use of SCADA technology, biogas and horse manure byproducts to keep costs
low represents a substantial competitive advantage (entry barrier) towards the companys local
competition. At the same time, the companys cost strategy brings its product pricing closer to
the low quality imports which simplifies the consumers decision to buy our products.
7. Our current and projected strategy

Izumi Dai intends to leverage its tangible and intangible assets, its capabilities and core
competencies to obtain a competitive advantage and long-term strategic competitiveness.
As discussed in the previous section, Izumi Dai has free access to large amounts of horse
manure that can be used for a variety of cost reducing practices. Other tangible assets that are
currently in our possession are computer equipment, vehicles, machines, and land in sufficient
quantity for the companys proof of concept. Intangible assets are the company partners core
capabilities such as newly gained business management knowledge, our professional
experience in the fields of engineering, technology, and farming, as well as software necessary
to run back-of-house administration functions.
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Izumi Dais disruptive strategy of Organic, Halal and Kosher and Made in America
product certification enables a narrow market segment focus.
This initial focused
differentiation will further distinguish the company from its competitors regarding customer
value.
Soon after inception, we anticipate demand to increase beyond the aquacultures
maximum annual output.
At that time the company will reinvest profits towards swift
expansion into other premium markets by leveraging our unique modular aquaculture design
and technology.
As Izumi Dais footprint increases, the company will require a broader market to sell its
products.
The companys strategy will gradually shift towards cost leadership thanks to
economies of scale by reaching the highest levels of efficiency in high cost categories such as
feed, energy, and labor. Reaching a cost leadership position in the US market space will be
beneficial in the long run given previously described economic factors, as well as the ongoing
ecological degradation of water quality in Asia and South America. In short, the projected
increase in demand for healthy sources of animal protein in the US ensures a successful
outcome for aquaculture companies that are able to produce large quantities of fish at
affordable pricing to the middle class.
8. An update on your selected competitor since the case ended.

In light of the market share data discussed earlier in this report, a single competitor will
not be selected. Instead, imports, representing both frozen and fresh tilapia, will be
consolidated and categorized as a single competitor, although this category will be comprised
of various farms from different countries. The logic behind this choice is that it is near
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impossible to identify any one, single competitor because of the minimal concentration and
high fragmentation of the competitive landscape.
The bulk of frozen tilapia imports come from China, while Latin American countries with
a closer proximity to the US dominate the fresh tilapia import market. Although the products
from these countries are cheaper because of the low cost of labor and less stringent regulatory
policies, recent incidences have led to growing concerns regarding the safety of the seafood
products produced in these countries.
One such startling and recent example is published in Bloomberg Businessweek.
According to the article, the tilapia at an aquaculture farm located in Chinas Guangdong
province are fed partly with feces from hundreds of pigs and geese. These same fish are
purchased by exporters and sold to US companies. This practice is dangerous for American
consumers, says Michael Doyle, director of the University of Georgias Center for Food Safety.
The manure the Chinese use to feed fish is frequently contaminated with microbes like
salmonella, says Doyle, who has studied foodborne diseases in China (Uyen & Bi, 2012). The
article explains that this is not an isolated incident. In fact, a purportedly growing number of
farmers are adopting this practice in order to cut costs because of competition, with some
farmers abandoning commercial feed entirely and switching over to feces. The FDA only
inspects about 2.7% of food imported into the US. Since 2007, the FDA has rejected 820
Chinese seafood shipments, 187 of which contained tilapia (Uyen & Bi, 2012).
Similarly undesirable farming conditions have been practiced in Latin American
countries, where the bulk of fresh tilapia imports to the US come from. One practice of concern
is farming tilapia in lakes or ponds where the fish excrement is unable to be filtered out or
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removed, thus polluting the water. Dr. Jeffrey McCrary, an American fish biologist who works
in Nicaragua said, We wouldnt allow tilapia to be farmed in the United States the way they
are farmed here, so why are we willing to eat them (Rosenthal, 2011)?
Further concerns are raised from tilapias invasive nature. Reportedly, tilapia has
squeezed out native species in lakes throughout the world with its aggressive breeding and
feeding (Rosenthal, 2011). In the US, the use of cages to farm tilapia in lakes is generally
forbidden. If tilapia escape from their enclosures, then they can potentially destroy the existing
ecosystem within the lake or pond, as was the case with Lake Apoyo in Nicaragua. When the
tilapia escaped from the cages, they consumed an aquatic plant called charra, which the other
fish fed off of. As a result, some species of plants and fish that once inhabited the lake are now
extinct.
9. Competitors current and projected strategy

