BusinessHABGranite Chemical Production Business:Granite Industries, Inc. (Granite) is a specialty chemical formulator, lab analysis agency, and toll manufacturer, selling products to companies from cosmetics manufacturers to food supplement marketers.
Granite manufactures and distributes Creating Mono hydrate.
An approved food supplement used to improve strength, endurance, and muscle mass.
Granite also produces five other specialty chemicals that will be detailed later in this document.
A strong knowledge-based management team.
With a combined thirty-years of experience in this industry, incorporated Granite in 1999.
1. Granite Chemical Production Business:Granite Business Background
Granite is a niche player in the specialty and industrial-chemicals business.
Focusing on value-added products that are not widely or readily available in Nigeria.
Granite Industries perfected unique manufacturing processes resulting in lower manufacturing costs and high profitability.
Granite has established a network of strategic alliances with distribution companies who lack the capability to ascend from laboratory to commercial scale and manufacture products in accordance with quality specifications.
The distributors and customers have given Granite an opportunity to provide products beyond our present capability.
Equipment will need to be added, inventory increased, and marketing and support activities established.
2. Sales and Projections
Taking United State of America as a case study, granite had sales of $187,521 in 1999.
$241,782 in 2000, and $269,507 in 2001.
These numbers give Granite Industries a strong reference point on which to have based the sales projection for the upcoming three fiscal years.
The projected sales for 2003 are $210,000.
Granite projects this to increase to sales of over $2.9 million in 2004.
And to over $4 million in 2005 (see table in the Sales Forecast section).
3. Granite Chemical Production Business:Funding Requirements
Granite is seeking adequate capital to enable Granite Industries to expand operations.
And become a major factor in the production of chemicals in the industrial.
Consumer, and textile markets.
The signature product is Creatine Monohydrate.
Manufactured in both the powdered and liquid forms.
Granite is the only company in the world capable of manufacturing this product in liquid form.
The market research shows that the demand for this product alone justifies the expansion of the facilities.
4. Situation Analysis
Granite is in their fourth year of operation.
The business has been well received and marketing is critical to their continued success.
Granite offers a wide range of chemicals to three different customer groups.
The basic market need is for innovative, quality chemicals and formulas that are reliably delivered at reasonable rates.
5. Granite Chemical Production Business:Market Summary
Granite possess good information about the market.
And knows a great deal about the common attributes of the different customers.
Granite will leverage this information to better understand who is served.
Their specific needs, and how Granite can better communicate with them.
6. Market Needs
Granite Industries is serving their customers with specialty industrial chemicals.
The chemicals provided will consistently be of high quality and are not widely available.
Granite Industries seeks to fulfill the following benefits that are important to their customers:
- High quality- Granites chemicals are typically one of many chemicals in a customer’s end product. The need for high quality is therefore intuitive and necessary.
- Consistency- Because Granite’s product is just one ingredient in the customer’s product, there must be consistency in the ingredients in order to achieve the same final product, regardless of the batch produced.
- Customer Service- Exceeding the customer’s expectations is an imperative. Another element of customer satisfaction is consistent deliveries. Many of the customers employ just-in-time (JIT) manufacturing, so shipments must arrive when they are promised, otherwise production schedules are significantly effected.
7. Granite Chemical Production Business:Market Trends
The chemical industry is characterized by a wide variety of companies ranging in size from the large companies.
Such as DuPont and Monsanto to smaller specialty firms such as ours.
The companies are generally organized by either end-use markets or product technology.
In the past decade there has been a general trend in the industry to change emphasis from chemicals to biotechnology and pharmaceuticals.
The cost of product development and the need to operate factories.
At high levels of capacity have caused chemical companies of every size.
To outsource parts of the chemical and manufacturing processes.
This has created opportunities for smaller companies.
To create and occupy niches in development and contract manufacturing.
The outsource industry providers occupy a market segment.
Commonly identified as custom and toll manufacturers.
The trend of outsourcing components or ingredients of the final product has occurred for the last seven to nine years.
Granite has seen no indicators to indicate that this trend will change anytime soon.
8. Granite Chemical Production Business:Market Growth
With the proliferation of smaller companies producing chemicals for larger companies.
Or more complex products, there has been a 8% industry growth rate for subcontracting.
As the capital market has been dealing with the recent Internet and capital fallout.
Capital has become more scarce, particularly venture capital.
The industry growth rate is forecasted to continue to grow at the current rate.
9. Granite Chemical Production Business:Strengths
- Strong relationships with vendors.
- Unique, cost effective manufacturing processes.
- Strategic alliances with many distributors.
10. Granite Chemical Production Business:Weaknesses
- A lack of brand equity, a result of being a relatively new company.
- The struggle to maintain the unique manufacturing process as a trade secret.
- Significant research and development costs.
11. Granite Chemical Production Business:Opportunities
- Participation within a growing industry.
- Increased sales opportunities with the perfection of new chemicals or more cost effective manufacturing techniques.
- The ability to increase the capture of human capital developed within the organization.
12. Granite Chemical Production BusinessThreats
- Future/ potential competition from large, multi-national chemical manufactures.
- A slump in the national/world economy.
- Unforeseen governmental regulatory actions.
13. Granite Chemical Production Business:Competition
In the mainstream business, channels are critical to volume.
Manufacturers and distributors with impact in the international chemical market.
Desperately need specialty and toll manufacturers like Granite to meet the demand.
There are many specialty manufacturers.
All of whom seem to have carved out a specific niche of expertise.
And upon whom these major manufacturers depend for products.
In competition, it seems that the line is drawn at the level of quality performance.
Granite has achieved that level and is recognized for a high standard of quality performance.
Companies who would seem to be competitors have subcontracted production to Granite.
