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Hydrocan - Commercial Market

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Autor:   •  May 19, 2017  •  Case Study  •  416 Words (2 Pages)  •  16 Views

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Cases Analysis - HydroCan Commercial Market

HydroCan is start-up company which wants to deploy their new, patented product to US and Canada markets. The company is in the situation where they are evaluating all data to determine the most appropriate marketing strategy for deploying new product. The main objectives of the company is to deploy new products to the market and maximize profits and to show profit as soon as possible in order to acquire expansion capital. Thus, they need to show profit as soon as possible.

  • Potential market of 1800 golf courses is growing 4-5% per year and golf courses are usually owned by small entrepreneurs. The expected market value oscillates around 350.000$: (104k+4*300k+800k)/6.
  • Most of specialized manufactures for commercial market are also small companies. Their flexibility to adjust to new prices and technology might be limited. Although part of them are divisions of big companies, which might be able to run a price war and push R&D to gain competitive advantage after the launch of HydroCan product. Although, they also do not spend much on marketing.
  • Golf owners care about costs and ground water pollution but are very loyal to providers. Although they need cost reductions and lower pollution because these starts to limit their business. Their conservative approach towards new suppliers might be broken additionally because of shrinking golf market - constantly decreasing popularity.
  • After analysis of VC and margin, breakeven about 92.000kg which leaves nearly 50% of the production capacity so the rest will be profit and therefore it will be a good decision to market the product.

Establishing solid relations with golf courses owners by offering samples and explaining positive impact on costs and pollutions, might be good positioning and the right launch strategy. These ‘life’ test will prove actual benefits. HydroCan should consider smaller owners at the beginning because of a higher potential to change their supply practices because of growing environmental pressures and needs for cutting the costs. Moreover, the limited production capacity might become a weakness when dealing with big potential customers at the beginning. Because the company needs profits fast, they should not address big companies as it’s harder to influence and change their procurement habits and agreements with other suppliers.

Price (50kg bag)

 $150

Variable costs

 $60

CM

 $90

Yearly

Rental

 $58 333

$700 000

G&A

 $6 683

$80 200

R&D

 $1 721

$20 650

Other

 $1 029

$12 350

Salaries

 $16 667

$200 000

Distribution

 $18 750

$225 000

Sales

 $62 500

$750 000

Total Fixed

 $165 683

 

BE Point units

1840

92000

kg

Potential profit

$158 400

88000

kg

Marketing

$100 000

 

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