Strategic Plan for eMerge I nteractive Jessica Musengezi Leigh - - PowerPoint PPT Presentation

Strategic Plan for eMerge I nteractive

Jessica Musengezi Leigh Ann Love University of Florida IFAS

Presentation Outline

• Company Description
• Case Facts and Assumptions
• Industry and Market Analysis
• Key Questions
• Goals, Constraints, Analysis
• Identification of Alternatives
• Recommendations and Implementation

What is eMerge Interactive?

• Founded in 1993
• Originally developed infrared

thermography systems with maritime applications

• 1994-2000: Changed focus to cattle

industry

• 2001-2005: New Management

– CattleLog – VerifEYE

Case Facts and Assumptions

Facts

Tech company CattleLog and VerifEYE Publicly traded (2000) Previously owned cattle trading division Strong management, R&D Little emphasis on sales and marketing Operating loss

Assumptions

Mandatory traceability (Jan 2009) Packer/Processor increased food safety liability Persistent concern of livestock diseases and transference to humans Affect of food safety and traceability issues on U.S. cattle export market

Past and Current Financial Situation

• Negative net earnings since 1999

– 2004: $1 million in sales – 2004: $10 million net loss

• Stock price has decreased

– High in 2000: $70.00/share – Current (52 week high: 2005): $2.49/share

• Large research and development costs
• Minimal emphasis on sales and marketing

Source: MSN Money

Financial Ratio Analysis

Industry and Market Comparison

eMerge Interactive Internet Services Business Services Market Average Gross Margin 70.59% 54.13% 42.43% 49.25% Return on Equity

• 1.00%

6.60% 11.80% 13.60% Return on Assets

• 71.80%

4.20% 4.50% 2.30% Days Cost of Goods Sold in Inventory 360 20 18 43 Asset Turnover 0.1 0.6 0.7 0.4

Source: Hoovers Online

eMerge Products

• CattleLog

– Data collection and management – Herd management tools – Information sharing

• VerifEYE CIS/Solo

– Identifies bacteria which may cause

• Ecoli 0157:H7
• Salmonella
• Listeria
• VerifEYE Hand Scanner

– Identifies bacteria which may cause

• Shigella
• Norovirus
• Hepatitis-A

Industry Positions

• Cattlelog major competitors, virtually

undifferentiated product

Monopolistic Competition

• Own sole license of VerifEYE technology

Patent-derived Monopolist

Sales Employees eMerge Interactive $1,200,000 42 APEIS Corporation $800,000 6 IMI Global Inc $330,000 5 Micro Beef Technologies Ltd N/A N/A AgInfoLink USA N/A N/A

Source: Hoovers Online

Market Environment

• Unpredictable regulatory environment

– Traceability – Identity Preservation

• Foreign countries are adopting traceability

requirements

• To maintain export market, U.S. will need

to meet importing countries requirements

• Japan markets re-opened in 2004; Japan approves

the use of PVP to document age verification

Key Questions

How will eMerge stay afloat? How to increase adoption of eMerge technologies?

eMerge Goals

• Profitability
• Provide value added capabilities to

customers

• Identify further applications of existing

products

• Research and develop new products for

current and potential customers

SWOT Analysis – Internal

(CattleLog)

Strengths

Experienced management team Strong R&D International and domestic partnerships Paper and electronic option Approved by USDA PVP- Process Verified Program

Weaknesses

Persistent financial losses Undifferentiated product Slow adoption rate Not first company to market

SWOT Analysis – External

(CattleLog)

Opportunities

Increasing concern about traceability Increased demand of branded meat products COOL and traceability government legislation Foreign country adoption of traceability regulations

Threats

Low demand Competition from other companies with products similar to Cattlelog Highly fragmented beef market at producer level Government policy uncontrollable by firm

BCG Matrix for CattleLog

• Low demand
• Fragmented market, do not

share information

• Slow to adopt new products
• Regulatory environment
• 4 strong competitors

Conclusion: CattleLog is a Question Mark

– Could become a star – Could become a dog

CattleLog Financial Contributions

• Share of total revenues are decreasing
• Share of total cost of revenues are increasing

2001 2002 2003 2004 AIS-Revenue 848,651 574,922 313,697 369,130 Total Revenue 848,651 574,922 926,838 1,156,019 AIS Contribution 100.00% 100.00% 33.85% 31.93% 2001 2002 2003 2004 AIS Cost of Revenue 1,065,174 335,111 55,277 104,299 Total Cost of Revenue 1,065,174 335,111 321,664 367,229 AIS Contribution 100.00% 100.00% 17.18% 28.40%

