In August of 1994
Bev Campbell contemplated purchasing a mould of a maritime fishing
village and harbour scene which she believed would appeal to
tourists. Bev was the owner / manager of Bevís Ceramics and Crafts
located in Lower Sackville, twenty minutes from Halifax , Nova
Scotia. She was anxious to expand into new markets, especially in
light of the recent decline in sales. A friend, the former manager
of a boutique catering to tourists, suggested that Bev expand into
the tourism market. She was seriously considering this option but
did not feel she had sufficient information on which to base her
and Proprietorís Background:
Since the mid 1980ís
Bev Campbell has had a passion for ceramics. Her passion began as a
hobby and by the latter part of 1991, it had mushroomed into a full
time business - Bevís Ceramics and Crafts. The transition from hobby
to business was prompted by the difficulty Bev had in finding a job
after the two video stores she managed for four years were closed.
Community organizations approached her to teach ceramics classes
and, since there were no firing facilities nearby, she acquired a
small kiln. Bev became the full time owner / manager of the business
assisted by her two adult daughters, Teresa and Catherine.
Bev held a Bachelor
of Fine Arts with a major in crafts and a Bachelor of Arts with a
major in psychology. She was a skilled craftsperson and took pride
in the quality of her work. Bev enjoyed all aspects of the business
- the creativity, the teaching and the management. She enjoyed
watching the talent and the self- esteem of her students develop.
The development of her students was particularly rewarding in cases
where students had arthritis or other conditions that made it
difficult for them to do other crafts.
The business began
with one kiln and about 150 moulds. A second kiln and additional
moulds were acquired, financed through operations. She estimated
that the business owns approximately $20,000 worth of moulds at
cost. Bev hoped to expand her business to a point where she could
make a comfortable living doing what she loved to
case was prepared by Professor E. Hicks of Mount Saint Vincent
University for the Acadia Institute of Case Studies as a basis for
classroom discussion, and is not meant to illustrate either
effective or ineffective management.
© 1995, the
Acadia School of Business Administration, Acadia University.
Reproduction of this case is allowed without permission for
educational purposes, but all such reproduction must acknowledge the
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Services and Distribution:
Bevís Ceramics and
Crafts sold supplies and ceramics, at various stages of completion.
The business also provided kiln firing services and ceramics classes
In 1993 33% of the
gross revenue was from the sale of supplies; 32% from the sale of
unfired, semi-finished products (greenware); 19% from firing
services; 7% from the sale of fired, semi-finished (bisque); 6% from
the sale of finished ceramic products; and 3% from classes. Although
the classes account for a small portion of the gross revenue, Bev
was of the opinion that the classes promoted the sale of supplies,
semi-finished products and firing services.
The company had a
wide variety of moulds. Bev purchased a variety of moulds from
different suppliers based on what she believed would be popular. The
cost of the mould depended on the size and the detail of the mould
as well as its popularity. The cost of the mould was also determined
by supplier, transportation costs, and duty. In the case of more
expensive moulds, Bev generally waited until she had firm orders for
at least five units before she purchased the
A wide diversity of
ceramic products were produced by the company. Products ranged in
size from small thimbles to large decorative lawn ornaments. They
also varied in terms of complexity. The company produced everything
from simple, utilitarian items such as coffee mugs and salt and
pepper shakers to very intricate, esoteric items such as villages,
angels and wizards.
The sale of
supplies, semi-finished products and firing services to ceramic
hobbyists were predominantly to walk-in traffic. The business was
located in the basement of Bevís rented home. Although the house was
not located in a high retail traffic area, it was on a busy road
within short walking distance of three malls and the main street in
Lower Sackville. The premises were predominantly designed to
accommodate ceramics classes and production rather than the
aesthetic display of ceramic products.
In the past, a
number of methods for distributing finished products have been
employed. Bev attended, on average, three craft shows annually and
sold between $200 and $800 worth of finished products at each show.
The craft shows also promoted her business by creating customer
awareness of her companyís products and services. Provided the craft
show sales covered the costs associated with the craft show, Bev
felt that the business had received the benefit of free
Bev had also placed
finished products on consignment with gift and craft stores.
Generally, she had been dissatisfied with the loss of control over
the display and exposure of her products in the craft stores and the
time it took to receive payment from consignees for goods sold.
Bev had attempted to
interest florist shops in purchasing quality ceramic vases for their
floral arrangements but florists were not enthusiastic. The florists
believed it would have been difficult to pass the cost of the more
expensive vases on to their customers. Consequently, she had only
received a few small orders.
and Financial Position
Bev Ceramics and
Crafts was a cash business. All sales were cash and all supplies
were purchased for cash. Bev considered it fortunate that the
company never had any debt. As she said, "I could close up the
business at any time and not have to be concerned about creditors".
