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Strategic Analysis

Strategic Analysis. Hilary Dorr Michelle Mullins. Overview. Summary of Key Industry and Firm Characteristics Summary of SWOT Analysis Strategic Alternatives Considered Final Recommendation. Background on eMERGE. 1994 —eMERGE Interactive incorporated as eMERGE Vision

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Strategic Analysis

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  1. Strategic Analysis Hilary Dorr Michelle Mullins

  2. Overview • Summary of Key Industry and Firm Characteristics • Summary of SWOT Analysis • Strategic Alternatives Considered • Final Recommendation

  3. Background on eMERGE • 1994—eMERGE Interactive incorporated as eMERGE Vision • Developed image and infrared thermography systems for maritime use • 1999—IPO, high stock price, initial offering 8 M shares • Fall 2001— Sold many non-profitable company operations • August 2001—New mngmt. team, significant exp. in cattle industry. • 2002 – New product launch • 2004 – Sold PCC • 2005—Two business units • 2005— Company has been operating in the red since IPO • Huge stock price fluctuations.

  4. Case Study Objectives • How does eMERGE stay afloat until the market is ready? • What can eMERGE do to increase the adoption rate of their new technologies?

  5. Industry Overview • eMERGE Interactive operates in two distinct industries: • Animal Information Management Industry • CattleLog: Animal Information Management System • Provides a management system for the livestock as well as traceability if there were a food safety issue. • Visual Diagnostic Technology Industry • VerifEYE: Detects organic contamination on several surfaces • VerifEYE has many other applications, not just in the realm of food safety.

  6. Firm Financial Analysis COGS = Approx 32% of Net Sales Combined SGA and R&D = Approx 760% of Net Sales Implies eMERGE Cost Structure = High Fixed Costs, Low Variable Costs

  7. SWOT Analysis:CattleLog Pro

  8. SWOT Analysis:VerifEYE

  9. General Strategies to Increase Net Income

  10. Increase Volume of CattleLog Sold

  11. Increase Volume of VerifEYE Sold

  12. Final Recommendations • QUESTION: How does eMERGE stay afloat until the market is ready? • ANSWER: Limit operational expenditures to net sales • Best achieved by increasing net sales • QUESTION: What can eMERGE do to increase the adoption rate of their new technologies? • ANSWER: • Reposition investment among products • Increase volume of VerifyEYE Solo and Hand Hygiene System • Licensing Agreement with Unilever

  13. Economics Behind the Unilever Strategy At high prices, volume is low Lower the price and increase volume sold Move along AFC curve providing lower company fixed costs

  14. Final Strategy Recommendation • Increase volume of VerifEYE products sold through a licensing agreement with Unilever

  15. SWOT: eMERGE Strengths Utilized • Good reputation among consumer base • Patented Technology – possible marketing monopoly • Many Potential Applications • Alliances with major global distributors

  16. SWOT: eMERGE Weaknesses Addressed • Poor financial health • Consumer’s purchase price can be large – high cost of product (CIS, possible hand wash system) • Lack of Brand Recognition

  17. SWOT: eMERGE Capitalized Opportunities • Increased food safety movement (Bioterrorism) • Unfulfilled customer need • Wide variety of buyers • Global market expansion

  18. SWOT: eMERGE Threats Addressed • Gap in the Technology Adoption Curve • Cost of R&D

  19. Plan of Action • Short term: 1 year • Form licensing agreement with Unilever • Market Hand Hygiene System and Solo to food service industry • Medium term: 2-5 years • Branch into other industries such as medical, education and child care

  20. Conclusions • The products that will see eMERGE to a future of net profit are predominantly the VerifEYE products. • eMERGE should maintain the current quality of the CattleLog Pro and work closely with the industry and government on the NAIS mandate

  21. Sources • Copeland, Tom et al. Valuation: Measuring and Managing the Value of Companies, 3rd ed. Wiley Publishing, 2000. • eMerge Interactive, http://www.emergeinteractive.com/. Accessed July 20, 2005. • Golan, Elise, et al. Food Safety Innovation in the United States: Evidence from the Meat Industry. Agricultural Economic Report Number 831. April 2004. • Gremaud, Michael. Personal Interview. July 18 2005. • Mays, Don. Personal Interview. July 14, 2005. • Oster, Sharon. Modern Competitive Analysis, 3rd ed. Oxford University Press, 1999.

  22. Thank you from Mizzou!

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