Economic ConsiderationCHEMICAL PRODUCT ENGINEERING ASEP MUHAMAD SAMSUDIN

Commodity Product Vs Non-Commodity

Products[how much product is made] [what equipment is

used][which producer makes the most money]

Commodity Products

1. How much is made? Commodities are normally made in quantities greater than 10.000 tons per year.

2. What equipment is used? Commodities are normally manufactured in dedicated equipment which is operated continuously.

3. Which producer makes the most money? As a general rule, the one with the lowest manufacturing cost will be the most profitable.

Non-Commodity Products1. How much is made? While there is a much wider range

for products than for commodities, the volumes are much smaller, and many are made in quantities less than 10 tons per year.

2. What equipment is used? These chemical products tend to be made in generic, off-the-shelf equipment, the operation of which is sometimes not well quantified.

3. Which producer makes the most money? The company perceived as making the most effective product usually makes the most money. As a rule of thumb, the first company to market gains around 70% of total sales.

Economic for Commodities

Hierarchy of Process Design1. Batch vs. continuous2. Input - output structure3. Reactions, including recycles 4. Separations and energy integration

Economic Potensial

1. Estimate the potential based only on the current prices of the product and the raw materials.

2. How much energy we will need to make our product.

3. Estimate the capital required in order to complete this economic précis.

Three sequential test

Capital Requirement

Economic for Non-Commodities

Product's Viability

The important factors determining a product's viability are 1. Its potential life time in the market, 2. The size of that market. 3. The price the product.

The life of non-commodity chem ical products in the market may be limited by 1. The expiry of patent protection. 2. The arrival of a competitor's better product, 3. Changes in fashion.

Product‘s Economy Summary Product economics can be summarized in various ways,

including net present value, return on investment, and payback time.

Net present value (NPV) is the product's total value. in today's money, including all future cash flows.

Return on investment (ROI) is the average profit per year (again in today's money) divided by the investment.

The payback Period (PBP) is the point at which the initial investment has been just recouped by net profits. The payback time must be significantly less than five years.

Costs are normally dominated by salaries, usually mainly research and development and marketing.

Gantt Chart

Gantt Chart

BUSINESS PLAN

Introduction

Business plans are commonly around 40 pages long, including perhaps 10 pages of financial analysis, often as an appendix.

The purpose of the business plan is to persuade the reader, who has money, that the potential benefits of the busi ness proposition outweigh the risks and that a healthy profit is likely to be made.

Doing this effectively requires not only outlining the benefits and how they will be achieved, but also realistically estimating the risks

The business plan must emphasize the positive, but must also be realistic.

Good Business Plan

1. The executive summary2. The business idea3. The management team4. Intellectual property5. Market potential6. Competition7. Finance

Business Model

A business model describes the rationale of how an organization creates, delivers, and captures value

9 Building Blocks

9 Building Blocks

CUSTOMER SEGMENT/CS

MASS MARKET NICHE MARKET

DIVERSIFIED MULTI SIDED PLATFORM

1

VALUE PROPOSITION/VP

PRICE DESIGN BRAND FAST/GETTING

THE JOB DONE CONVENIENCE ACCESSIBILITY ETC

2

CHANNEL/C3

CUSTOMER RELATIONSHIP/CR

• PERSONAL ASSISTANCE• SELF SERVICE• AUTOMATED SERVICE• COMMUNITIES• CO-CREATION

CUSTOMER HELP EACH OTHER.

4

REVENUE STREAM/RS

PRODUCT SALE USAGE FEE SUBSCRIPTION FEE LENDING/RENTING/

LEASING LICENSING BROKERAGE FEE ADVERTISING

5

KEY RESOURCES/KR

PHYSICAL INTELLECTUA

L HUMAN FINANCIAL

6

KEY ACTIVITIES/KA7

• PRODUCTION• PROBLEM SOLVING• PLATFORM&NETWORK

KEY PARTNERSHIP/KP8 MOTIVATION:

OPTIMIZE RESOURCE AND ACTIVITIES, REDUCTION OF RISK & UNCERTAINTY, ACQUISITION OF PARTICULAR RESOURCES &ACTIVITIES

COST STRUCTURE/CS

FIXED COST VS VARIABLE COST

COST DRIVEN VS VALUE DRIVEN

9

2 1

3

4

5

6

78

9

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