Dairy Doo Prelim Report PDF

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Dairy Doo Case Study Preliminary Report with key facts, problem statement, and rationale that includes key tables, numbers and calculations....

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Alaina White Dairy Doo or Dairy Don’t Prelim Report April 19, 2018 I.

Key Facts 1. Morgan Composting desired to expand their composting business into the home gardening market. In that market, if they wanted to be competitive, they would have to offer a full range of merchandise and expand their distribution. 2. Morgan Composting was negotiating with Nature Safe about two alternatives 1) new brand creation or 2) resell Nature Safe through Morgan Compositing. 3. If to create a new brand, MC would combine their signature soil, Dairy Doo, with Nature Safe and create their new, Healthy Gardens, soil. This new product would require new packaging, and an investment of time and money. It would be a riskier choice, but could lead to a greater profit in several years. 4. Quality control was essential for Morgan Composting, as a poor quality compost could harm crops. High quality requires testing the ingredients, continual lab tests, and windrow temperature maintenance. 5. After creating his first formulation for his signature composting mixture, Dairy Doo, Brad had to report to state and local government over concerns they had for the environment, even though his business was the only in the nation operating without a governmental subsidy. 6. Improper use of Dairy Doo by produce farmers was also a potential problem if the farmer were to use too much soil or bury it too deep. MC offered services to aid customers in proper use of the product.

7. 94% of the MC business consisted of the Dairy Doo sales. 75% of customers were local residents and 25% were travelers that stopped specifically for Dairy Doo. II.

Problem Brad Morgan, CEO of MC, faced a critical decision of whether or not to expand his company further by working with Nature Safe to introduce a new fertilizer for MC. Brad had to choose between two alternatives: 1) to mix in Nature Safe with Dairy Doo, package it in 40 pound bags, and market it to home gardeners as Healthy Gardens, or 2) buy Nature Safe, not mix it in, and sell it as the Nature Safe name, and sell it as a 50 pound bag.

III.

Review of Data and Figures 1. Table 1: Gallup’s 10 qualities of a successful entrepreneur. 1. Business Focus: You make decisions based on observed or anticipated effect on profit. 2. Confidence: You accurately know yourself and understand others. 3. Creative Thinker: You exhibit creativity in taking an existing idea or product and turning it in to something better. 4. Delegator: You recognize that you cannot do everything and are willing to contemplate a shift in style and control. 5. Determination: You persevere through difficult, even seemingly insurmountable, obstacles. 6. Independent: You are prepared to do whatever needs to be done to build a successful venture. 7. Knowledge-Seeker: You constantly search for information that is relevant to growing your business. 8. Promoter: You are the best spokesperson for the business. 9. Relationship-Builder: You have high social awareness and an ability to build relationships that are beneficial for the firm’s survival and growth. 10. Risk-Taker: You instinctively know how to manage high risk situations. When making decisions about his company, Brad referred to this table from his business textbook. When adopting a new product, number 1 from this table says that it should be based off profit. If Brad has anxiety about his growing business he should refer to Determination and Independent to give him reassurance that growing his business is for the best.

2. Table 2: New Branding vs. Resale Costs- 1st Three Years Estimated New brand – Alternative 1 Year 1: Charging $23.49 per 40# bag, 880 bags sold Package Design costs $ 5,000 Registration fee with the Department of Agriculture $ 250 Container bags at 30 cents a bag (1000 initial order) $ 300 Advertising costs (media buys)… $ 2,000 Estimated cost of mixing and re-bagging $ 1,200 Purchase of Nature Safe and shipping to Michigan $ 8,140 Other Ingredients $ 1,043 Redistribution $ 200 Total $18,133 Year 2: Charging $23.49 per 40# bag, 1,760 bags sold Advertising costs (media buys)… Container bags at 30 cents a bag (2000 order) Estimated cost of mixing and re-bagging Purchase of Nature Safe and shipping to Michigan Other Ingredients Redistribution

Year 3: Charging $23.49 per 40# bag, 2,300 bags sold Advertising costs (media buys)… Container bags at 30 cents a bag (2000 order) Estimated cost of mixing and re-bagging Purchase of Nature Safe and shipping to Michigan Other Ingredients Redistribution

$ 2,000 $ 600 $ 2,200 $16,280 $ 2,086 $ 400 $23,566 $ 2,000 $ 600 $ 2,600 $21,165 $ 2,261 $ 525 $29,151

Total 3-year costs: Year 1 + Year 2 + Year 3 = $70,850 The Revenue for the first year is $20,671, year 2= $41,342, and year 3= $54,027, for a total three year revenue of $116,040. For a profit before tax for the three years equals revenuestotal costs, which is equal to $45,190.

Resale – Alternative 2 Year 1: Charging $28.50 per 50# bag, 600 bags sold Purchase of Nature Safe and shipping to Michigan Redistribution Total

$ 12,840 $200 $ 13,040

Year 2: Charging $28.50 per 50# bag, 1000 bags sold Purchase of Nature Safe and shipping to Michigan Redistribution Total

$ 21,412 $250 $ 21,662

Year 3: Charging $28.50 per 50# bag, 1500 bags sold Purchase of Nature Safe and shipping to Michigan Redistribution Total

$ 32,120 $300 $ 32,420

Total 3-year costs: Year 1 + Year 2 + Year 3 = $67,122 The Revenue for the first year for the resale is $17,100, year 2= $28,500, year 3= $42,750, and for the total revenue for three years of $88,350. For the profit before taxes for the three years, that equals revenues – costs, which is $88,350 - $67,122 = $21,228. From these two differences in profit and two revenues, Brad could make an assumption that creating the new brand will benefit the company in the years to come....