Apex Chemical
Apex is a medium-sized chemical manufacturer with annual sales of $60 million that must make a crucial decision on how to allocate its limited resources. These types of decisions often occur during the S&OP process and are made using product data, market analysis, risk tolerance, culture, and a little bit of luck. However, making long-term investments based on luck is not a business plan I would be comfortable with. Fortunately for the Executives at the Apex Company they can assess potential business models to drive innovation and determine the best avenue for generating recurring and incremental revenue.
Analysis
To help Apex make a decision we must determine where is the money, who has it, how do I get it, how do I repeat getting it, how can I add to it later, and how do I get it faster than anyone else? Compound A-115, a new electrolysis agent, has a potential market of $10MM and seems stable in the near term. This new compound is a technological breakthrough and outperforms every current product in the market. Additionally, the market only contains one competitor who currently dominates the field with a 95% satisfaction rating. This satisfaction rating should not scare Apex since customer satisfaction is based on past history and the case study does not mention if the survey asked customers about their willingness to switch products. If customers agree that A-115 is a superior product and is priced correctly Apex would have to spend some resources marketing their product but could make significant headway if branded correctly. Rigorous marketing could have the additional advantage of highlighting Apex’s plastic oxidizer products which may open new channels for sales. If Apex works hard to get 50% of the market share it would have a potential revenue stream of $5MM of which $1-2MM would need to be spent on marketing expenses leaving a much smaller profit in the short term.
In the long-term Apex would be entering a new market where it will have the
Analysis
To help Apex make a decision we must determine where is the money, who has it, how do I get it, how do I repeat getting it, how can I add to it later, and how do I get it faster than anyone else? Compound A-115, a new electrolysis agent, has a potential market of $10MM and seems stable in the near term. This new compound is a technological breakthrough and outperforms every current product in the market. Additionally, the market only contains one competitor who currently dominates the field with a 95% satisfaction rating. This satisfaction rating should not scare Apex since customer satisfaction is based on past history and the case study does not mention if the survey asked customers about their willingness to switch products. If customers agree that A-115 is a superior product and is priced correctly Apex would have to spend some resources marketing their product but could make significant headway if branded correctly. Rigorous marketing could have the additional advantage of highlighting Apex’s plastic oxidizer products which may open new channels for sales. If Apex works hard to get 50% of the market share it would have a potential revenue stream of $5MM of which $1-2MM would need to be spent on marketing expenses leaving a much smaller profit in the short term.
In the long-term Apex would be entering a new market where it will have the