Optical Distortion Lenses in Chicken Raising

Introduction

Optical Distortion Inc. is a small new company, not yet in business, with a cash asset of $200,000 and a patent for an innovative new product (the only one) which is a contact lens designed to impair the eyesight of chickens. . These lenses are used instead of debeaking. Lensed chickens are more likely to survive. They also eat more efficiently than debeaked chickens. The key issue facing ODI is "How to market these lenses?". The analysis in this paper provides recommendations for ODI on their marketing and pricing strategy to launch this new product.

Strengths include highly innovative product (main competitive advantages over debeaking arriving into savings from reduced cannibalization, trauma elimination, better feed efficiency, no weight loss and no reduction in egg production, a little bit less costs then debeaking for lense installation), tested with good results for couple of months in California and Oregon farms, without retention problems, trust from venture capital markets, patent and license protection for three years (which keep potential competition far), time plan (introduce in at least one region during Spring 1975 and national distribution by the end of 1997 latest), long-term license from New World Plastic for the exclusive use of hydrophilic polymer for nonhuman applications, marketing strategy (additional service - technical to follow up sales, to make sure that lenses are being used in such a way to maximize benefits to the farmer, sales force ¡V one person for 80 farms and one technical representative for each five salesperson, price - $0.08 $/chicken as incremental cost for farmer; benefits should be explained to farmers; they have two principles in mind not to start with a low cost, expansio...

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... ¡V Break even point

1975

Total Chicken Population 457

Chickens in Farms >10000 chickens 365.6

Penetration Rate 2.18925%

Share of Market 8.00

Cost Analysis (all expenses in 000s)

Total chickens served (millions) 8.00

Headquarter expense 73.64

R &D Expense 250

Advertising expenses 100

Number of regional offices 1

Regional office expenses 196

Number of salespersons * 1

Salespersons expenses 40

Number of technicals 1

Technicals expenses 35

New world licensing 25

Cost of lenses 256.1247

Cost of lenses instalation 266.80

Number of new Injection molds 2

Injection mold expenses 24

Order handl&shipping expenses 13.45

Total Expenses 1280.00

Average cost for a box of 250 lens 39.98

Revenue forecast (all numbers in 000s)

Demand for 250 lens boxes 32

Price per box 40

Total Revenues 1,280.00

Operating Margin 0.00

Price per pair ($) 0.16