Forecasted Revenues and Costs

• Case 1: Assume ceteris paribus
• $200,000

$0 $200,000 $400,000 $600,000 $800,000 $1,000,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Product Gross Margin Company Gross Margin

Possible Alternatives: CattleLog

• Close division
• Sell division to competition
• Adopt a “wait and see” attitude regarding

regulatory environment

• Lobby to enact favorable regulations
• Develop alternative product uses

Recommendation and Justification

Recommendation Sell CattleLog to competition

Invest profits from sale into VerifEYE product line

Justification

• Low demand from target market
• Market slow to adopt product
• Technology will be obsolete by 2009
• Consider R&D a sunk cost

Case 2: Life after CattleLog

• Assume ceteris paribus for VerifEYE

$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 Product Gross Margin Company Gross Margin

SWOT Analysis – Internal

(VerifEYE)

Strengths

Exclusive license Strategic alliances Exceeds HACCP requirements Highly integrated market Numerous applications Reduces liability for customers

Weaknesses

Persistent financial losses Low sales Undeveloped sales and marketing plan

SWOT Analysis – External

(VerifEYE)

Opportunities

Increasing concern about safety assurance Market willingness to adopt new technologies Global expansion through

• verseas distributors

Applications to health and retail sectors

Threats

New entrants Product alternatives

–Irradiation –Pasteurization

VerifEYE Financial Contributions

• Share of total revenues are increasing
• Share of total cost of revenues are decreasing

2001 2002 2003 2004 FST-Revenue 613,141 786,889 Total Revenue 848,651 574,922 926,838 1,156,019 FST Contribution 66.15% 68.07% 2001 2002 2003 2004 FST Cost of Revenue 266,387 262,930 Total Cost of Revenue 1,065,174 335,111 321,664 367,229 FST Contribution 82.82% 71.60%

Case 2: VerifEYE after CattleLog

• Assume ceteris paribus, discontinue CattleLog

$0 $100,000 $200,000 $300,000 $400,000 $500,000 $600,000 $700,000 $800,000 $900,000 $1,000,000 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Product Gross Margin Company Gross Margin

BCG Matrix for VerifEYE

• eMerge holds license, no

competition

• Highly integrated industry
• Increases profit by

decreasing waste

• Reduces liability

Conclusion:

– CIS/Solo potential to become cash cow – Hand-Scanning Unit potential to become star

Possible Alternatives: VerifEYE

• Close or sell division
• CIS/Solo products

– Stop R&D, focus on sales and marketing – Continue R&D while developing sales and marketing

• Hand Scanner

– Stop R&D, discontinue product – Continue R&D while developing sales and marketing

Staying Afloat:

Recommendations Continue R&D Develop sales and marketing plan

For all VerifEYE products

eMerge Implementation Plan

Objective: Increase Sales

Emphasize promotion Penetrate market

• Establish a sales team

– Combine sales and technical specialists – Personal selling and service support – Establish lasting industry relationships

VerifEYE Marketing Plan

Problem: Early adopters are focused on benefits; Early majority consider themselves to be progressive Solution: Highlight key benefits of product performance and applicable business solutions – Help increase revenues

• Decreasing trimmings, streamline cutting process

– Exceed compliance standards

• Exceed industry standards for disease detection

– Opportunities for branded product management – Provide assurance of contaminant-free products

• Decrease liability for end users

Market Plan Implementation

VerifEYE CIS/Solo VerifEYE Hand Scanner

Target Market

Health Sector Retail/Food Service Penetration pricing

Pricing Promotion

Strategic alliances, regional trade shows, educational sales meetings, direct marketing to target market and affiliates.

Distribution

Domestic: Strategic alliances and direct sales to target market Global: Continued alliances with complementary products Meat Packers and Processors Volume discount

Adoption of Technology:

Recommendations

• Identify additional strategic partnerships
• Re-evaluate marketing and sales plan
• Expand to other industries

Institutional sectors (prisons, schools, government) Laboratories

• Continue R&D for new applications of the

VerifEYE technology

• Broaden spectrum of diseases recognized by

scanner

Conclusion

How will eMerge stay afloat?

• Sell CattleLog to competition
• Use profit from sale to

– Continue R&D – Develop sales and marketing team for VerifEYE

Conclusion

How to increase adoption of eMerge technologies?

• Increase sales through marketing force

– Communicate benefits to target market – Maintain and build new alliances – Identify additional applications – Broaden spectrum of disease recognition

Thank you for your time and attention!