With more health concerns and disturbing stories regarding aquaculture operations
coming to light, foreign farmers are growing more conscientious with regards to their farming
practices. The importers current and projected strategy focuses on strengthening consumer
confidence by qualifying for accreditation from industry watchdogs. Such certifications are
received by complying with specific standards which require farmers to adopt environmentally
responsible farming practices.
Regal Springs, which operates tilapia farms in Mexico, Honduras, and Indonesia, is one
such importer who is employing this strategy. Regal Springs tilapias Honduras plant has been
awarded the Global Aquaculture Alliances Best Aquaculture Practices (BAP) certification (Regal
Springs Honduras Farm Receives BAP Certification, 2013). They are also the first fish farm to be
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certified by the Aquaculture Stewardship Council (ASC).Such certifications and practices help
aquaculture farms and processors to do business with large corporate customers like Costco
(Rosenthal, 2011).
Similar initiatives are improving farming conditions in Chinese aquaculture farms. In
2012, the ASC began work in China with the objective of developing more sustainable methods
of tilapia farming (ASC to help China tilapia farming, 2012). The project was planned to last
two years. Its three primary objectives are: first, to make more details on the tilapia supply
chain in China available; second, to introduce ASC standards to China and encourage Chinese
tilapia producers to seek ASC certification; and third, drum up public and consumer support for
ASC-certified tilapia from China (ASC to help China tilapia farming, 2012).
10a. Izumi Dai Growth-Share Matrix
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Izumi Dai will have an initial focused product of fresh, organic tilapia. Tilapia
consumption in the US is increasing steadily and will continue to increase. Izumi Dai and similar
domestic aquaculture firms use the live fish market with higher market price to circumvent the
Asian and South American importers with low-price, frozen tilapia fillets. Increasing market
share is critical to moving into the Star investment quadrant, as the industry growth is
expected to continue to increase domestic supply.
Growing demand in developing nations may reduce the supply of imported tilapia.
Izumi Dai will penetrate the mass frozen fillet market when import supply decreases and thus
price increases. Operations will need to support not only live fish, but increase production and
invest in processing and packaging for frozen tilapia. By increasing the frozen fillet market share
captured from imports Izumi Dai will realize Cash Cow conditions.
10b. Our competitors growth-share matrix
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Chinese tilapia farms process and export tilapia to the US in frozen whole and fillet
portions. In addition to supporting US fish demand, the Chinese aquaculture industry is seeing
an increase in Chinese domestic demand. Exported US frozen fillets are currently Cash Cows.
Low labor and low regulation allow imports to dominate the US market share. As more South
American and African aquaculture programs are established, the market share will decrease
towards the Dog quadrant. Chinese farms may see the opportunity of live or fresh regional
tilapia as more attractive and move the Domestic tilapia category from Star to Cash Cow.
With this move, Izumi Dai will attempt to secure US market share.
11. Critical resources, strengths, core capabilities, core competencies, and

weaknesses
The competitive analysis in this thesis has identified the imports from China and South
America as our main competitor. Other competitors described in this paper represent an
estimated 1% of US tilapia market share only.
Izumi Dai versus overseas imports
Izumi Dai
Critical
Resources
Modular tank des ign, SCADA Technology (1)
Strengths
3 MBA students with proven profess ional track records (2)

Easy access to intellectual capital (2)
Low local competition (2)
37 million potential consumers locally (2)
Made in San Diego (1)
Core
Green energy and feed
Capabilities
Core
Fresh, Organic, Halal, Kosher
Competencies Consis tent proprietary genetic strain
Price point much higher than imports (3)
Reliance on technology (2)
Startup issues: seed funding, dis tribution, plant, equipment,
property, no client-base (3)
Weaknesses Need 12-18 months to s tart the company (2)
Never done this before (1)
Psychographics (3)
Regulatory requirements and compliance (3)
Low volume production (3)
Overseas imports
Acces s to inexpensive labor (1)
Access to inexpensive feed (1)
Access to offshore processors (1)
Mas s production and cos t leadership (1)
Minimal regulatory requirements (1)
Existing distribution channels (1)
Their ability to manage the individual components of the

process from start to finish
High volume production
Inability to provide fresh, organic to the US market (1)
Psychographics of cheap imports from ques tionable origin (3)
Increas ing demand for Tilapia in the respective local markets
affects their ability to supply to the US in sufficient quantities (3)
Water pollution (2)
Rising labor rates (2)
Reliance on inexpensive labor (1)
Dis tance to market / carbon footprint (2)
Low technology (3)
Red ocean (3)
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Izumi Dai versus the weaknesses of overseas imports

Izumi Dai
Critical
Resources
Modular tank des ign, SCADA Technology (1)

3 MBA s tudents with proven profes sional track records (2)
Strengths
Easy access to intellectual capital (2)

Low local competition (2)
37 million potential consumers locally (2)
Made in San Diego (1)
Core
Green energy and feed
Capabilities
Core
Fresh, Organic, Halal, Kosher
Competencies Cons is tent proprietary genetic s train
Overseas imports (WEAKNESSES)

