aaron troyer marisa zansler 2001 aaea case study competition

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Aaron Troyer Aaron Troyer Marisa Zansler Marisa Zansler 2001 AAEA Case 2001 AAEA Case Study Study Competition Competition Food & Food & Resource Resource Economics Economics Dept. Dept.

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UF. Food & Resource Economics Dept. Aaron Troyer Marisa Zansler 2001 AAEA Case Study Competition. XS Inc.com “Redefining Agricultural Input Supply”. XS Ag.com Website designed to enable producers, dealers, and manufacturers to trade agricultural seed, chemicals, fertilizer, etc. - PowerPoint PPT Presentation

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Page 1: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

Aaron TroyerAaron TroyerMarisa Zansler Marisa Zansler

2001 AAEA 2001 AAEA Case Study Case Study CompetitionCompetition

Food & Food & Resource Resource Economics Economics Dept.Dept.

Page 2: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 3: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 4: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

XS Inc.com: ChallengesXS Inc.com: Challenges

CompetitionCompetition

Supply Chain Supply Chain InefficienciesInefficiencies

Market ReadinessMarket Readiness

Page 5: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 6: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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.

Page 7: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 8: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 9: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 10: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 11: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 12: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

Target By RegionTarget By Region

Mid revenue firm Mid revenue firm size by regionsize by region

Page 13: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 14: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 15: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 16: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 17: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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%

Page 18: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 19: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 20: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 21: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 22: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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.

Page 23: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 24: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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

Page 25: Aaron Troyer Marisa Zansler  2001 AAEA Case Study Competition

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