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Competitive Strategy for Pacific Ethanol, Inc.

Competitive Strategy for Pacific Ethanol, Inc. Economics of Business Decisions. Team #3. Ethanol Production. Poof!!!. Ethanol Production. Market Definition. Ethanol from corn West Coast. Advantages. Renewable Produced domestically Burns cleaner than fossil based fuels.

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Competitive Strategy for Pacific Ethanol, Inc.

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  1. Competitive Strategy forPacific Ethanol, Inc. Economics of Business Decisions Team #3

  2. Ethanol Production

  3. Poof!!! Ethanol Production

  4. Market Definition • Ethanol from corn • West Coast

  5. Advantages • Renewable • Produced domestically • Burns cleaner than fossil based fuels

  6. Financial Information SOURCES OF REVENUE • Merchant of ethanol from third parties to customers • Producers (2 plants operational, 3 in construction) • Acting as agent for suppliers

  7. Financial Information

  8. Five Forces Analysis Table

  9. Competitors

  10. Internal Rivalry Advantages P.E. is the only major ethanol producer concentrated in the Western U.S. Rate of Industry Growth/Excess Capacity Transportation Cost Advantage • Disadvantages • No Product Differentiation • Potential for future excess supply • No Production cost Differences

  11. Entry P.E. has a competitive advantage due to … Loyalty – strong relations with gasoline, ethanol and grain suppliers Distribution Channels – truck delivery and secured storage at fuel terminals Favorable Locations – strategic locations near blending facilities, railroads and co-product consumers (Midwest producers pay more for distribution) Government Protection – tariff protects domestic producers from imports

  12. Compliment & Substitutes Compliments: • Gasoline • Substitutes: • Gasoline • Ethanol from other sources • Hybrid Electric Vehicles • BioDiesel • Fuel Cells

  13. Supplier Power: 300,000+ Corn farmers Corn Price raising Buyer Power: Better position to service west coast customers Demand for ethanol much higher than supply Highly concentrated customer base Supplier & Buyer Power

  14. Government as Regulator • Government subsidies have played a major role for nearly for 30 yrs • Virtually every production input and production stage of ethanol is subsidized somewhere in the country at the federal, state, or local level

  15. Strategy Short Term • Increase production capacity • Explore new sources to produce ethanol from (sugar cane, etc.) • Lock down clients & suppliers

  16. Strategy Long Term • Develop ethanol as a primary fuel alternative • Moving higher up in the production chain • Research and Development • Building & Maintaining Strong Relationships • Foreign Relationships & Government

  17. Thank You!

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