Rising labor rates (2)
Reliance on inexpensive labor (1)
Low technology (3)
Increas ing demand for Tilapia in the respective local markets
affects their ability to supply to the US in sufficient quantities (3)
Psychographics of cheap imports from ques tionable origin (3)
Water pollution (2)

Dis tance to market / carbon footprint (2)
Inability to provide fresh, organic to the US market (1)
Red ocean (3)
Izumi Dais weaknesses versus overseas imports
Critical
Resources
Strengths
Overseas imports
Access to inexpensive labor (1)
Access to inexpensive feed (1)
Access to offshore processors (1)
Mass production and cost leaders hip (1)
Minimal regulatory requirements (1)
Existing dis tribution channels (1)
Core
Their ability to manage the individual components of the
Capabilities process from start to finish
Core
High volume production
Competencies
Izumi Dai (WEAKNESSES)

Reliance on technology (2)
Startup is s ues : s eed funding, distribution, plant, equipment,
property, no client-base (3)
Price point much higher than imports (3)
Regulatory requirements and compliance (3)
Need 12-18 months to s tart the company (2)
Psychographics (3)
Never done this before (1)
Low volume production (3)
12. External threats and opportunities in this industry

Opportunities in the eatable fish market sector favor the organic sustainable product
strategy of Izumi Dai. Changes in consumer habits, global environments, and natural food
stocks create an immediate need for innovation and growth in the aquaculture industry.
a. Opportunity - Changes in consumer habits (2):
The US Millennial generation, born between 1982 and 2001, differ in their food buying
habits from older generations. Millennials are willing to spend more on fresh, organic, and
healthy food (How 'Millennials' Are Changing Food as We Know It, 2012). Processed and canned
foods are falling out of favor with Millennials who are starting families and entering into careers
41 | P a g e
after schooling. Izumi Dai believes the buy local and organic trend will grow and steadily
increase fresh tilapia demand. This benefits local aquaculture, agriculture and aquaponic
companies.
b. Opportunity - Natural fish stocks decreasing (1):
Lower ocean food stocks are at the root of the initial aquaculture interest from Izumi Dai
team members. Global populations are growing and the per person fish consumption is
increasing as well. With nearly 85% of global fish stocks over-exploited, depleted, fully exploited
or in recovery from exploitation, the global population will need to increase alternative fish
stocks to maintain natural ecosystems (Vince, 2012). In addition, man-made and natural
disasters are affecting natural fish stocks. Oil spills, El Nios and climate change, along with
hydraulic fracturing pollution are wiping out lake, river, and coastal environments natural
ecosystems. As a result of decreasing natural food stocks, the aquaculture industry was
expected to increase 4.6% in 2012 (McBee, 2012).
c. Opportunity - Technology reducing labor (3):
Increased off the shelf technology with internet integration is changing the way Izumi
Dai is approaching the traditional aquaculture labor resources. Our research shows that few
competitors have adopted such an off the shelf strategy. Innovations in residential pond
equipment, home reef aquarium alarm and control systems, as well as SCADA industrial control
systems will allow Izumi Dai to reduce traditional fish labor resources. Fish grow out oversight,
including water quality parameters, feeding, and alerts will be recorded and modified by
automated systems with visible dashboards available to stakeholders over the internet. Izumi
42 | P a g e
Dai will move the saved labor to auxiliary support tasks, which allow for the vertical integration
of the feed and hatchery operations.
d. External Threat - Regulation and labeling (1):
Izumi Dais major differentiator with the major import market is organic, hormone, and
chemical free. Research indicates no major governmental or academic agencies monitor the
labeling and claims or organic and hormone use in aquaculture. Izumi Dai believes tilapia
importers, as well as US competitors, may use the organic and hormone-free labels without
oversight, thus nullifying a major marketing effort. Izumi Dai will work with academics and food
agencies to propose and construct food practice oversight in aquaculture.
e. External Threat - Adjacent aquaponic industry (3):
Aquaponics is a related field to aquaculture. By taking the effluent from fish populations
and using plants to filter out organic waste, aquaponic operations produce both fish and plants.
With the organic and fresh food opportunity described in the above section, Izumi Dai may be
challenged by a stronger, locally grown marketing scheme and perceived to be more green.
Izumi Dai is not initially interested in aquaponics, as the tradeoffs between fish and plant
population would reduce the density and capacity of fish production.
f. External Threat - Distribution channels (2):
Farmed tilapia imports, as well as ocean-caught fish, have mature distribution channels
already in place. High volume grocery chains and restaurants typically contract food distributors
and do not allow independent suppliers, which overlap with distributor products. Distributors
of course will stock products that will allow high margins and have consistent dependable
supply chains. With the low labor costs and economies of scale farmed imports have
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unbeatable prices, in order for Izumi Dai to break into distribution it must first work
independently to distribute product and build branding until distributor clients ask for organic
local tilapia.
13. Strategy canvas and strategy curves

