The company was formed in response to age opportunity lying due to inefficient practice of debating The process of debating carried a host of problems such as trauma, temporary weight loss, and retardation of egg production. The company had 2 most important assets: United States product patent on the ODD contact lens Company’s contract with New World Plastics.
ODD agreed to pay New World $50000 & to purchase lens exclusively from New World Several technical difficulties were there with the product: Early prototypes did not always remain in the chicken’s eyes Frequently caused ever irritation in the last month of chicken’s 12 month laying life Retention problem was solved by modifying the size of the lens New World sold lenses to ODD at a price of price of $0..
32 Injection mold supplied by ODD to New World at a cost of $12000 each California, North Carolina and, Georgia accounted for 25% of nation’s chickens The number of small farms has been declining at the rate of 25% per year Hierarchical type of social order was established through fighting and pecking Cannibalism was a greater problem when birds were confined in cages Replacing dead bird also disturbed the eek order Debating reduced mortality rate from 25%(in case of full beak) to 9% Debating led Optical Distortion Inc Group 5 Section By Subhuman-Awkward to loss of 1 egg/chicken per 5 months A crew of 3 was used for debating at .
0/hour for 220 chickens per hour Chicken wearing ODD lens had its depth perception reduced to about 12″ ODD lenses claimed to reduce mortality to an average of 4. 5% Trained crew could install the lenses in about 225 chicken per hour at $2. 50/hour The lenses were harder to take out than to put in Food disappearance per 100 birds per day was reduced from 24. 46 pounds when the feed in trough was 2″ deep to 23. 8 at 1″ deep Annual savings amounted to $1 58 Annual cost of west coast regional office and warehouse was $196000,40000 for salesperson and $35000 for technical representative Monthly advertising cost in 8 leading poultry industry publication would cost approximately $100,000 per year Headquarter expenses would rise from 184,000 at 20 million pair to 614,000 at 60 million and 1. 2 million at volume of 20 million pair Salesperson were expected to over at least 80 farms each Investment of at least $250,000 per year in research and development was expected Price per pair of lens was $0. 8 Case Analysis The Three Co’s – Company, Competition, and Customer Founded by Robert D. Garrison, Ronald Olson and James Arnold in 1965. The vision is to become multipurpose, MultiMate company which can provide effective service anywhere in the country. To determine whether ODD can meet its customer needs, we need to do its SOOT Analysis: Although ODD does not face any direct competition as of now but has its competitor s debating process; used to reduce centralization behavior of chickens satisfying the same need.
Despite the fact that the debating process lowers chicken morality caused by cannibalism from 25% to 9%, there are heavy and drastic repercussions for the chickens and farmers, in terms of production and chicken morale. Thus ODD can maintain its monopoly if it is able to capture the market by targeting and influencing the farmers in right direction. Customer The case says that it’s not profitable to sell to small farms having chicken count less than 10000.
There are three segments based on size of farms: Small Farms (10000 or fewer birds) Medium Farms (10000-50000 birds) Large Farms (over 50000 birds) We would now see which segment to target and on what basis: We see that savings per chicken is $0. 401 per year. Savings to different segments: Lens Price Net Savings Annual Savings by Farm Size (# of Chickens) ASK ASK KICK MM 0. 08 $0. 32 $3,210. 91 $16,054. 55 $32,109. 09 $321,090. 91 0. 1 $0. 30 $3,010. 91 $15,054. 55 $30,109. 09 $3,01 ,090. 91 0. 12 $0. 28 $2,810. 91 $14,054. 55 $28,109. 09 0. 15 $0. 25 $2,510. 91 $12,554. 55 $25,109. 9 . 2 $0. 20 $2,010. 91 $10,054. 55 $20,109. 09 $2,01 ,090. 91 We could see that savings is higher for bigger farms. Thus, we would target initially selling to KICK and MM Category where from ODD can obtain maximum market share. The pricing would be on high side to gain maximum contribution. This is supported by the statement given in the case that lowering the price may trigger unfavorable response. Pricing Strategy ODD should go for price which is not too high, not too low. Low price will result in low quality perception in customers’ minds and low contribution margins.
Also ODD being new product, high price can hamper initial sales. Break Even Analysis Fixed Cost Low High Sales for $ KICK Profit Market Share 1691 5641 . 48 31 195079. 09 70 11752136. 75 26 21672771 . 67 9003741 . 81 5 20 16604303. 09 37 6665512. 465 15 12292243. 77 27 4652005. 8 10 8579023. 683 19 Recommendations Based on the calculations, we would recommend pricing at $0. 15 for a pair of lens and targeting large farms with chicken flock size >IOW, because of following reasons: Long term License from New World would expire after few years and ODD can take advantage before that happens.
Also they have advantage of being the first movers and no present competition. Catering to few big farms would require less sales personnel and other expenses than convincing small farmers who have less savings. Big Farmers using modern techniques of poultry would be willing to accept the idea. We could capture the 15% market share even in low penetration scenario. The short term objective of the firm is to earn maximum contribution to support further expansion; if we are able to beat our BEEP Sales, we would be at better position than in case of competitive pricing.
Cite this Optical Distortion Inc
Optical Distortion Inc. (2017, Jul 20). Retrieved from https://graduateway.com/optical-distortion-inc-5270/