Case Analysis----Optical Distortions, Inc.
MKT6301 MARKETING MANAGEMENT
Expected Value to Famers
Reduced cost due to feed (For 1/2 feet)
Cost per pound: 158/2000=0.079 $/pound
Saving per year per bird: 156/20000*1/2*0.079*365=$0.1125
Saving on egg production
Loss one egg 5 months: loss of egg per hen a year is 2.4
Cost per dozen: $0.50
Saving per hen per year: 0.50*2.4/12=$0.099
Reduced cost due to mortality
Cost of mortality with debeaking 2.4*9%=$0.216
Cost of mortality with ODI lenses 2.3%*4.5%=$0.108
Saving per hen: $0.108
Total saving by using ODI lenses compared to debeaking: 0.1125+0.099+0.108=$0.319 Because farmers won’t accept this price of $0.319, and the expected value to farmers is: 0.319-0.08=$0.239
Value Sensitivity to Assumptions
As we see in this case, the value of the lenses is 20$ per 3 boxes of 250 pair or 0.08$ per pair, it includes cost as follows: Payment for NW
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| Let’s see how sensitive this value is to assumptions made. Assumption: the value of the lenses, which is 20$ per 3 boxes of 250 pair or 0.08$ per pair. If factor inventory increases, according to Little’s law: Inventory=Flow rate * Flow time, it means the though rate declines, inventory turnover declines, so the fixed cost will increase. If the number of sales increases, which means the inventory turnover, is fast and cycle time is short, in the end, the company will make profit. If the cost of Ad increases, it means fixed cost goes up. In the market, if Ad has a positive effect on the selling, with the net margin increasing, the cost of the lenses will decline relatively. To these assumptions, there are many reasons towards these assumptions go wrong; we can put these parts as follows: 1. Population and its composition. This factor is related to the number of size of poultry industry. Theoretically speaking, if the number of customer goes up, the lens company can get more profit. 2. Income level. In marketing environment, consumer demand is not only depend on consumption desire but also rely on income level. Therefore, income level and its growth rate to the lens market demand and the structure of the population variation play a decisive role there. 3. Commodity prices. In the same purchasing power circumstances, if the price of lens goes up, which means that the same amount of money can buy fewer goods; on the other hand, a product or the price change also can cause the transfer of purchasing power, so that the market demand structure will change. 4. Goods supply condition change. The supply of lens change, the emergence of new products, and the quality of lens changes, etc., can cause commodity demand increased or decreased, so the purchasing power transfers between in the commodity. 5. Political law and change of the demand idea. During economic interval, the change of the economic development trend, development scale, increasing speed and so on can affect purchasing power and demand of the lens market.
Strengths: (easy to penetrate)
1 For Company:
(1) The Optical Distortion Inc. owns the patent and license protection. (2) They obtain a long-term license from New world for the exclusive use of hydrophilic polymer for nonhuman applications. 2 For Product:
(1) The lenses can reduce 4.5% of flock mortality compare to debeaking. (2) It can reduce cannibalization, less trauma, and greater feeding efficiency. (3) It can save time and reduce labor cost.
Weaknesses: (difficult to penetrate)
1 For Company:
(1) Their assets, managerial and financial resources are limited. (2) They lack of intensive sales and technical coverage.
2 For Product:
(1) The lenses cannot be reused.
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