Competitive Strategy for Pacific Ethanol, Inc'

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Competitive Strategy forPacific Ethanol, Inc.

• Team 3

Economics of Business Decisions
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Ethanol Production
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Ethanol Production
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Market Definition

• Ethanol from corn
• West Coast

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Advantages

• Renewable
• Produced domestically
• Burns cleaner than fossil based fuels

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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

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Financial Information
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Five Forces Analysis Table
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Competitors
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Internal Rivalry

• Disadvantages
• No Product Differentiation
• Potential for future excess supply
• No Production cost Differences

• Advantages
• P.E. is the only major ethanol producer
  concentrated in the Western U.S.
• Rate of Industry Growth/Excess Capacity
• Transportation Cost Advantage

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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

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Compliment Substitutes

• Compliments
• Gasoline

• Substitutes
• Gasoline
• Ethanol from other sources
• Hybrid Electric Vehicles
• BioDiesel
• Fuel Cells

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Supplier Buyer Power

• 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

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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

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Strategy
Short Term

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

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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

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Thank You!