Figure 2: Strategic Canvas for the Industry
Izumi Dai created a strategic canvas which covers 6 attributes of an aquaculture firm:
ease of buying, supply chain risk, responsiveness, health conscious, sustainability, and price.
The attributes were given values from low to high based on producing tilapia and selling them
in the southern California region. The players who received values were Izumi Dai, in the initial
production years, Blue Ridge Aquaculture, a major, large-scale US aquaculture competitor, and
an East Asian importer of frozen tilapia.
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Ease of buying is defined by the number of point of sale locations to consumers. Izumi
Dai will initially have a low footprint of retail locations. This will be a large challenge for Izumi
Dai. Blue Ridge aquaculture was low to moderate ease of buying, due to limited geographical
range. They have a large portfolio of locations in the Midwest and East. We believe their
national connections would give them an advantage in Southern California. Asian importers
have a high ease of buying, as frozen fillets can be packaged by multiple distributors and
transported through a wide network of buyers.
Tilapia supply chain risk includes supplier product flaws, and timing and inventory issues
which can affect fish production and quality. Izumi Dai has a low supply chain risk. By investing
in self-grown sustainable feed, off the shelf equipment, and tilapia breeding, the exposure to
risk from suppliers is low and internally managed. Blue Ridge has a moderate supply chain risk
with its large operation. Unique, large-scale filtration systems are believed to be used along
with commercial feed. Asian importers have a high supply chain risk based on downstream
partners including shipping and distributors. Packaging and shipping across the Pacific, along
with lead times, adds risk to the quality and distribution to customers.
Responsiveness evaluates the time it takes to adjust to customer requests including
packaging and quantity. Izumi Dai has a moderate responsiveness score. This is attributed to
the fact that the modular tank systems can be scaled with demand, although an upper limit for
initial capacity exists. Time to market is low as Izumi Dai is close to local markets and
customers. Blue Ridge aquaculture has a high responsiveness with its large production capacity
and experience in growing production levels and distribution. Asian importers have a low
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responsiveness rating due to long lead times and their model of offloading frozen fish at full
capacity to lower prices.
Health conscious is a rating assessing the consumer expectation of pollution and
chemical free, hormone-free, safe and nutritious fish. Izumi Dai has a high health conscious
rating. Marketed as organic and hormone-free, Izumi Dai will make quality the differentiator
with imports. Blue Ridge Aquaculture also received a high rating for health conscious, since it is
marketed as hormone and pollutant free. Feed sources are not revealed publically. Asian
importers received a low health conscious score. Importers have been discovered to have
poor, unregulated tilapia raising conditions with measured pollutant levels found in their fish
(Barboza, 2007).
Sustainability is the effect of the tilapia farm on the environment, balance of resource
inputs and reuse of outputs. Izumi Dai rated high in sustainability due to plans to create a
sustainable food source, thus eliminating the demand for protein feed. Blue Ridge rated
moderate to high. Like Izumi Dai, Blue Ridge uses the recirculating aquaculture model to
reduce water usage. However, it is unclear whether Blue Ridge uses a sustainable feed source
or relies on commercial protein feed, which commonly consists of fishmeal. Asian importers
received a low sustainability score since they typically use outdoor pond setups which utilize
large amounts of water and runoff. Antibiotic and hormone use have unknown effects on the
natural ecosystem. Price is the fillet gate price per pound. Izumi Dai has a high price for fillets.
Labor and infrastructure costs are required for implementing a vertical supply chain strategy
and setting up facilities in Southern California. Izumi Dai believes consumers will pay the high
price for safety, piece of mind, and quality. Blue Ridge has a moderate price, with Asian
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importers at a low price. Although Blue Ridge has a large economy of scale advantage it still
cannot beat Asian import prices. According to Virginia Tech professor Dr. Lori Marsh, US
aquaculture producers cannot raise tilapia for the sale price of Chinese and Thai imports
(Valencia, 2011).
By reviewing the strategy canvas one can see that Izumi Dai understands it cannot beat
imports on price. Instead, Izumi Dai will focus on sustainability and quality as food sources
become further scrutinized in the media, and supply is limited further.
14. Suggested changes to current strategic plan

