aegis international analytics - case analysis
TRANSCRIPT
Presented by Group IAlexander Christian (1342980602)Dina Sandri Fani (1342981574)Muhammad Irsan (1340001263)Puntin Kulmongkon (1342980514)
Binus Business School, MM Executive Batch 20
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
2
Table of ContentsAegis Case
01 Case synopsis
02 Problem(s) identification
03 Related theories/ frameworks/models
04 Case analysis & solutions
05 Recommendation
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
3
Table of ContentsAegis Case
01 Case synopsis
02 Problem(s) identification
03 Related theories/ frameworks/models
04 Case analysis & solutions
05 Recommendation
Case SynopsisThe History of Aegis Analytical
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
4
1995
• Founded by Gretchen Jahn and Justin Neway in Lafayette, Colorado
• Jahn: 20 years experience in information technology & integrated resources management
• Neway: 20 years experience in pharmaceutical & biotechnology manufacturing
1999 (a)
• Receive contract worth USD 1.3m from Aventis to develop their software “Discoverant”
1999 (b)
• Receive funding USD 400,000 and USD 500,000 from angle investors and Sandlot Capital
Case SynopsisThe History of Aegis Analytical
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
5
1999 - 2000
• First version of product was developed
2000 (a)
• Received fund USD 4.5m from GlaxoSmithKline’s investment arm, SR one and Aventis’s investment arm, Future capital (Germany) and Viscardi Ventures (Germany)
• Team of applications & technical specialists, management team & advisory board of industry and regulator experts were set up
2000 (b)
• July: successfully sold and implement first product
Case SynopsisThe History of Aegis Analytical
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
6
2001
• Sep: reject funding USD 4m because valuation is too low
• Oct 2001: brought in funding USD 14.5m while other companies were failed to raise fund
2002 (a)
• Growth journey
• 35 employees
• Sales agreement with 8 corporate customers
• 25 sales in pipeline by the end of 2002
• Hired John M. Darcy as President and CEO
2002 (b)
• Jahn moved into corporate development role to pursue new markets and develop alliances and market awareness
Case SynopsisThe History of Aegis Analytical
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
7
2001
• Sep: reject funding USD 4m because valuation is too low
• Oct 2001: brought in funding USD 14.5m while other companies were failed to raise fund
2002 (a)
• Growth journey
• 35 employees
• Sales agreement with 8 corporate customers
• 25 sales in pipeline by the end of 2002
• Hired John M. Darcy as President and CEO
2002 (b)
• Jahn moved into corporate development role to pursue new markets and develop alliances and market awareness
Case SynopsisWhy Discoverant: the externalities were in favor of the development of a product like Discoverant
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
8
Environment landscape
Serious failures during manufacturing process lead to increasing needs from potential customers
Increasing pressure from consumer groups and the government
Big chunk of potential market, accounted for 77 percent or $464 million of the total potential market
Why Discoverant?
Time saver
Reduce costs
Help meet quality standards
No direct competitors
Non-experts can use
Case SynopsisWhy Discoverant: Bottom Line
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
9
Advantages
Clients are #1: made to communicate with non-experts
Great customer service and consulting services
Neway’s 3D visual process signature
Customized product for each customer
Sales Team’s long term relationship
Negatives?
