J&j presentation athena
- 1. J & J Case Competition February 23, 2012 RIDER UNIVERSITY: Eric Elgin, Bryan Griffith, Victoria Marquardt, Jonathan Moyer
- 2. MediHealth Leader in branding and selling skin care products Possible acquisition or license of Athena Three distinct business decisions to make: License or Buy Pricing and Distribution Strategy Selling and Marketing Central Issue
- 3. Environmental Analysis: SWOT - Uses natural and organic ingredients - 15 year strong brand equity - Break through in skin cell aging technology - Fifth branded entrant - Culture shift - Economic climate - Growing beauty market - Large target market - Growing innovative technology in medical field - Possible product cannibalization - Acquisition cost of 40MM STRENGTHS WEAKNESSES OPPORTUNITIES THREATS
- 4. “We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services.” “In meeting their needs everything we do must be of high quality.” “Our suppliers and distributors must have an opportunity to make a fair profit.” “Our final responsibility is to our stockholders. Business must make a sound profit.” “We must maintain in good order the property we are privileged to uses protecting the environment and natural resources.” “We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for.” MediHealth’s Mission Statement
- 6. Alternative Solutions: Product Benefits Drawbacks Buy • More control and flexibility to innovate product • High customer awareness • Full responsibility including all risk License • Lower initial costs • Competition based on brand reputation • Risk shared among investors • 12% royalty payments per year • Milestone payments at year 5 of at least 15 MM • Restrictions on R&D and marketing
- 7. Alternative Solutions: Pricing Strategy Benefits Drawbacks Parity • Consumer purchase satisfaction • Increase unit sales • “Lower-quality” brand image Premium • Increased brand equity • High price reflects high quality • Less expensive products on the market
- 8. Alternative Solutions: Selling & Marketing Benefits Drawbacks Standard • Less costly investment • Full DTC capabilities • Not reaching influencers • No dermatologist/celebrity endorsements 360 • Reaches influencers and consumers • Greater diversity • Significantly higher costs • No recommendations guaranteed
- 9. Alternative Solutions: Distribution Benefits Drawbacks Mass • More accessible to mass consumers • High customer awareness • They carry a large variety of premium, branded, and generic products • Prices are an important factor Prestige • Justifies higher prices • Competition based on brand reputation • Lower availability to mass consumers • Would have to create new distribution channel
- 10. Recommended Strategy Our group’s recommendations Financial Analysis
- 11. Years 1-5 Years 6-10 Decision Buy No additional action Pricing Premium Premium Distribution Mass Mass Market Growth 3% 3% Annual Price Change Assumption 1% 1% Selling and Marketing 360 SM 360 SM MediHealth’s Objectives: • Expand customer base • Gain a return on investment to buy Athena • Become co-leader in beauty market without product cannibalization Strategic Overview
- 12. Buy: More control over production quality and monitoring No licensing fees after initial acquisition Allows for continued development of the product No Line Extension: Minimize cannibalization of our existing product lines Does not make financial sense to invest the resources for a smaller return Recommended Strategy: Buy and No line Extension “We must experiment with new ideas”
- 13. Premium Pricing Create sense of quality with the product Potential for higher return on sales Mass Market: Available to more consumers Less competition for premium products Easier to differentiate products Economic Climate Recommended Strategy: Premium Pricing and Mass Market “In meeting their needs everything we do must be of high quality.”
- 14. 3% Market Growth: Assume beauty market will continue to grow with baby boomers Green movement’s momentum 1% Price Change: Consistent with premium price and brand image Increase profit margin from sales Recommended Strategy: Market Growth and Price Change
- 15. 360 Marketing: Increase awareness and capture market share more effectively More flexibility to influence brand perceptions Cost of strategy is covered by increased sales Recommended Strategy: 360 Marketing
- 16. Recommended Strategy: Decision Outcome ‘12 ’13 ’14 ’1 5 ’1 6 ’17 ’18 ’19 ’20 ‘21 Total Net Income (34) (2) 7 22 38 56 80 98 121 147 533 Net Cash Flow (77) (6) 3 17 34 52 75 93 114 140 445 Profit: $4.39/unit Total Unit Sales: 121,504,000 In Millions
- 17. Peak Share 6.2% Peak Year Sales $642 mil. Cumulative Sales $3,279 mil. NPV $173 mil. IRR 21% Recommended Strategy: Financial Highlights “Our final responsibility is to our stockholders. Business must make a sound profit.”
- 18. Sensitivity Analysis Conservative, Anticipated and Aggressive
- 19. Sensitivity Analysis – Manipulated Variables Conservative Model Anticipated Model Aggressive Model License or Buy Buy Buy Buy Line Extension No Line Extension No Line Extension Line Extension Market Prestige Market Mass Market Mass Market Pricing Premium Pricing Premium Pricing Premium Pricing Market Growth 5.0% 3.0% 3.0% Annual Price Increase (Over 10 Year Period) 1% Price Increase Each Year 1% Price Increase Each Year 1% Price Increase Each Year Marketing Strategy 360 SM 360 SM 360 SM Cumulative Net Income (Millions of Dollars) 440 533 497 Cumulative Cash Flow (Millions of Dollars) 365 445 399 Net Present Value (NPV) (Millions of Dollars) 142 173 152 Internal Rate of Return (IRR) 19% 21% 19%
- 20. Cash Flow Comparison In millions 0 20 40 60 80 100 120 140 160 1 2 3 4 5 6 7 8 Normal Aggressive Conservative
- 22. Evaluating Target Market Women age 20-30 Age 50+ women All Women
- 23. Marketing Strategy INSPIRE Women to feel Naturally Beautiful
- 24. Mother Daughter Campaign Will combine traditional & Interactive media for maximum effectiveness Promote LOVE and working together Social media to generate and celebrity endorsement to promote consumer communication “We must maintain in good order the property we are privileged to uses protecting the environment and natural resources.”
- 25. Release your Inner Goddess • Empower and Inspire women to become like the Greek Goddess Athena • Make women feel confident and confortable in their skin • Ads will include print, radio, TV, Internet, an d other media sources • Targeting mature women but will be perceived by all women • Promote inner beauty as well as outer beauty
- 26. Guerilla Marketing Untraditional media source “Eye capturing” An effective way to reach a large audience Effective against 20-30 yrs
- 28. EBIT Based on Strategy 0 100 200 300 400 500 600 700 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 OPR ($) OPX ($)
Editor's Notes
- #2: Names and Majors!
- #25: BryanAlthough we r new to the OTC market, we are not new to the allergy market. Similarly when a private doctor moves to a clinic, the quality is just as high and its more convenient. We want to inundate traditional media sources with a selection of print, tv, radio, and internet ads that will increase confidence and word of mouth. These advertisement would be focused on existing customers and create awareness on our big and exciting move tot the otc market, which should be emphasized in each ad. No introduction necessary will provide a simple yet effective awareness campaign for prescription users to switch to OTC.
- #26: Sebastian
- #27: One example: Have “movie” type posters asadvertisements and place next to movies theatres