Given that this thesis represents a startup company as opposed to a case study of an
existing company, all items included in this paper are of strategic importance to the viability of
the undertaking. Additionally Izumi Dai does not plan to copy its competition because of its
reconstructionist approach that transcends market boundaries and industry structure. Rather
the company intends to differentiate themselves on quality in an attempt to establish a Blue
Ocean in Southern California. The sections below are based on Blue Ocean Strategys four
actions framework and highlight the importance of remaining true to our current strategy.
a. Create a certified healthy source of fish protein (1):
Health conscious consumers in Southern California do not have ubiquitous access to
healthy fish protein of proven origin. Izumi Dais strategy to certify its food as Organic, Halal
and Kosher will mitigate this shortcoming. Additionally, the Made in America tag line will
mitigate undesirable psychographics related to tilapia and aquacultures. The companys insight
and deep understanding of what its competitors and customers are about allows it to maximize
the power of market information, which relates to Sun Tzus Deception and foreknowledge.
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Furthermore, the companys focus, divergence, and compelling tagline is anticipated to lift
buyer value and create new demand.
b. Raise supply availability to year-round operation (1):
Izumi Dais intention to leverage proximity to market as well as heterotrophic, SCADA,
and modular tank technology to keep operational expenses low year-round represents a
substantial advantage compared to the companys US-based competition that relies mostly on
seasonal climate and labor. This strategy will allow the company to capture the fresh and
healthy tilapia market without fighting with the local competition. Izumi Dais fresh products
and unique brand will be in front of customers year-round which will increase their confidence
to pick our product over a seasonal competitors. It also allows the company to attack its
competitors at their weakest point because they are unable to provide high quality fresh tilapia
to the local market space given their geographical location and ecologically harmful practices.
c. Eliminate seasonal fluctuations in supply (2):
Izumi Dais strategy of vertical integration ensures constant production quality. The
strategy also reduces the bargaining power of suppliers as well as buyers because no other local
aquaculture will have the capability to consistently produce tilapia of the same quality in the
short run. Speed and preparation will be central to the success of the initiative.
d. Reduce harmful ecological impacts (3):
Izumi Dais differentiating strategy to build an ecologically friendly and self-sustaining
facility represents a substantial departure from the traditional overseas fish farm that depletes
the nutrients in natural bodies of water and that generates substantial pollution in the form of
residual chemicals, nitrates, and carbon footprint. This strategic approach is anticipated to
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result in free recognition by customers and local media, which in turn will help with demand
creation and branding.
15. Concrete and specific strategic and major tactical actions

The IBISWorld Industry Report notes that, Local producers will continue to face
competition from imports...Imports will continue to challenge the viability of many US
aquaculture producers and limit growth in company numbers and employment (McBee, 2012).
In order to address the competition from tilapia imports, Izumi Dai has developed a strategic
plan which focuses on avoiding the strengths of the import competition and exploiting its
weaknesses and prioritizing specific market segments.
a. Avoid strengths and attack weaknesses
The main strengths of tilapia importers, which will be analyzed collectively and not
individually, are high volume output and low price. Izumi Dai acknowledges that it could not
profitably compete in the areas of volume and price when stacked against foreign importers.
Consequently, Izumi Dai has evaluated the weaknesses of these competitors in order to find
solid footing upon which it can compete. Izumi Dai has concluded that the primary weaknesses
of the import competition which it plans to exploit are quality and location.
Quality: Izumi Dai will farm high quality, organic tilapia. Organic certification is a key
differentiator because it is a quality benchmark that imports have not attained. In addition to
organic certification, Izumi Dai plans to qualify for Halal and kosher certifications, thus
differentiating its tilapia further and appealing to a broader market segment.
Also related to quality is the farming environment. Izumi Dai has plans to farm tilapia
using environmentally friendly aquaculture practices. To emphasize this portion of its strategy,
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Izumi Dai plans to offer both physical and virtual tours of its operations. The virtual tour will be
experienced via Izumi Dais website. On the website, a patron can explore an illustrated layout
of Izumi Dais aquaculture operations. The patron will be able to see actual photos and videos
regarding specific aspects of the aquaculture process by selecting links available on the
illustrated layout. Izumi Dai is confident that this degree of transparency will result in increased
confidence from clients.
Location: Izumi Dai will leverage its advantageous location in Southern California by
establishing a network of strategic alliances with local grocers, processors, restaurants, and
markets. As discussed in section 17 of this report, there is a growing trend among consumers
to purchase and support locally farmed products. Izumi Dai knows it can help the local
commercial players capitalize on this emerging trend. Similarly, Izumi Dai understands that
these commercial players could also significantly increase its brand awareness and presence in
the local community.
One idea of how this reciprocity could be realized is to have informational pamphlets or
other materials about Izumi Dai on display at participating sites. For example, pamphlets could
be displayed at a local, specialty grocer for customers to take while visiting the seafood section.
The specialty grocer knows that its customers want a high quality, locally farmed fish. By
sharing the pamphlet with its customer, the specialty grocer markets its unique product and
wins the confidence of the customer. Izumi Dai benefits by receiving exposure.
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b. Win all without fighting: Prioritize markets and determine competitor focus
Through market prioritization, Izumi Dai has decided to make the Southern California
specialty food market its primary target segment. This market has been selected because of its
location and growth and profitability potential. In order to secure footing in this market, Izumi
Dai is planning to launch a marketing and branding campaign aimed at increasing both brand
awareness and loyalty. The first phase of the campaign will be focused on creating a website
for Izumi Dai. A website is a critical component for businesses operating in this day and age.
The website will serve as a window, allowing individuals to have an intimate glimpse into the
operations and culture of Izumi Dai. By visiting the website, individuals will be able to learn
about who Izumi Dai is and why it is unique, for example, highlights regarding Izumi Dais
community outreach and involvement initiatives. Once the website is completed, Izumi Dai will
be ready to move onto the second phase of the campaign.
The second phase of the campaign is a series of video journals that will be released on Izumi
Dais website. The video journals will chronicle Izumi Dais pre-production operations, like tank
set-up, to its post-production operations, such as its first harvested tank of tilapia. The purpose
of the video journals is to promote brand awareness and loyalty by allowing viewers to
participate in Izumi Dais journey and experiences.
The third phase of the campaign, which will also begin and run concurrently with the second
phase, is the creation of Twitter and Facebook accounts. The timing of such action will be
critical as speed and deception are central to the success of the initiative. Pre-production,
Izumi Dai plans to use these social networking sites to keep potential clients and customers
informed regarding its production schedule. These sites will be a perfect platform for releasing
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and disseminating video journals, photos, and other updates. Post-production, Izumi Dai plans
to use the sites to communicate news, updates, promotions, and other relevant and exciting
material to its customer base.
All three of these phases combine to form a brand experience. Customers within the
specialty food segment do not only want high quality food, but they also want to be a part of a
causethe bigger picture. By showing its clients what it does and what it stands for, Izumi Dai
will be able to give their consumers an opportunity to participate in a cause which promotes
responsible farming, healthy lifestyle, and community cohesion.
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16. Implementation plan and time line
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17. What do you expect the competitor to do?