1 3 cycles of completing a sale:
Head of Manufacturing will need 3 to 9 months to check for demand
Upper management will need 3 to 12 months
Purchasing & legal department will need1 to 6 months
2 Long, tedious sales cycle
Total: 7 months to 2 years
Case SynopsisThe Start of Strategic Alliance Implementation (1)
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
10
Gretchen Jahn
“We understood the power of brand recognition and company reputation in reaching our target market. We need to form a strategic alliance with well-known service providers to increase our sales”
Justin Neway
March 2002: formed strategic alliance with Honeywell POMS
Honeywell POMS had USD 24 billion annual sales, over 120,000 employees and operate in 95 countries
Aegis product was bundled and resold under name “POMS Explorer, powered by Aegis”
Case SynopsisThe Start of Strategic Alliance Implementation (2)
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
11
Gretchen Jahn
“We understood the power of brand recognition and company reputation in reaching our target market. We need to form a strategic alliance with well-known service providers to increase our sales”
Justin Neway
April 2012: formed strategic alliance with Propack Data/Rockwell Automation
Rockwell Automation had USD 4.3 billion annual sales, over 23,000 employees and operate in 80 countries
Finder’s fee system: receive once referral led to actual sales
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
12
Table of ContentsAegis Case
01 Case synopsis
02 Problem(s) identification
03 Related theories/ frameworks/models
04 Case analysis & solutions
05 Recommendation
Problem(s) IdentificationAs a start-up, Aegis still need to find out its growth strategy
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
13
Operating Expenses & Net
Operating Income
Revenues grew strongly in 2002 as Discoverant succeed in getting its 8 first
customers
Operating expenses went high as Aegis still need high investment for product
research & development
(Still) record a negative net operating income since 2002
1998 1999 2000 2001 2002
$8,053
$814,001 $670,754 $562,741
$2,513,267 Total Revenues
CAGR: 320%
1998 1999 2000 2001 2002
Operating expenses $152,189 $1,239,510 $3,417,575 $5,128,508 $7,779,047
Net Operating Income $(144,136) $(425,509) $(2,746,821 $(4,565,767 $(5,265,780
$(6,000,000)
$(4,000,000)
$(2,000,000)
$-
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
Operating expenses Net Operating Income
Problem(s) IdentificationImplementation of alliances strategy did not bring any sales for Aegis (1)
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
14
01 Aegis was not on the high priority list for the sales managers
Discoverant became just one item from Honeywell’s and Rockwell’s sales catalogue
The sales efforts of both allies were in no way focused on selling Aegis’ product, but were rather offering it as an “add-on”
02 Moral hazard
Aegis committed a huge part of their organizational resources to both alliances
In contrast, lack of commitment from both allies, thereby frustrating the Aegis team
Problem(s) IdentificationImplementation of alliances strategy did not bring any sales for Aegis (2)
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
15
03 Unnecessary procedures and bureaucracy
Due to the big size of both Strategic Allies
Longer sales cycle – affected prospective customer decision making process
04 High dependency to Allies
Communication between Aegis and Rockwell Pro Pack was suffering when the primary contact for Aegis left ProPack
Fragility of the position that Aegis has in terms of operational communications, the dependency on informal contacts, and the reliance on managers’ predisposition towards Aegis’ product
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
16
Table of ContentsAegis Case
01 Case synopsis
02 Problem(s) identification
03 Related theories/ frameworks/models
04 Case analysis & solutions
05 Recommendation
Related theoryStrategic Alliances
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
17
Mission Objectives
External Analysis
Internal Analysis
Strategic choices
Strategy Implement
ation
Competitive Advantage
Corporate Level
Strategy
Biz to enter?
Vertical Integration
Diversification
Strategic Alliances
Related theoryTypes of Strategic Alliances
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
18
Non-equity alliance
Equity alliance Joint venture
Contracts based
• Licensing
• Supply & distribution agreements
What is Strategic Alliances?Any cooperative effort between two or more independent organizations to develop, manufacture, or sell products or services
Cross equity holdings
Partners own stakes ineach other
Joint equity holdings
Independent firm is created
Related theoryThe implementation of V-R-I-O to Strategic Alliances: may generate competitive advantage if combinations of complementary resources and governance responses meet the VRIO criteria
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
19
Valuable
Strategic Alliances can
create value if:
• Improve current
operations
• Shaping the
competitive
environment
• Facilitating entry
and exit
Rare
As a form of organizing economic exchange: NO!
The sources of value creation within alliancesmay be rare, if:
• firms may form a combination of complementary resources within an alliance that is rare
• the stock of such complementary resources may be limited so that first movers have a rare combination
Imitability
As a form of organizing economic exchange: NO!
