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Management of Innovations and Entrepreneurship

Management of Innovations and Entrepreneurship. Malin Brännback Spring 2004. In Keeping a Company Entrepreneurial, Remember. One the greatest pains to human nature is the pain of a new idea. - Walter Bagehot. Keeping a Company Entrepreneurial.

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Management of Innovations and Entrepreneurship

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  1. Management of Innovations and Entrepreneurship Malin Brännback Spring 2004

  2. In Keeping a Company Entrepreneurial, Remember One the greatest pains to human nature is the pain of a new idea. - Walter Bagehot

  3. Keeping a Company Entrepreneurial Thus you have to make identifying and capturing opportunities a joyous and fulfilling experience. - Dodge Morgan

  4. The setting • Four drivers: • A story that need to be tended to • The business opportunity • The opportunity to change animal husbandry, generate savings, impact more than just Randy • Glory...a dream to go to history as having done something

  5. Market Segment US World Market Table Eggs 240 1,200 Broilers 4,000 16,000 Brooders 32 128 Total 4,272 17,328 Annual Chicken Turnover in Millions of Birds Chicken population annual growth 6-12 percent Egg production decline 1% per year

  6. The Process • Start laying eggs at the age of 18 weeks • Lay their first eggs in the spring • Farmers have to trick the hen into thinking it’s spring • The amount of light during the day= spring

  7. The Economics A 20 week old hen $2.50 Feed cost/dozen eggs $0.28 other production costs $0.06 depreciation $0.12 -------- $0.46 Total production costs/dozen eggs $0.52 The weighted average income/ dozen eggs $0.53 Not much profit

  8. Problems with red light: • it has to be entirely in the red range (5300-6800 Ångström) – if it spills into blue or green – ineffective • the building has to be closed – which is not the case in the largest egg producing states; CA,GA, Fl, Tx, Ol. • Red light takes more energy than white light since 90% of the white light is screened out. Costs for light and ventialtion is thus required! • Hard for workers to constantly adjust their eyes while entering and leaving the closed houses

  9. Previous Attempt • 1963 – Vision Control Inc. started by Al Schriner and Irv Wise, closed after a few months • late 1960’s&early 1970’s a second attempt – no luck • 1969 – a patent for contact lenses for chickens, patent expired • 1973-1974 – third attempt by Randy Wise...no luck here either

  10. Fourth Attempt • In 1984 – Randy Wise, Al Leighton (Univeristy of Virginia Polytechnic) started working on the lenses • Victor Cota and George Daniels of Omicron joined the in the efforts • Can we manufacture these lenses and if so at what price? • 15 cents was seen as the rigth sales price – 15-20 perhaps – collective gut feeling • Built a mold enabling production of 775,000 pair a month • Patens are important – filed in oct. 1987

  11. The Team • Randy Wise, Professor • Al Leighton, Professor • Carl Johnson, VP sales • Bill Erickson, VP marketing • Diane Porter, Director of Administration and Secretary-Treasurer

  12. The Market • Relatively few potential customer; 200-250 egg raising ranches represent 80% of the US market • 700-1,000 cover 80% of the market overseas • Turkeys, pigs, and ducks all of which exhibit aggressive behaviour when raised under commercial conditions

  13. Market Strategy • Economic savings from reduced mortality, reduced feed consumption, and more eggs • No other value • No competiton against other products

  14. Economic justification to the farmers Decreased mortality $0.10 Decreased feed consumption $0.26 Increase in egg production $0.32 $ 0.68 Cost of a pair ABL-1 lenses $-0.15 Cost of insertion $-0.15 --------- Total $0.48 Cost of a Chicken $2.50 Chickens increase in egg production from 1%-3% or 4%

  15. Market Strategy • Advertise their product in 2 or 3 main poultry digests for exposure • Send a trial kit to larger farms containing ten pairs, a booklet about the company and a short video showing how the product is used and how to insert the lenses • Sales force to convince the larger ranches to do trials on 1,000 chickens

  16. Finance Needed & Preparation • In 1988 a limited offering memorandum for raising $300,000-$420,000 • What about the reasons for raising money?

  17. Part I 2and 3 • What recommendations would you make to improve any of the above? • Would you invest in this company in late august 1988 at $30 per share?

  18. Part II • What have they learned from their first three months of operations? Should their problems have been forseen? Why or why not? • What does this all mean for their financial plans? • What should they do now? • Marketing • Finance • Operations • What do you think will happen next? • Would you invest in this company in late october 1988 at $30 per share

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