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Aaron TroyerAaron TroyerMarisa Zansler Marisa Zansler
2001 AAEA 2001 AAEA Case Study Case Study CompetitionCompetition
Food & Food & Resource Resource Economics Economics Dept.Dept.
XS Inc.com XS Inc.com “Redefining Agricultural Input “Redefining Agricultural Input
Supply”Supply”
XS Ag.comXS Ag.com Website designed to enable producers, Website designed to enable producers,
dealers, and manufacturers to trade dealers, and manufacturers to trade agricultural seed, chemicals, fertilizer, agricultural seed, chemicals, fertilizer, etc.etc.
NterlineNterline Combines the traditional agricultural Combines the traditional agricultural
input distribution system with up to input distribution system with up to date technology that streamlines the date technology that streamlines the supply chainsupply chain
Problem Problem StatementStatement
XS Inc.com must XS Inc.com must
consider a consider a marketingmarketing
strategy designed tostrategy designed to
meet its challenges meet its challenges andand
allow profitableallow profitable
operation in the operation in the futurefuture
?
Mar
ketin
g Pl
an
XS Inc.com: ChallengesXS Inc.com: Challenges
CompetitionCompetition
Supply Chain Supply Chain InefficienciesInefficiencies
Market ReadinessMarket Readiness
XS Inc. Internal ForcesXS Inc. Internal Forces
Core StrengthsCore Strengths Lower Input PricesLower Input Prices 24 hour availability24 hour availability Fills Supply Fills Supply
Efficiency needEfficiency need Allows for better Allows for better
price transparencyprice transparency Customer data Customer data
managementmanagement
Company Company WeaknessesWeaknesses Internet Only Internet Only
AccessAccess ServiceService ““Return ability”Return ability” Delivery TimeDelivery Time No Personal No Personal
RelationshipsRelationships
XSInc. External ForcesXSInc. External Forces
OpportunitiesOpportunities Participates in Participates in
large marketlarge market Internet market is Internet market is
growinggrowing Access growers Access growers
around US in one around US in one locationlocation
Nterline is open Nterline is open platformplatform
PressuresPressures Traditional markets Traditional markets
turning e-friendlyturning e-friendly Strong service from Strong service from
traditionalstraditionals Many online ag Many online ag
servicesservices Compete directly Compete directly
with manufacturers, with manufacturers, distributors, and distributors, and retailers.retailers.
XS Ag.com Market XS Ag.com Market SegmentationSegmentation
Total U.S. Farms Inputs
188.5 Billion
Chemical Sales & Application
8.48 Billion
Seeds & Plants
7.35 Billion
Machine Parts & Repairs
3.58 Billion
Animal Health
2.26 Billion
Other Ag Inputs
166.88
0
10
20
30
40
50
60
1998 1999 2000
Percent of FarmsLand in Farms
Source: Farms and Lands in Farms, Agricultural Statistics Board, NASS, USDA February 2001
Percent of Farms and Land in Farms:
By Economic Sales, U.S., 1998-2000Farms Reporting Greater Than $100K
AlternativesAlternatives
Continue on current courseContinue on current course
Address issues of XSag.com and Address issues of XSag.com and Nterline pricing and positioningNterline pricing and positioning
Drop either two linesDrop either two lines
XSag.com XSag.com ImplementationImplementation
Redefine the target marketRedefine the target market
Launch a phone service for Launch a phone service for
producersproducers
Add enticing information to websiteAdd enticing information to website
Increase customer service Increase customer service
availabilityavailability
XSag.com: The TargetXSag.com: The Target
Focus the target to specific usersFocus the target to specific users
Promote planning Promote planning
Advertise use for specific cropsAdvertise use for specific crops
Target mid-revenue not acreageTarget mid-revenue not acreage
Target By RegionTarget By Region
Mid revenue firm Mid revenue firm size by regionsize by region
Add New Telephone Add New Telephone ServiceService
Hire or contract new telephone Hire or contract new telephone customer servicecustomer service Allow for orders over the phoneAllow for orders over the phone Can provide price information Can provide price information Access potential new clientsAccess potential new clients Fits with the traditional method of Fits with the traditional method of
communicationcommunication
Expand Informational Expand Informational ServicesServices
65% of growers with access to the 65% of growers with access to the internet use it to find informationinternet use it to find information Add news and weatherAdd news and weather Crop informationCrop information New products availableNew products available Commodity Prices and OutlooksCommodity Prices and Outlooks
