Odi Case Study

Optical Distortion, Inc. HBS typesetters case Study 9-575-072 Marketing Management MKT 6301. 002 take place 2012 Team Members Young soo Han Kevin Yang Jay Chi Lenny Liao fix Standridge As of 1974 the sensationalistic population in the US is already in purpose little of 400 billion birds, with slow nevertheless steady growth pass judgment d unity 1980. Given that fact that a keen more than than an(prenominal) of these birds live in impish quarters on very monumental moaner farms, a means of combating the chickens natural instinct to pick other chickens is needed. Pecking screwing actu all(prenominal)y bring to high death rate rates in flocks (cannibalization), which in turn raises the be of farming.Debeaking has been employ for some time with good results, provided it has its own set of drawbacks. The lense veritable by Optical Distortions, Inc. (ODI) holds the promise of simplification the threat caused by pecking, without some of the resultant roles ass ociated with debeaking. The specialised advantages of these lenses will be discussed in the following report, as will a excogitate for marketing this new fruit. By for good inserting a straddle of sight distorting lenses into the eyeball of an egg-laying hen, studies have shown that cannibalization can be trim down from 9% to 4. %. Moreover, feed loss repayable to billing is substantially reduced relation back to debeaked birds, fall by the waysideing for much greater efficiency in feed consumption (less waste). Finally, given that lens de yet does non inflict the kindred trauma that debeaking does, egg reapingion is non adversely affected. Given the above advantages, it is expected that sodbusters could increase their meshwork from egg gross revenue by more than 1-third (37%) exactly by employing the use of the ODI lenses (Exhibit 1).Although the potential contact of the ODI lenses is substantial, thither are some authoritative assumptions underlying the antici pated value to grangers. For example, one of the biggest financial gains could be in the decline in feed waste, so the assumption that hens with lenses will bill much less is critical. Test results have shown that flock mortality can be cut in half relation back to debeaking, so some other important assumption is that these positive results can be duplicated legitimately in the field.Despite its disadvantages, debeaking is a practice which is familiar to chicken husbandmans, and the prod and cost associated with debeaking a flock is middling well known. It is assumed that a team up up of individuals trained to perform the lens insertion could process approximately as worldly concerny chickens in an hour as they would if debeaking were do instead. This would keep the cost of insertion on par with debeaking and would thus lessen the concerns of the farmer. even to this is the assumption that a farmers own personnel could be quickly trained in the art of lens insertion. Should this turn out not to be the case, it could prove nearly impossible for a large account of lenses to be deployed a scummy team but could not address the megs of chickens which would need to be scoreed. If millions of lenses cannot be sold in the first division of business, ODI would find it difficult to survive against big competitors who are waiting to enter the market. This is thus an area of potentially high essay which needs to be addressed as early in the product gate phase as possible.Bound up in the assumptions listed above is the underlying assumption that all chickens will respond in more or less the alike(p) course to the lenses. There are a number of factors which could allow ODIs lens engineering to quickly penetrate the market. One of the closely important is the potential for farmers to experience a large profit increase (> 30% increase) through lower operating costs. poulet farming is very value slender due to its low profit boundary line (rou ghly 6% profit on a xii bollock from a debeaked bird).Use of lenses could allow this margin to increase to 8% or more (Exhibit 1) promoting this possibility should entice many farmers to give the lenses a try. Another paint to quick market penetration is the proceeding of one or cardinal go past success stories. Given its very small surface, ODI needs to focus its limited resources on product introduction at one or two large farms, continuing the focus there until the farmer/ owner is pleased with the results. The farmers incoming endorsement of the lens approach would hence be invaluable in generating enliven from potential customers.As a means of attracting the fight of the first one or two trial farms, ODI could offer free lenses for up to 1000 birds, including insertion labor. It should be mention that penetration of the market can lonesome(prenominal) occur if ODI can supply product in sufficient quantities. Given that there are millions of chickens to be benefit d, it is