An implication wheel is a visual tool used for strategic decision making. It addresses the
possible actions a competitor may take in response to a strategic move made by a competing
firm. In this case, the strategic move proposed by Izumi Dai is the central node, shown in figure
1.2. The arrows branching off the central node point to the perimeter nodes, which are the
possible actions Izumi Dais competitor may take. The counterpunch nodes detail Izumi Dais
counter measures which it plans to implement in order to counter and mitigate the effect of
the competitions various responses.
As discussed earlier, the competition is comprised of both Latin American and Asian
imports. The various nodes of the implication wheel specify which of the two types of
competitors is being analyzed. The analysis of the implication wheel begins with the node in
the upper left hand corner and then proceeds clockwise.
As discussed in section 5, the competitive landscape of the aquaculture industry is
highly fragmented, with low levels of concentration. Thus, the actions of one firm will more
than likely not elicit a direct response from competing firms. Consequently, Izumi Dai estimates
that the probability that the importers will take no action in response to their strategic move is
30%.
Izumi Dai estimates that the probability of Latin importers responding by offering a
fresh, organic tilapia fillet is 20%. Section 9 of the report addresses the growing trend for Latin
importers to conform to higher health and quality standards. A natural extension for these
importers would be to convert a portion of their farms to accommodate organic farming
conditions, thereby capitalizing on the growing demand for organic products in the US.
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However, qualifying for organic certification can be a lengthy process. Therefore, the estimated
time to implement such a strategy would be anywhere from six months to a year.
Izumi Dai anticipates such a move from Latin importers and, as such, is planning to
immediately differentiate itself by marketing its tilapia as farmed locally in the US under US
standards. A growing trend among consumers is the desire to support local farmers. In fact,
When the National Restaurant Association (NRA) unveiled the results of its Whats Hot in
2012 chef survey in December, few were surprised that locally sourced meats and seafood
secured the No. 1 spot on the list of top 10 menu trends for this year. Or that the term local
showed up in three other trends on the list (Fletcher, 2012). Izumi Dai plans to leverage this
growing trend in its favor by establishing strategic alliances with local restaurants, markets, and
grocers.
The probability that a Latin importer will respond by opening a US based aquaculture
farm in order to compete in the fresh, organic, locally raised tilapia market is 20%. For
example, Regal Springs, which operates tilapia farms in Honduras and Indonesia, has also
expanded into Mexico. Since these companies are exporting their tilapia to the US, it makes
sense for them to have operations with a closer proximity to their destination market, thereby
cutting back on transportation costs and shortening the length of the supply chain. Such a
transition would be lengthy, taking at least one to two years before the farm was producing.
Knowing that such a move by a foreign competitor may be a possibility, Izumi Dai has
developed a three-pronged approach to bolster the loyalty of consumers, distributers, and
communities.
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First, Izumi Dai plans to start immediately building brand awareness and brand loyalty.
With an emphasis on its local presence, Izumi Dai hopes to be a gregarious and transparent
operator within its community. Tours of the farm will be open to the public. A Facebook page
and other social media websites will be used to disseminate information and promotions. Izumi
Dai wants consumers to know who they are and what they do.
Second, Izumi Dai will form strategic alliances with local restaurants, distributors,
processors, and markets. Currently, in the Southern California area, there is a scarcity of local
tilapia farms. Therefore, Izumi Dai will have the first move advantage when establishing
relations with these players. With time, Izumi Dai is confident that it will establish loyalty
through its unprecedented quality and service.
Finally, Izumi Dai wants to strengthen its ties to the community by embracing value
added initiatives in the form of community outreach. Izumi Dai is already in talks with
individuals about concepts such as Spectrum Farming.
Spectrum Farming is a program
designed to help individuals on the autism spectrum find fulfillment, receive treatment, and
have meaningful experiences through work. Izumi Dai will devise a plan to allow individuals on
the autism spectrum contribute and work on the farm as a part of their healing process.
Now addressing the Asian importers, the probability that Asian importers respond by
offering a frozen, organic tilapia fillet is 20%. The estimated time to implement such a strategy
is one to one and a half years.
As a countermeasure, Izumi Dai would eventually like to source a processor such as
Pacific Seafood or Ocean Beauty who could help bring a frozen, organic fillet to market. Such a
fillet would allow Izumi Dai to reach a broader market outside of its local presence. This
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product would help Izumi Dai maintain market share that it may have potentially lost if such a
product was not introduced.
The probability that an Asian company responds by opening a US based aquaculture
farm in order to compete in the fresh, organic, locally raised tilapia market is 10%. The reason
that the probability is lower for the Asian companies than for their Latin counterparts is
because the Latin companies are already firmly established in the fresh tilapia supply chain,
whereas the Asians are not, dominating the frozen supply chain. As a countermeasure, Izumi
Dai plans to implement the same three-pronged strategy mentioned earlier.
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Implication Wheel
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18. Business Startup Scenario