The resource combinations that create value inalliances may be very costly, if not impossible,to imitate if:
• the value creating combination depends on social complexity (trust), causal ambiguity, and/or historical uniqueness
Organizing
Two types of governance responses:
Formal/codified
Explicit contracts & legal sanctions: creates mutual understanding
Joint ventures: aligns interests of partners through ownership of independent firm
Equity investments: aligns interests of partners through ownership in each other
InformalTrustFirm reputation
Related theoryAre Strategic Alliances substitutable?
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
20
Yes, they are!Two options available to
substitutes strategic alliances
Internal Development
Can be an option
No partner is available
transaction-specific investment is high
low uncertainty about the investment
Mergers & Acquisitions
Can be an option
There are no anti-trust issues
Low uncertainty about the investment
Firms can be integrated easily
Value of combined firm is not tied to independence
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
21
Table of ContentsAegis Case
01 Case synopsis
02 Problem(s) identification
03 Related theories/ frameworks/models
04 Case analysis & solutions
05 Recommendation
Aegis’ External AnalysisAegis’ Five Forces Model
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
22
No. Threats Rating
1.Threats of new entrants
High
2.Threat of competitors
Low
3. Threats of buyer High
4.Threats of substitutes
High
5.Threats of suppliers
Low
Aegis’ External AnalysisPorter Five Forces: determine the threats (1)
Rivalry
Potential Entrants
Customers
Substitutes
Suppliers
Low
Consulting services and software provider to the pharmaceutical and bio-technology in States and Europe is an industry with a low threat level competitors. This is due to the investment in the product is high and has a risk level failure is high. In addition, the creative industries also have the opportunity to monopoly, which is due to the laws regarding patents or copyrights
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
23
Aegis’ External AnalysisPorter Five Forces: determine the threats (2)
High
Consulting services and software provider to the pharmaceutical and bio-technology in the United States and Europe is the industry with the level of threat of new entrants is high. This is caused by the cost of exit-entry are low and the products offered are heterogeneous.
Consulting services and software provider is the main capital of the creative industries is the power of human thought and creativity so that resources are not unlimited, other than that the industry has access to capital are high through venture capital.
Rivalry
Potential Entrants
Customers
Substitutes
Suppliers
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
24
Aegis External AnalysisPorter Five Forces: determine the threats (3)
High
Consulting services and software provider to the pharmaceutical and bio-technology in States and Europe is an industry with a high level of bargaining power of buyers. This is due to the limited number of buyers and the products offered in the category are not essential to the current operation of the enterprise buyer’s pharmaceutical .
Rivalry
Potential Entrants
Customers
Substitutes
Suppliers
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
25
Aegis’ External AnalysisPorter Five Forces: determine the threats (4)
High
Consulting services and software provider to the pharmaceutical and bio-technology in States and Europe is an industry with a high level of threat of substitutes. This is caused by the presence of other companies engaged in manufacturing information system, which has the advantage of partnerships with company’s manufacturer’s pharmacy.
Manufacturing information system and Aegis products are complementary, but did not rule out the potential to replace Aegis products due to economies of scale that are owned by the company manufacturing information systems such as Honeywell or Rockwell
Rivalry
Potential Entrants
Customers
Substitutes
Suppliers
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
26
Aegis’ External AnalysisPorter Five Forces: determine the threats (5)
Low
Consulting services and software provider to the pharmaceutical and bio-technology in States and Europe is an industry with a low level of bargaining power of suppliers. Raw material of this industry can be defined as human resources or human capital and financial resources
Rivalry
Potential Entrants
Customers
Substitutes
Suppliers
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
27
Aegis’ Internal Analysis Initial Strategic Posture: considered Strategic Alliance as their Corporate Strategy
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
28
Formed non-equity alliances with two companies: Honeywell and Rockwell.
The alliances were in the form of contractual agreements.
Strategically, this provided Aegis the flexibility to exit the alliance easily.
Strategic Choices Why Strategic Alliances
Both leader in the Pharmaceutical Manufacturing Industry and sold complimentary products
Allow Aegis to gain credibility and visibility
Reduce sales time Reduce the amount of
research done by Upper Management
Aegis’ Internal Analysis VRIO Analysis
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
29
Value
Discoverant was a highly innovative technology which would change the way data is collected, analyzed, and turned into reports.
