Odysseus Case Study from Global Marketing Management by Keegen
Odysseus is a medium sized firm, relatively new to international business in terms of how to operate outside of its local market where it has been successful by being able to build a niche with its coupling and clutch products.
Key Facts:
Product
• 8 products with 600 sizes and types – small batches of orders (not mass production)
• Patents across the globe
Sales
• Odysseus Flexible coupling product - 33% of sales revenue, total from $83.8 M in 1990
• Largest customer only less than 4% of revenue – sales is highly spread out
• Export Sales @ $1.3M at a profit of 12% (0.61 M)
International expansion
• Siren in UK o 15 year license o 1.5% royalty – $ 0.12 M and rise to $0.61 M in 1991 o Broad geographic coverage rights plus non-exclusive outside UK
• Scylla, S.A. in France o 10 year license o 1.5% royalty - $ 0.03 M and $ 0.06 M in 1991 o Exclusive in France and non-exclusive in Belgium
• JV with Scylla, S.A o Name change to SOSA o 60/40 equity split with Odysseus funding the startup costs at $0.64 M o Market opportunity in France of $8.7 M for L type coupling alone – capture of 14 % MS of $ 1.2M
• German Acquisition o Halted due to existing long-term license with Siren for the geography o Market opportunity in Germany of $ 14.5M for L type coupling alone o Access to largest marketing Europe
Analysis
• Local production challenge – competitiveness in local market and internationally o Need to diversify into low cost centers o US production – avg cost of a manufacturing worker per hour = 100 index point, was too high, need to review Mexico at only 16 index point (almost 6.25 times cheaper)
• Licensing o Siren’s sales tripled in 5yrs to $ 35.5M – huge growth! o Period of 15years is too long o 1.5% royalty is very low
• Exporting o High tariffs 10% ++ o Hard to compete and transportation is a challenge o Only be able to supply to spare parts market (considerably smaller)
• Pricing o Same pricing model applied to all markets!
Key Facts:
Product
• 8 products with 600 sizes and types – small batches of orders (not mass production)
• Patents across the globe
Sales
• Odysseus Flexible coupling product - 33% of sales revenue, total from $83.8 M in 1990
• Largest customer only less than 4% of revenue – sales is highly spread out
• Export Sales @ $1.3M at a profit of 12% (0.61 M)
International expansion
• Siren in UK o 15 year license o 1.5% royalty – $ 0.12 M and rise to $0.61 M in 1991 o Broad geographic coverage rights plus non-exclusive outside UK
• Scylla, S.A. in France o 10 year license o 1.5% royalty - $ 0.03 M and $ 0.06 M in 1991 o Exclusive in France and non-exclusive in Belgium
• JV with Scylla, S.A o Name change to SOSA o 60/40 equity split with Odysseus funding the startup costs at $0.64 M o Market opportunity in France of $8.7 M for L type coupling alone – capture of 14 % MS of $ 1.2M
• German Acquisition o Halted due to existing long-term license with Siren for the geography o Market opportunity in Germany of $ 14.5M for L type coupling alone o Access to largest marketing Europe
Analysis
• Local production challenge – competitiveness in local market and internationally o Need to diversify into low cost centers o US production – avg cost of a manufacturing worker per hour = 100 index point, was too high, need to review Mexico at only 16 index point (almost 6.25 times cheaper)
• Licensing o Siren’s sales tripled in 5yrs to $ 35.5M – huge growth! o Period of 15years is too long o 1.5% royalty is very low
• Exporting o High tariffs 10% ++ o Hard to compete and transportation is a challenge o Only be able to supply to spare parts market (considerably smaller)
• Pricing o Same pricing model applied to all markets!