Case Analysis: Optical Distortion

Case Analysis: Optical Distortion

Problem: What is the optimal pricing policy for Optical Distortion, Inc. (ODI) so its product can penetrate the market with sustainable contribution?

Company: ODI manufactures and market contact lens for chicken that could partially blind the chicken thus prevent chickens from cannibalism behaviors toward each other, a problem that was traditionally solved by debeaking.

Competition: Primary- The product is revolutionary at the time, plus ODI secured an exclusive contract with the suppliers for the contact’s material. As such, we expect no other firms would product the same product to compete with ODI in the short term.

Secondary- Traditionally, debeaking is the method to solve the cannibalism problem among chickens. The labor cost of debeaking is about the same as the cost of contact lens installation. Nevertheless, contact lens provides other benefits compared to debeaking such as further lowering the mortality rate of chicken caused by cannibalism, reducing the feed consumption, and causing no negative effects to the productivity of a chicken.

Customer: In order to substantiate the benefit of ODI’s product, a chicken farm needs to have at least 10,000 or more chickens. Such farms comprise of 3% of total US chicken farm. From exhibit 3, California has 592 farms with flock size of 20,000 or more in 1969.

Segmentation: From the geographic perspective, California, North Carolina, and Georgia are the largest markets in the U.S. Given that ODI only has $200,000 initial capital and only four people work part time for the project, ODI should focus on the California market at least for the beginning. From the farm size perspective, the size of a chicken farm can be categorized as small farm, which has 10,000 or fewer chicken, medium farms, which has 10,000 to 50,000 chicken, and large farms, which contain over 50,000 chickens.

Targeting: ODI should focus on large farms first then medium farms. Small farms are not ODI’s target because they are not economically feasible for ODI’s products. Focusing on large farms has several benefits: first, large farms has much greater potential benefits to use ODI’s products due to the economy of scale, the substantial financial incentives will make the persuasions to use ODI’s products much easier. Second, the owners of large farms are more likely to be entrepreneurial minded and are more open to adopt new and novel technologies/products. Third, if large farms start to use ODI’s products, smaller farms may be attracted to follow these large farm’s steps. Fourth, consider the extremely limited sales force of ODI in the initial phrase, focusing on large farms can bring more contributions for the company.

Positioning: For owners of chicken farms with more than 10,000 birds in California, ODI’s product can successfully reduces the morality rate of chicken due to