Rarity
Discoverant was one-of-a-kind product, which provided Aegis with rarity as a source of competitive advantage. The product was user-friendly and didn’t require programming expertise to be used.
Imitability
Required substantial financial investments: an initial start-up investment of $1.3 million, followed by $4.5 million, and $14.5 for completing their product. This was a barrier to entry, which makes the development of this product difficult to imitate.
Organization
The resources of Aegis enable it to exploit an external opportunity by developing an innovative product like Discoverant.
“May Gain a Competitive Advantage”
Aegis’ Internal Analysis Why It Did Not Work
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
30
1 Struggling economy?
2 Lack of corporate spending across industry
3 Lack of communication
Honeywell POMS
1 Group phone calls
2 Bi-yearly meetings
3 Sale calls
1 Loss of key personnel
2 Single point of contact
Proposed Solution(s)3 (three) alternatives available to be opted by Aegis Management
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
31
Option 1: Exit the alliance, “going-it-alone” and reasons for the exit
Because of the uniqueness of its product, Aegis could gain its position on the market by “going-it-alone”.
Aegis already had two major client-investment partnerships and was consistently increasing their revenue
The operating expenses were too high and growing at a steady rate
Hiring additional sales staff to work with the alliance partners added to the operating expenses
The current alliances were very costly to Aegis
None of the contracts within the Strategic Alliance gave any exclusivity
Focused on using its small size
As their emergent strategy, Aegis should move towards direct sales
Aegis spent lots of resources on training the alliance partners.
When the level of transaction specific investment is high, it is recommended to go-it-alone
Proposed Solution(s)3 (three) alternatives available to be opted by Aegis Management
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
32
Option 2: Improve current Strategic Alliances
Improve Discoverant brand recognition within the partners’ sales catalogue by changing the contractual obligations
Change the positioning of Discoverant to primary spot in the partners’ sales catalogues
Improve incentives of the sales force
Improve communication with Rockwell.
Aegis should be able to interview reps of the sales force and select individuals who would be a good cultural fit for the alliance
To ensure better commitment from partners, include sales targets (with specific numbers per FY) and implement penalties for lack of sales performance.
This would incentivize the sales reps to add effort into their sales agenda
Proposed Solution(s)3 (three) alternatives available to be opted by Aegis Management
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
33
Option 3: Consider a different type of Strategic Alliance
Consider Equity Alliance
Non-equity alliance might have hurt Aegis as the partners did not have any commitment to deliver
Equity investments, we could have more commitment from the alliance partners
Leverage further on the current alliance with their client-investment partners: Merck & GalxoSmithKline.
Utilize such customers as partners to demonstrate the value of Discoverant to potential new customers
As a way to reduce the Operating expense, reduce the sales cycle from up to two years to a shorter timeline.
Aegis could achieve this by better targeting of decision makers at the potential customers
Explore licensing option; engage independent resellers for distribution of their product.
Wouldn’t require an additional investment on Aegis’ side. It would be a commission-per sales based contract.
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
34
Table of ContentsAegis Case
01 Case synopsis
02 Problem(s) identification
03 Related theories/ frameworks/models
04 Case analysis & solutions
05 Recommendation
Proposed RecommendationWe recommend Aegis to exit the alliance and “going-it-alone” while gradually shifting away to licensing model
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
35
Combination of Option 1 & 3
Focus on uniqueness of its product to gain its position on the market by “going-it-alone”.
Leverage further on the current alliance with their client-investment partners: Merck & GalxoSmithKline: utilize them as potential customers
The operating expenses weretoo high and growing at a steady rate
Thus; reduce the sales cycle from up to two years to a shorter timeline.
Aegis could achieve this by better targeting of decision makers at the potential customers
Focused on using its small size
As their emergent strategy, Aegis should move towards direct sales
Explore licensing option. It would be a commission-per sales based contract.
9/3
/20
15
Aeg
is A
nal
ytic
al C
ase
An
alys
is
36