a. Phase 2: Pilot stage, proof of concept:
Funded by initial business partners with private capital, the pilot stage will be an initial
grow out of tilapia to test assumptions and to have a product for additional investors and
customers. This stage will include breeding tilapia and growing to selling weight. This will allow
monitoring and control of water health levels and system fluctuations. The alternative feed
solutions will be setup at a reduced scale, and feasibility will be analyzed to reduce feeding
costs. The pilot stage will be a scaled down and accurate representation of the full production
stage.
Assumptions include free facilities and free labor provided by funding team members.
Facilities require approximately 300 square feet with electricity and water on residential
property. All equipment will be reused in the production phase.
Tank and Equipment Cost Breakdown:
Tanks
$2,000
Biological filters
$2,000
Pump
$500
Plumbing and fittings
$300
SCADA Monitoring
$600
tilapia Breeding Pairs
$800
Heating
$300
UV filter
$200
Electricity/year
1000
Feed
2000
Total
$9,700
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b. Phase 3&4: Acquisition and Production

Initial production will require approximately 5,000 square feet of enclosed area for fish
breeding and grow out. Utilizing an existing greenhouse or manufacturing structure, Izumi Dai
will rent or lease property in San Diego County with electricity and water access. With a site
obtained, tank construction and equipment procurement will proceed along with transport of
the proof of concept tilapia and equipment.
A sample layout is proposed below. Main tanks will be 30 feet in diameter with a depth
of 4 feet. Equipment including filters, heaters, aeration and monitoring equipment will be
collected to two pods next to each tank. The hatchery area will include tilapia breeding pairs
and new fry holding. Fry tanks allow young tilapia to grow in a special feed and filtering
environment up to a size allowing introduction to the main tanks. Sample layout below:
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Costs associated over the first 5 years are detailed in below. Again, capital will be
provided by Izumi Dai owners with equal equity. Equipment in the first year will be major
upfront costs. Equipment costs in the following years are assumed to be approximately 20% on
initial investment for maintenance and replacement. Unused equipment will be an opportunity
split between equipment upgrade and sales and marketing. Labor will include one full-time
employee on site; labor provided by Izumi Dai partners will not be compensated until the
company reaches profitability. Additional labor provided through internships will be explored
with California agricultural colleges. Land lease was estimated from open land with existing
greenhouse structures in Escondido, California.
For the purpose of a technical summation of fish production costs, fully independent,
alternative feed and energy were not included. Savings from these initiatives will be considered
a long range opportunity. Feed costs include 50% alternative feed and 50% commercial feed.
Commercial feed will supplement the alternative feed through full sustainment to cover the risk
of an internal feed breakdown.
Marketing will include distributor media, consumer education through social media, and
activity in aquaculture organizations. The long range plan produces a net profit between the
fourth and fifth year of operation at a very conservative estimate of $2 per lb.
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Year 1
Year 2
Year 3
Year 4
Year 5
Tanks
$35,000
$3,500
$3,500
$3,500
$3,500
Biological filters
$28,000
$2,800
$2,800
$2,800
$2,800
Pump
$7,000
$700
$700
$700
$700
Plumbing and fittings
$2,500
$250
$250
$250
$250
SCADA Monitoring
$5,000
$500
$500
$500
$500
Breeding Pairs
$1,600
$160
$160
$160
$160
Heating
$2,000
$200
$200
$200
$200
UV filter
$2,000
$200
$200
$200
$200
Aeration
$2,000
$200
$200
$200
$200
Equipment Subtotal
$85,100
$8,510
$8,310
$8,310
$8,310
Electricity/year
$20,000
$20,000
$20,000
$20,000
$20,000
Water
$5,000
$5,000
$5,000
$5,000
$5,000
Commercial Feed
$15,000
$15,000
$15,000
$15,000
$15,000
Labor
$60,000
$63,000
$66,150
$69,458
$72,930
Rent
Truck and
transportation
Marketing
$36,000
$36,000
$36,000
$36,000
$36,000
$20,000
$4,000
$4,000
$4,000
$4,000
$10,000
$10,000
$10,000
$10,000
$10,000
Total
$251,100
$161,510
$164,460
$167,768
$171,240
Production (live lb)
20,000
100,000
120,000
120,000
120,000
Cash Inflow ($2/lb)
$40,000
$200,000
$240,000
$240,000
$240,000
Cumulative Returns
($211,100)
($172,610)
($97,070)
($24,838)
$43,922
Expense
********
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Tilapia Farming in Recirculating Aquaculture Systems NettlesAndrew - Spring2013