Launch Promotional Launch Promotional CampaignCampaign
Advertising: @Agriculture online Advertising: @Agriculture online and in and in Successful FarmingSuccessful Farming Promote PricePromote Price New Telephone Order ServiceNew Telephone Order Service 800 number to access XS ag 800 number to access XS ag
Establish Establish Customer Customer LoyaltyLoyalty
Pinpoint Most Pinpoint Most Likely UsersLikely Users
Addressing the Addressing the needs expressed needs expressed by the end-userby the end-user
More capital More capital riskrisk
Returns are Returns are somewhat somewhat unknownunknown
EvaluationEvaluation
PROSPROS CONSCONS
Revenues And Costs Revenues And Costs XSag.comXSag.com
Expected 2001 Expected 2001 Revenues 1.44 Revenues 1.44 million from million from XSag.comXSag.com
Base costs on Ag Base costs on Ag
Services Services
Powerfarm.comPowerfarm.com
They lost .03/share They lost .03/share
or $164,000 dollarsor $164,000 dollars
XS ag Costs then XS ag Costs then
could range +/- 20%could range +/- 20%
XSag.com Anticipated XSag.com Anticipated 2002 Financial Data2002 Financial Data
20012001 20022002
Revenues Revenues $1.44 $1.44 $2.88 + $2.88 + $.600$.600
CostsCosts $1.43 - $1.43 - $2.05$2.05
$2.11-$2.11-$2.83$2.83
Marketing Marketing PlanPlan
ROIROI
22.5%22.5%
Profit or Profit or (Loss)(Loss)
$.01 – $$.01 – $(.61)(.61)
$1.37 - $1.37 - $.65$.65Dollars are in millionsDollars are in millions
Nterline EvaluationNterline Evaluation
Core Core competencycompetency Software that Software that
anticipates and anticipates and analyzes demand analyzes demand for ag inputsfor ag inputs
Open systemOpen system Coordinates Coordinates
different users different users along different along different points in the points in the supply chainsupply chain
ChallengesChallenges Competition Competition
from large from large traditionalstraditionals
Many large Many large distributors distributors already use some already use some form of ASPform of ASP
Must be Must be compatible with compatible with all usersall users
ASP Market SizeASP Market SizeRevs Revs (M)(M)
PercentaPercentagege
USiUSi $110$110 7.77.7
QwestQwest $100$100 77
InterliantInterliant $52$52 3.63.6
PeopleSoftPeopleSoft $40$40 2.82.8
CorioCorio $33.5$33.5 2.32.3
eOnlineeOnline $25$25 1.71.7
Breakaway Sol.Breakaway Sol. $20$20 1.41.4
AgileraAgilera $20$20 1.41.4
SurebridgeSurebridge $17$17 1.21.2
TelecomputingTelecomputing $11$11 0.80.8
Source: Gartner Group May, 2001
Nterline PricingNterline Pricing
Should be based on the level of Should be based on the level of service providedservice provided Three levels of serviceThree levels of service CustomizedCustomized
Must be competitive with other Must be competitive with other available ASPavailable ASP
Must save customers money Must save customers money
Three Levels of ServiceThree Levels of Service
First Level provides transactional First Level provides transactional assistance throughout supply assistance throughout supply chainchain
Second Level available provides Second Level available provides the first plus customer data tools the first plus customer data tools and regional anonymous dataand regional anonymous data
Third level includes both 1 and 2 Third level includes both 1 and 2 plus and website integration.plus and website integration.
Nterline PricingNterline Pricing
Each level adds additional service, Each level adds additional service, thus additional pricethus additional price First level $2,000 per quarter plus First level $2,000 per quarter plus
transactional feestransactional fees Second level $3,000 per quarter plus Second level $3,000 per quarter plus
transactional feestransactional fees Third level $4,000 per quarter plus Third level $4,000 per quarter plus
transactional fees plus website transactional fees plus website maintenancemaintenance
Nterline FinancialsNterline Financials
Cost associated with the development Cost associated with the development of Nterlineof Nterline $5.0 million + .5M to promote and service$5.0 million + .5M to promote and service
Long term approachLong term approach Target smaller to midsize firms and Target smaller to midsize firms and
Co-OpsCo-Ops Set a goal of 125 customers in the first Set a goal of 125 customers in the first
yearyear Yields revenue of 1.5 million Yields revenue of 1.5 million
ConclusionConclusion Chose to continue development of Chose to continue development of
both Nterline and XSag.comboth Nterline and XSag.com Nterline Nterline
profitable after 2 yearsprofitable after 2 years Investment recovered after 6 yearsInvestment recovered after 6 years
XS ag restructured:XS ag restructured: Fits end-user needsFits end-user needs Increases service and supportIncreases service and support