Reference no: EM1391796

The Italian Sausage Company (ISC) of New York City was founded in 1948 by John Perrone, an Italian immigrant. Mr. Perrone built his business with the expressed purpose of providing the highest quality of Italian sausage to the finest restaurants and delicatessens in New York City. ISC has had a steady growth throughout the years and last year broke the $30 million sales barrier with a Net Before Taxes of $10 million; a very high margin in this type of business. Mr. Perrone has consistently upgraded his production facilities to take advantage of the latest technology available while still maintaining high quality. Mr. Perrone personally purchases the sausage ingredients to assure that ISC's high standards are always met. In discussing his business operations for a magazine on successful entrepreneurs, Mr. Perrone briefly described the business this way:
"We purchase only the best meats and ingredients from a very limited group of local suppliers. We have many new potential suppliers willing to supply us but I believe in sticking with known quantities. Our suppliers appreciate our loyalty and provide us with great service. The meats are inspected for freshness and then ground up and are blended with a special formulation of seasonings. Only I know the formula of the blend. We make our own sausage casings. We then fill the casings with our sausage. We do no pre-cooking. The product is then sampled in our quality control lab which involves checking for freshness, appearance and taste. We then package the sausages and ship them in our own trucks to our customers; who by the way are very demanding of quality and service. It's worth the trouble because we can charge premium prices".
Since the business has grown large and Mr. Perrone is now 74 years old, he wishes to enjoy the "fruits of his labor" and has turned most of the day to day operations over to Mr. Joe Bigbucks, a Columbia University MBA graduate.
After one year on the job, Mr. Bigbucks is proposing that ISC enter into the Hot Dog marketplace. "The New York area would be a great place to test market our Hot Dog product; if it succeeds we can branch out into other areas quickly. Just imagine the potential in every supermarket, corner Hot Dog stand and sandwich shop in New York alone; in addition, making sausages and hot dogs are very similar" says Mr. Bigbucks.
Mr. Perrone has hired you as a strategy consultant to look into this proposal.