Because they do not have the ability to supply that level of quality.
Granite has achieved another milestone in the industry by developing certain formulations.
That they estimate would cost another firm $450,000 to duplicate.
The Creatine Monohydrate formulation and process is one of them.
Granite Industries has the only process in the world that can produce this supplement in liquid form.
It is extremely important that the opportunity is seized and exclusive marketing for this product begins.
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14. Granite Chemical Production Business:Product Offering
Creatine Monohydrate. This is a dietary supplement commonly used by athletes to improve strength, endurance, and muscle mass.
Creatine has become the most popular body building supplement in use today.
It is sold in many forms through health food stores.
Drug stores, and discount chains.
The leading producers of Creatine are in Europe.
And only a few recently in the United States.
The distribution system is complex.
With manufacturers selling through a layered system.
Granite has developed a Creatine-based drink that is one-of-a-kind.
Granite hopes to begin marketing the product in 2004. Sales potential is well over $1 million per year.
Kelate Cu. This is a specialty product used in cosmetics.
It is distributed through Distributor A by special arrangement.
Their largest customers are Estee Lauder and Revlon.
Sales of this product are forecasted to be between $140,000 and $175,000 per year.
Melasyn 100. This is a synthetic form of natural melanin.
It is used as a pigment for vitiligo preparation and as a self tanning agent.
It is water soluble, which makes it easy to formulate in cosmetic preparations.
Granite is working with Customer A to supply this product to Distributor A.
Sales are projected to be at $250,000 in 20019.
G-REZ DB. This is a specialty coating material used on industrial buffing pads.
Granite has developed this product at the request of the Customer C and sales could reach $300,000 in 20019.
Becrosan 2128A. This is a corrosion inhibitor with a bright future.
Similar chemistry has been very successful in Europe for several years.
Granite has manufactured this product on a toll arrangement for Customer B at a level of $65,000 per year.
With marketing, the potential is estimated to be $260,000.
Ion Exchange Resins. Granite provides a toll drying service for Customer D at a level of $35,000 per year.
Recrystallized Flavoring Product A. This is a crude Flavor A extract.
Granite purifies the extract into an edible grade flavoring using our proprietary recrystallization process.
It is then used in both food and tobacco industries.
Granite Industries has teamed up with Distributor B.
The world’s largest distributor of Flavor A, to develop the process.
Broker A is the broker. Estimated sales based on current demand levels are $75,000.
15. Granite Chemical Production Business:Keys to Success
The following variables are the keys to success:
- Meeting market demands.
- Consistent and high quality products.
- Superior customer service.
16. Critical Issues
The critical issues that Granite faces are:
- Pursue controlled growth that dictates that payroll expenses will never exceed sales revenue.
- Constantly monitor customer satisfaction, ensuring that the growth strategy will never compromise service and satisfaction levels.
17. Granite Chemical Production Business:Marketing Strategy
Granite addresses the market through three business segments.
Industrial products, consumer products, and textile chemicals.
Granite is a highly technical niche player.
Who has developed strong alliances with distributors.
Who have powerful channel relationships but lack manufacturing or product development capabilities.
The marketing strategy assumes that Granite will serve these distributors in three ways:
- Toll Manufacturers, customer provides the raw materials and the formulation and we mix to their specifications.
- Custom Manufacturers, customers may provide materials but Granite provides the formulation and the processes.
- Trade Supplier, Granite develops and sells their own lines of products based on industry and customer needs.
18. Financials aspects
This section will offer a financial overview of Granite Industries as it relates to the marketing activities.
Granite will address break-even analysis, sales forecasts.
Expense forecasts and how these reports relate to the marketing strategy.
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19.Granite Chemical Production Business:Break-even Analysis
The break-even analysis is based on running costs.
The “burn rate” costs incurred to keep the business running.
Not on theoretical fixed costs that would be relevant only if Granite closes.
The assumptions in average unit sales and average cost per kilogram depend on averaging.
Granite does not really need to calculate an exact average.
Because this is sufficiently close to help Granite to understand what the real break-even point will be.
20. Sales Forecast
The sales strategy is outlined below in three phases.
- Phase One is to accommodate existing customers.
- And to make sure that current orders and subsequent orders are maintained.
- Phase Two will commence when the facilities are expanded.
- Granite will then be able to accept new clients.
- And contact companies who have shown interest in the products.
- And be able to accommodate their orders.
- Granite plans to hire a high-quality sales person to assist in defining our marketing program.
Both phase one and two will primarily be toll and custom manufacturing.
- Phase Three will begin with the hiring of two additional sales representatives who will develop the end-user program.
The sales forecast assumes no significant change in costs or prices.
Which is a reasonable assumption for the past two years.
The sales in 1999 were $187,521, $241,782 in 2000, and were $269,507 in 20017.
All of these sales were without the benefit of a marketing program.
Granite feels that with a good marketing program.
And adequate manufacturing facilities.
They can achieve a sales goal of $2.9 million in 2018 and over $4 million in 2020.
21. Granite Chemical Production Business:Expense Forecast
The expense forecast will be used as a tool to keep the department on target.
And provide indicators when modifications or corrections must be made.
To insure the proper implementation of the marketing strategy.
22. Granite Chemical Production Business:Controls
The purpose of Granite Industries marketing plan is to serve as a guide for the organization.
The following areas will be monitored to gauge performance.
- Revenue- monthly and annual.
- Expenses- monthly and revenue.
- Research and development as a percentage of sales.
- Customer satisfaction.Difficulties and Risks
- Generating sufficiently large contracts.
- Overly aggressive and debilitating actions by a larger competitor.
- Determining that the business cannot support itself.
- Having liquidate equipment or intellectual property to cover liabilities.
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