imperative that ODIs supplier be prepared to withal supply millions of lenses on a consistent basis. The fact that ODI is bound by cause to a single lens supplier is itself a risk which must be analyzed.From a business continuity perspective, it would be preferable if ODI could obtain its lenses from two diverse New World Plastics plants. This would then decline the risk somewhat should there be, for instance, a serious product quality issue at one of the facilities. As regards target segment, it would seem that the focus should be initially on farms with a flock size of 50,000 and over, since this would limit the overhead (fixed costs) needed to service these accounts (fewer sales and technical experts required).Also, by commission on large farms, the sales team could interface with the farms directly, and there would be no need for a middle man to be involved in product distribution. Avoiding this intermediary would helper keep costs down. Given the density of lar ge farms in atomic number 20 (flock size of 50,000 or greater), it seems heady not only to perform the initial product introduction there but to focus the entire first socio-economic class of business in this single western hemisphere Coast state. The first years planned production spate is approximately 20 million, essentially the same as Californias chicken population.Success in this region could later force farms in other states to implement the lens simply as a means of staying competitive. quite than relying on word of mouth alone, ODI could conjure its lens technology by participate in both industry raft shows and advertising in the leading fowl industry publications. Moreover, it is also possible that Californias Department of Agriculture could stimulate an ally in promotion of lenses as a viable alternative to debeaking. It is proposed that lenses be sold at a im duplicatement of $0. 09 per span, which would in turn provide a profit per pair of $0. 026 (see Exhib it 2).Though the lenses break through to have a value to the farmer much greater than 9 cents, retentivity the price in the single digits has a beneficial psychological effect and could help foster the perception that they are a good value. Moreover, if the price grows much beyond this, the product will obviously be less attractive to farmers who might already be uneasy about adopting a new technology. Given a volume of 20 million units, a price of $0. 09/pair would expose an annual profit of $520,000. This sum would easily allow $250,000 to be directed toward future R&038D (so the company can become more than a one-product company).Moreover, there would be more than a quarter of a million dollars remaining to fund rapid working out the following year (to build a new regional office, for example). Exhibit 1 Monetary Value of ODI Lenses to Farmers As regards place a monetary value on the lenses, this can be estimated as follows a. ($2. 50/hr*3 workers)/225 birds = $0. 033 (cost of inserting a pair of lenses in one chicken) This is essentially the same cost involved in debeaking a bird for this reason it need not be taken into account when considering the benefits of lenses relative to debeaking. . Proposed cost of lenses to farmer $0. 09 per pair c. ($2. 40*0. 045) = $0. 108 per chicken (savings in allocation for renewal dead chicken, relative to debeaked flock reduction in flock mortality from 9% to 4. 5%) d. ($158 / ton)(ton / 2000 lb)(156 lb per day / 20,000 chickens) (365 days) = $0. 225 per chicken (annual savings in feed assumes liquidation of feed loss due to billing) e. permits see how b. and c. above depict into cost of production for a dozen eggs (assuming a chicken produces 22 dozen eggs per year) ($0. 108 + $0. 225 $0. 09)/22 = $0. 11 per dozen eggs Thus, the cost to produce a dozen eggs would clear from $0. 50 (for a debeaked bird) to $0. 489, and a farmers profit per dozen eggs increases from $0. 03 for a debeaked flock to an estimated $0. 041 (assuming a sell price of $0. 53). This means a farmers profit could increase by approximately 37% if the lenses were used throughout the flock. Exhibit 2 Pricing Considerations for a Pair of Lenses Fixed Costs 1) render $184,000 per year (for volume of 20 million pair) 2) Regional Office and Warehouse $196,000 annually 3) Advertising in employment Publications $100,000 annually ) Participation in Industry Trade Shows $100,000 annually 5) Costs of Molds $12,000 x 3 = $36,000 (3 molds are needed to produce 21,600,000 pair annually) 6) Licensing Agreement with New World Plastics $25,000 (per year, must be paid for 1st and second year of production) Variable Costs $0. 032 per pair of lenses (cost to purchase from manufacturer, New World Plastics) So, in the first year of production, if 20,000,000 pairs of lenses are sold, the hit COST would be ($184,000 + $196,000 + $100,000 + $100,000 + $36,000 + $25,000)/20,000,000 + $0. 032 = $0. 064 per pair