TABLE OF CONTENTS
Reasoning Behind the Recommended Actions4
Alternative Action Programs6
Risks and Contingency Plan7
Application of Readings8
The New Business Development division of DSM is faced with the decision of whether it should continue to develop the Stamypor resin. The product is already near the end of the second stage of development. If NBD’s management board approves this product to continue into the third stage, it will require €16 million to be invested for equipment. However, if the Stamypor project is ended, no further expenditures will be required, allowing DSM-NBD to cut its losses and move on.
Stamypor currently faces several problems, in addition to the large amount of money that must be invested for the project to continue. Several direct competitors already have the ability to provide similar products, while indirect competitors have the process technology to also enter this market, if they choose to do so. It is likely that Stamypor will not be able to compete without investing in a new production process. Furthermore, DSM-NBD may have difficulty finding a customer for this product.
For these reasons, it is recommended that the Stamypor project should not continue. By ending this project now, no further money will be wasted on a project that probably has more potential competitors than potential customers. The Stamypor project suffered from a severe lack of analysis at several stages of its development. First, it was a poor idea to purchase a patent and try to create a need for this product. Instead, NBD should first perform research to listen to the voice of the customer, and then develop a product that the customer wants. Furthermore, the stubborn decision to ignore Stamypor’s potential competition has wasted a great deal of DSM’s money. The simple step of performing an NABC analysis would have predicted these problems in advance and would have allowed the money spent on Stamypor to have been invested elsewhere. SITUATION SUMMARY
Dutch State Mines (DSM) Corporation was founded in 1902 and remained in the mining industry until the 1960s, when it was no longer profitable. After several decades of product diversification, DSM created a separate New Business Development (NBD) unit in 1995. The purpose of the NBD was to research and commercialize new technology innovations. A project named Stamypor was taken up by NBD in 1995. Stamypor is a porous polyethylene that can absorb three major types of additives: anti-statics, slip agents, and anti-oxidants (1, p13). The potential customers for this product are the masterbatch producers that mix resin and additives, who subsequently sell this mixture to converters who manufacture the final product (1, p7). Its market segments mainly include crosslinkers, anti-oxidants, surfactants, and other additives (1, Exhibit 15). Stamypor’s introduction would mainly focus upon the European market (1, p11). Stamypor has both direct and indirect competition in this market. Direct competition consists of companies offering similar products, while indirect competition comes from companies that offer processes for mixing resins with additives.
All projects at NBD go through the Stage-Gate process. Each project must meet certain criteria formulated by DSM in order to move through each stage of this process. Stamypor is near the end of the second stage of the Stage-Gate process. However, the management board must decide whether this project should proceed to the third stage. A large amount of money has already been invested into the project, but even more funding would be required in the future. It is therefore imperative to determine if the market potential for Stamypor is large enough to justify these investments (1, p1). - 1 -...