Agri-tech Case Analysis

Topics: Marketing, Generally Accepted Accounting Principles, Variable cost Pages: 6 (1166 words) Published: September 24, 2013
On October 12, 1989, Dr. Renato Melgar of the Institute of Biotechnology of an Agricultural College located in Northern Luzon approached the Agri-tech Products Company for the production and marketing of Rapidgrow. Agri-tech is a firm that specializes in the production and marketing of Rapidgrow. Rapidgrow is a biotechnology product developed by the faculty institute. It is a soil treatment in pellet form (1/4 of an inch long) which increases the growth rates of two trees species commonly used in reforestation in Asian Countries by 30-70% in a span of six to eighteen months. Survival rates of the trees are expected to double from the usual 40% to 80-83%. A simple treatment for seedlings with this can substitute for the 50-70% fertilizer requirements for these species. Agri-tech normally enters into royalty agreements with inventors and scientists for new product developed by them. They were paid based on gross sales (2%) or net profit (10%). Dr. Melgar asking for 340,000 pesos payable upon signing of the contract and royalties based on given sales. But unfortunately, Rapidgrow will require a new machine for pellet production costing $35,000, no tariffs and taxes will be paid related to the importation of the machine. This Rapidgrow is really needed by now by most of the agri-businesses not only on our local market but also domestic market where they can get more income and profits. They have those potential buyers like Timber Licenses which will plant trees for approximately 3,326 hectares annually. Also, the Department of Environment and Natural Resources (DENR) which will plant trees with approximate area of 4,677 hectares per year. Other Private Institutes will also probably acquire their products; they will plant in approximate area of 18,710 hectares per year. The foreign Assisted Project is also their expected customer. They have also the foreign market which has 1.5 million hectares per year, Indonesia, Thailand, and Malaysia. The product direct cost is estimated at 0.0028 pesos per tablet, 0.026 for materials and 0.0028 for labor. The machine to be used will require only one operator.

The Owner of the Agri-Tech Products Company is the one who is responsible for the final recommendation. He is the one to decide whether or not they will accept the proposal of Mr. Melgar for acquiring new machine or subcontracting the product Rapidgrow.

October 12, 1989

Should the Agri-Tech Products Company accept the proposal of Dr. Melgar to produce and market Rapidgrow?

To accept the proposal of Dr. Melgar to produce and market Rapidgrow. To purchase new equipment or machine to be use for pellet production. To supply the potential buyers of Rapidgrow.
To create a profitable market for the Rapidgrow.

• Strengths
1. They have a unique product.
2. Rapidgrow can increase the growth rates of two tree species. 3. The survival rates of the trees are expected to double from the usual 40 percent to 80-85 percent because of the Rapidgrow. 4. Rapidgrow can substitute for the 50-70% fertilizer requirements. 5. No tariffs and taxes will be paid related to the importation of the machine if the product is registered with the Board of Investments as exportable. • Weaknesses

1. The acquirement of new machine and equipment will be costly. 2. If they will accept the proposal of Dr. Melgar, their laborers don’t have enough knowledge in operating the new machine that will use in the production of the product. • Opportunities

1. The Rapidgrow has potential buyers.
2. They can supply the foreign market.
3. Many of the agricultural businesses by now needed the product. 4. Their product is commonly used by the Asian Countries.
• Threats
1. Impulsive conditions that can lower the fertilizer utilization. 2. Unsteady economic status.


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