Optical Distortions (ODI) is a start up with limited resources and a product that can change the egg production business. Its product, contact lenses for chickens, would reduce the vision of the hen and achieve two desirable results in the behavior of the chicken. These behaviors include reduction in cannibalism and reduction in amount of food required for chicken. And as a further result, the reduction in cannibalism rate removed the need to debeak the birds, which adds further economic value to the farmers. These benefits far outstrip the costs of the contact lenses themselves. And for ODI, there are definitely profits to be had if the products can be marketed well before the competitors can enter the market in a few years. Therefore, ODI should introduce their product according to my analysis below.
The issue ODI is facing is that it currently has no revenue flow. And to stay competitive in the industry, ODI is estimating it will have large expenses coming up quickly to grow quickly enough to stay viable. Therefore, ODI must capitalize as soon as possible. Also, on the consumer front, the product is completely unknown to its customers. It will face a slightly uphill battle to convince potential customers that its product is better than the other more “conventional” methods provided by other vendors in the poultry egg production industry. On the competitor side, ODI has little breathing room. It expects that the competitors can be kept out of the market for at most two to three years thanks to patents and licenses that ODI currently holds. And ODI believes that competitors will likely try to enter the market as soon as possible because of the potential impact that the lenses hold on the egg production industry. Thankfully, ODI’s collaborator, New World, has entered into an exclusive contract with ODI on the non-human use of hydrophilic polymer. Given the general market information, we need more detailed understanding of the current market to determine a strategy for ODI. 1. How big is the market for ODI chicken lenses?
First, we must determine the market size of the ODI’s contact lenses. According to information provided by Garrison, that ODI can only profitably sell to a farm if that farm had at least 10,000 chickens in its flock. As our first target market, California, we must determine the number of farms and chickens in farms with more than 10,000 chickens. We are shown the distribution of farms in Exhibit 3. However, we are only shown break outs of farms with 20,000 more chickens. We can still use this information, because farms with just over 10,000 chickens is barely profitable, so we can concentrate on them later on in the process as ODI’s product becomes more mature. Hence, there are 521 farms with 20,000 hens or more, with 39,929,680 million chickens. (Please note that this is approximately 86.4% of all chicken in California farms.) The market size for ODI’s lenses in California is fairly big at 39,929,680 potential chickens. And nationwide, which will be the eventual target market for ODI, there are 197,970,487 chickens currently. And according exhibit 4, the trend in chicken farming shows that this market will continue to increase for two reasons. First, there is a net growth in the number of birds in flocks. Second, there is a trend for reduction of smaller farms and increase at the medium and large farms. And since we are targeting only medium and large farms, we can expect the number of birds in this market to continue to increase. 2. Who are the potential customers for such a product? Why would they buy it?
Next, we need to identify potential customers for the product. The clear customers are farmers of the egg farms, we will call this the direct to consumer (DTC) market. The farmers would definitely buy the product if they are aware of the cost savings it provides. For each 10,000 chicken, the farmer can expect to see savings of $2,617.60 ignoring the additional costs imposed by the lenses...
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