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Tilapia Farming in Recirculating Aquaculture Systems

Economic (2) ..................................................................................................................................... 3

Demographic (2) ............................................................................................................................... 4

Political / Legal (3)............................................................................................................................. 4

Technological (1) ............................................................................................................................... 5

Sociocultural (1) ................................................................................................................................ 6

Physical (2) ........................................................................................................................................ 7

2. Five forces of competitive strategy in the industry .................................................................................. 7

Rivalry among competing firms (2) ................................................................................................... 7

Threat of new entrants (2) ................................................................................................................ 8

Bargaining power of suppliers (1) ..................................................................................................... 9

Bargaining power of buyers (2)....................................................................................................... 10

Threat of substitute products (3) .................................................................................................... 11

3. Two-dimensional strategic group map for the industry ......................................................................... 12

4. Specific competitors in the industry ....................................................................................................... 14

Competitive Environment ............................................................................................................... 14

Immediate Competitors .................................................................................................................. 15

Impending Competitors .................................................................................................................. 19

Invisible Competitors ...................................................................................................................... 22

5. Major Competitors and their market share............................................................................................ 25

6. Why is our startup a good idea? ............................................................................................................. 26

Macro Economics and Competition................................................................................................ 27

Tilapia itself ..................................................................................................................................... 28

Tank Design and Technology .......................................................................................................... 29

Organic, Halal, Kosher and Made in America ................................................................................. 31

Production method: inexpensive energy ........................................................................................ 32

Production method: inexpensive organic feed............................................................................... 33

7. Our current and projected strategy ........................................................................................................ 34

BA-690 Strategic Management Thesis: Tilapia Farming in Recirculating Aquaculture Systems

8. An update on your selected competitor since the case ended. ............................................................. 35

9. Competitors current and projected strategy ......................................................................................... 37

10a. Izumi Dai Growth-Share Matrix .......................................................................................................... 38

10b. Our competitors growth-share matrix............................................................................................... 39

12. External threats and opportunities in this industry .............................................................................. 41

Opportunity - Changes in consumer habits (2): .............................................................................. 41

Opportunity - Natural fish stocks decreasing (1): ........................................................................... 42

Opportunity - Technology reducing labor (3): ................................................................................ 42

External Threat - Regulation and labeling (1): ................................................................................ 43

External Threat - Adjacent aquaponic industry (3): ........................................................................ 43

External Threat - Distribution channels (2): .................................................................................... 43

13. Strategy canvas and strategy curves..................................................................................................... 44

14. Suggested changes to current strategic plan........................................................................................ 47

Create a certified healthy source of fish protein (1):...................................................................... 47

Raise supply availability to year-round operation (1):.................................................................... 48

Eliminate seasonal fluctuations in supply (2): ................................................................................ 48

Reduce harmful ecological impacts (3): .......................................................................................... 48

16. Implementation plan and time line ...................................................................................................... 53

17. What do you expect the competitor to do? ......................................................................................... 54

Implication Wheel ................................................................................................................................... 58

18. Business Startup Scenario ..................................................................................................................... 59

Phase 2: Pilot stage, proof of concept: ........................................................................................... 59

Phase 3&4: Acquisition and Production ......................................................................................... 60

BA-690 Strategic Management Thesis: Tilapia Farming in Recirculating Aquaculture Systems