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Growth Plan Apex Essay

982 words - 4 pages

WEEK 2 – CASE STUDY
APEX CHEMICAL CASE

We learned that innovation is creating and implementing ideas that generate new customer value and/or improve the value of the firm.[1] While Apex desires to be an innovative company, I don’t believe that the only way to accomplish this is through the introduction of Compound A-115, a new electrolysis agent. It is important that Apex carefully weigh the benefits and drawbacks of their two options. Given the limited information we have, I would recommend that Apex Chemical commercialize the Compound B-227 beta-prednigone. In offering this recommendation, I would stress the fact that innovation is not simply R&D, or new product development. From ...view middle of the document...

The economics for the commercialization of Compound B-227 are stronger in the short term. The market size for plastic oxidizers is $40 million and growing. Betas, such as Compound B-227, represent 60 percent of the total market, or $24 million. This is approximately two and one-half times the market size for electrolysis agents. Notwithstanding, there are multiple competitors in this space. Apex has a strong existing brand reputation in the market, but only for stigones. Stigones represent the other 40 percent of the total market, or $16 million. Apex currently dominates the stigone segment in the plastic oxidizer market, but betas are eating into its sales, losing 10 percent of its sales per year. Twenty five percent of Apex’s total sales ($60 million) are derived from the plastic oxidizer market, or $15 million. This means that Apex has 94% market share in this space.
My recommendation for Apex to commercialize B-227 will not only provide growth in a $40 million market with upside, but it will also help to offset the 10 percent attrition ($1.5 million per year) that they are experiencing. Hence, it’s a strategic defensive move to maintain an already powerful brand in a market that continues to evolve. From an innovation standpoint, this is a “pruning and thinning” effort whereby Apex might be able to transfer resources currently committed towards the production and distribution of stigones and apply them towards B-227. The new growth strategy will capitalize upon economies of scale and grow an existing platform in the plastic oxidizer market. In order for B-227 to generate more revenue and gross profit than A-115 it would need to generate more than $2.5 million in revenue. This seems achievable, despite the fact that there are three strong competitors and at least six other companies selling off-brand and commodity-based betas. Apex would only need to capture 10% of the total beta market in the first year in...

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