However, cash flow was tight and it was sometimes difficult to meet
the rent and utility payments on time.
records were maintained on a computer spreadsheet by month with
columns for each category of sales and each type of cost. The
records were primarily designed to determine the sales tax
liability. One of Bevís daughters, Teresa, was in the process of
setting up the company on a point of sales software program.
financial statements were not prepared, an income statement for the
year ended December 31, 1993 was prepared for income tax purposes by
Teresa (see Appendix A). Financial statements for 1991 and 1992 were
not prepared. The following additional information related to the
1993 income statement was available: (a) the cost of goods sold only
includes materials used in production; (b) maintenance refers to the
regular maintenance required on the kilns; (c) depreciation of the
moulds was calculated using the straight line method and an
estimated useful life of two years; (d) electricity includes both
power to run the kilns ($541.44) and power for heat and lights in
the shop ($1,236.51); (e) shop rent amounts to $350 per month; and
(f) the income statement does not reflect depreciation of the kilns.
The kilns were purchased second hand for $550 and Bev estimated that
they would have a ten year useful life and no residual value.
During 1993 Bevís
Ceramics and Crafts used approximately 93 boxes of clay and the
kilns were turned on for a total of 752 hours or 5,414 kilowatt
hours. Supplies and greenware sales together accounted for 65% of
sales. The breakdown of gross sales for 1993 is shown in Appendix B.
The craft industry
was highly competitive and seasonal in nature. There was a demand
for crafts and ceramics and to capitalize on this demand the number
of annual craft shows had increased over the years. The number of
craftspersons had also increased substantially over the years,
partly due to poor economic times. People who had received pay cuts
or who had been laid off had been making and selling crafts to
supplement their incomes. During poor economic times the sale of
semi-finished products have tended to increase, while during good
economic times the sale of finished products had tended to increase.
Bev considered her
biggest competitor of bisque and finished products to be the flea
markets. The items sold at the flea market were often poor quality
but consumers did not generally recognize and appreciate quality.
There were other businesses similar to her own but she did not
regard them as direct competition because they were not located in
the vicinity. As well, there were so many ceramic products that no
one business could carry everything. Ceramic based businesses
frequently referred customers to one another. Customers were willing
to travel to obtain the particular item they wanted but they were
not willing to travel for firing.
In addition two
ceramics companies, one in the nearby community of Dartmouth and one
in the Annapolis Valley, produced bisque in quantity for a lower
price but these companies only carried a narrow line of products.
considered by many artists to be a "borderline craft". Some artists
argued that there was no originality unless the craftsperson was
involved in making her/his own moulds. Ceramics could have been
crafted with or without challenge and originality. In Bevís opinion,
ceramics could have been compared to an artistís canvas. The talent
of the ceramics artists would have been evident in how the ceramics
were cleaned, painted and finished just as the talent of a painter
would have been evident from the painting on the canvas.
Unfortunately, as with other craft\art forms, consumers did not
always recognize quality.
manufacturing process begins with mixing the liquid clay or slip and
pouring it into plaster moulds (day 1). This is left to set until
the item can support itself at which time it is removed from the
mould. The item is left to dry for two to three days depending on
its size. At this stage the product is known as " greenware" . The
greenware is rough and must be cleaned, sanded and washed to remove
imperfections, such as seams where the two halves are joined. After
cleaning, the greenware may be fired (day 4). The firing takes a
full day. After cleaning and firing the product is known as
"bisque". Various surfacing techniques, such as painting or glazing,
may then be applied to the bisque on the next day (day 5). If the
bisque has been glazed, then it is fired once more (day 6). The
finished product is ready for sale approximately five or six days
from the time the liquid clay is poured. This process is outlined in
Each kiln can fire
many items at once depending on the size of the item. The small kiln
is 2.9 cubic feet with a capacity for 27 kg. of product while the
large kiln is 5 cubic feet in size with a capacity for 55
The moulds must be
left to dry between pours. If a mould is used to pour one day then
it should stand for two days to dry. A mould can be used to pour up
to three small units or one large unit each pouring day. Gradually,
as moulds are used, their fine detail becomes less evident. Bev
estimated, on average, a mould was good for approximately 100 pours.
When moulds no longer met Bevís specifications for detail, they were
sold for an insignificant amount to ceramic
Although Bev enjoyed
all aspects of producing ceramics, the fine dust from sanding and
cleaning greenware bothered her eyes. She tended to leave the fine
detailed painting to her daughters because her eyesight was not
sharp enough for fine, detailed work.
The pricing of
products was very important. The demand for the products depended to
a large extent on the price, that was, demand was elastic. Bev tried
to set a price that would have sold her products quickly but she
also wanted to ensure the price would have recovered her costs and
provided a reasonable return to the business.
Recently Bev noticed
cherubs, in bisque form, being sold at a craft store at a price that
would have covered not much more than her cost of materials. She
considered offering to supply the craft store with these items at a
comparable price but decided it was not worth her
Bev believed that
her pricing policy was appropriate and that she priced her products
in accordance with the market. Most supplies, including clay or
slip, were grossed up by 80% of cost. Cost included delivery and
GST. Ceramics were priced based on the price of the mould which was
one of the methods suggested in some ceramics literature. Greenware
was priced at 10% of the cost of the mould (including shipping and
GST). The 10% was based on recovering the cost of the mould over 10
pours. Pricing of bisque and finished items was based on the
greenware price. Bisque that had been cleaned by the customer was
priced at 140% of the greenware price whereas shop cleaned bisque
was 200% of the greenware price. Finished, unglazed products were
priced at 300% while finished, glazed products were priced at 400%
of the greenware price.
For example, if a
mould cost $100 then the product prices at various stages of
completion would have been as follows: