Peanut Detective Business Plan

2007

SM 323 Spring 2007Section X4 Team 2

PTA: Professor Donald Santini

April 17, 2007

A device that detects peanut traces in foods, helping those with peanut allergies avoid

potentially deadly allergic reactions.

This business plan is the original work of the undersigned. All facts and figures are authentic. All contributions from

others have been appropriately acknowledged.

Frederick Hoang

Leora Kadisha

Alejandro Moreno‐Paz

Roman Nurik

Salonie Patel

Ryan Shore

Danielle Varney

Table of Contents Executive Summary .............................................................................................................................. 1 Product Need ......................................................................................................................................................... 1 Product Description ............................................................................................................................................ 1 Marketing ................................................................................................................................................................ 1 Operations ............................................................................................................................................................... 2 Information Systems .......................................................................................................................................... 2 Finance...................................................................................................................................................................... 2

Introduction ............................................................................................................................................ 3 Food Allergies ........................................................................................................................................................ 3 Peanut Allergies .................................................................................................................................................... 3

BSure Diagnostic Devices, Inc. .......................................................................................................... 4 Organizational Goal ............................................................................................................................................. 4 The BSure Peanut Detective ............................................................................................................................ 4 Revenue Sources .................................................................................................................................................. 6 Critical Success Factors ..................................................................................................................................... 6

Industry, Trends and Competitive Analysis ................................................................................ 8 Industry .................................................................................................................................................................... 8 Competitive Environment ................................................................................................................................ 9 Positioning the Peanut Detective ............................................................................................................... 11 Competitor Response ...................................................................................................................................... 12

Marketing Plan ..................................................................................................................................... 14 Communication Objectives ........................................................................................................................... 14 Segment Analysis .............................................................................................................................................. 14 Promotional Plan ............................................................................................................................................... 16 Push Strategies ................................................................................................................................................... 17 Pull Strategies ..................................................................................................................................................... 18 Advertisement Design ..................................................................................................................................... 20 Distribution ......................................................................................................................................................... 21 Pricing Strategy .................................................................................................................................................. 23 Sales Projection .................................................................................................................................................. 25

Operations & Manufacturing Plan ................................................................................................. 27 Product Design ................................................................................................................................................... 27 Patent Information ........................................................................................................................................... 29 Plant Characteristics ........................................................................................................................................ 30 Management Level Employees .................................................................................................................... 32 Supply Chain ........................................................................................................................................................ 32 Direct Sales .......................................................................................................................................................... 41

Situational Analysis .......................................................................................................................................... 42 Continued Development ................................................................................................................................ 43

Information Systems Plan ................................................................................................................ 44 Plan Overview ..................................................................................................................................................... 44 Achieving Critical Success Factors ............................................................................................................. 45 Value‐Adding Activities .................................................................................................................................. 46 Core Application Software ............................................................................................................................ 47 Web Strategy ....................................................................................................................................................... 49 Supporting the Business Model .................................................................................................................. 52 Hardware and Telecommunications ........................................................................................................ 53 Data Security ....................................................................................................................................................... 54 Personnel .............................................................................................................................................................. 55 Implementation Schedule ............................................................................................................................. 55 Costs ........................................................................................................................................................................ 56 Summary ............................................................................................................................................................... 57

Financial Analysis & Plan ................................................................................................................. 58 Internal Rate of Return & Net Present Value ........................................................................................ 58 Investment ........................................................................................................................................................... 58 Cash Flows ........................................................................................................................................................... 60 Ratios Analysis ................................................................................................................................................... 62 Risks ........................................................................................................................................................................ 63 Scenarios ............................................................................................................................................................... 65

Why Invest? ........................................................................................................................................... 68 Beyond Year Seven ........................................................................................................................................... 68 Conclusion ............................................................................................................................................................ 68

Table of Exhibits General Exhibit 1: Product Image ..................................................................................................................... 4 General Exhibit 2: Competitive Products .................................................................................................... 10 General Exhibit 3: Product Positioning A .................................................................................................... 11 General Exhibit 4: Product Positioning B .................................................................................................... 12 MK Exhibit 1: Segment Psychographics (Children & Teen Segment Separated) ....................... 15 MK Exhibit 2: Promotional Plan (Year 1) .................................................................................................... 17 MK Exhibit 3: Product Packaging ................................................................................................................... 21 MK Exhibit 4: Holder Purchase Intents ........................................................................................................ 23 MK Exhibit 5: Cartridge Purchase Intents .................................................................................................. 23 MK Exhibit 6: Holder Price Points .................................................................................................................. 24 MK Exhibit 7: Cartridge Price Points ............................................................................................................ 24 MK Exhibit 8: Product Lifecycle ...................................................................................................................... 24

MK Exhibit 9: BASES Sales Forecast .............................................................................................................. 25 OM Exhibit 1: Consumer Attribute Importance Preferences ............................................................. 27 OM Exhibit 2: Distributor Locations ............................................................................................................. 30 OM Exhibit 3: Factory Layout ........................................................................................................................... 31 OM Exhibit 4: Supply Chain Diagram ............................................................................................................ 33 OM Exhibit 5: Supplier Map .............................................................................................................................. 33 OM Exhibit 6: Holder Lead Times ................................................................................................................... 35 OM Exhibit 7: Cartridge Lead Times ............................................................................................................. 36 OM Exhibit 8: Holder Process Time ............................................................................................................... 36 OM Exhibit 9: Cartridge Process Time ......................................................................................................... 38 IS Exhibit 1: Information Systems Plan Summary .................................................................................. 44 IS Exhibit 2: Information Systems Value Chain ........................................................................................ 46 IS Exhibit 3: Implementation Schedule ........................................................................................................ 56 IS Exhibit 4: Pre‐launch IS Costs (w/o $60K in Salaries) ..................................................................... 56 FE Exhibit 1: IRR & NPV ...................................................................................................................................... 58 FE Exhibit 2: Contribution & Ownership..................................................................................................... 59 FE Exhibit 3: Contribution Details ................................................................................................................. 59 FE Exhibit 4: Cash Flows (years 0‐7) (data table values in thousands) ........................................ 60 FE Exhibit 5: Summarized Income Statement........................................................................................... 61 FE Exhibit 6: Breakeven for Cartridges ....................................................................................................... 61 FE Exhibit 7: Company & Industry Ratios .................................................................................................. 62 FE Exhibit 8: Sensitivity Analysis ................................................................................................................... 64 FE Exhibit 9: IRR & NPV for Optimistic, Base, and Pessimistic Cases ............................................. 65 FE Exhibit 10: IRR & NPV for Investors (Opt./Base/Pess.) ................................................................. 66 FE Exhibit 11: Cash Flows for Optimistic, Base and Pessimistic ....................................................... 67

Table of Appendices General Appendices ........................................................................................................................... 69 General Appendix 1: External Product Design ..................................................................................... 69 General Appendix 2: Internal Product Design ...................................................................................... 70

Marketing Appendices ...................................................................................................................... 73 MK Appendix 1: Segmentation Tree ......................................................................................................... 73 MK Appendix 2: Press Release .................................................................................................................... 73 MK Appendix 3: Instruction Manual Contents ..................................................................................... 74 MK Appendix 4: Survey & Result Summary .......................................................................................... 76 MK Appendix 5: Online Post‐Purchase Survey .................................................................................... 79 MK Appendix 6: Focus Group Summary ................................................................................................. 80 MK Appendix 7: Marketing Budget Expenses ....................................................................................... 81 MK Appendix 8: Base Case Sales Forecast ............................................................................................. 82

MK Appendix 9: Online Rebate ................................................................................................................... 83 MK Appendix 10: Introductory Advertisement ................................................................................... 83 MK Appendix 11: Web Commercial Storyboards & Snapshots ..................................................... 84 MK Appendix 12: Magazine Advertisements ........................................................................................ 85

Operations Management Appendices .......................................................................................... 86 OM Appendix 1: House of Quality .............................................................................................................. 86 OM Appendix 2: Organizational Chart (Year 1) ................................................................................... 86 OM Appendix 3: Supplier Information ..................................................................................................... 87 OM Appendix 4: Component Price Breaks ............................................................................................. 87 OM Appendix 5: Economic Order Quantities ........................................................................................ 88

Information Systems Appendices .................................................................................................. 89 IS Appendix 1: Preliminary Operations/Manufacturing ERD ....................................................... 89 IS Appendix 2: Preliminary Data Flow Diagram .................................................................................. 89 IS Appendix 3: Microsoft Dynamics GP Resources ............................................................................. 90 IS Appendix 4: peanutallergy.com Screenshots ................................................................................... 91 IS Appendix 5: Website Details ................................................................................................................... 92 IS Appendix 6: Information System Cost Schedule (w/o IS Manager Salary) ........................ 93

Finance Appendices ............................................................................................................................ 94 FE Appendix 1: Cash Flows & Returns ..................................................................................................... 94 FE Appendix 2: Income Statement ............................................................................................................ 95 FE Appendix 3: Balance Sheet ..................................................................................................................... 96

Executive Summary 1

Executive Summary

Product Need

Currently, the three million people who are diagnosed with peanut allergies have no means

of detecting peanuts in their food. They must rely on incomplete nutrition labels and other

inaccurate means to decide if there are peanut traces in foods. The Peanut Detective will

fulfill this need for a diagnostic device by accurately and quickly informing the consumer of

peanut contents within a food item.

Product Description

The Peanut Detective, which will be slightly larger than a USB flash drive, is comprised of

two components, a holder and a cartridge. The holder will contain the electronics of the

device, including the LED lighting, which will illuminate green if the food is safe to eat and

red if the food contains peanut traces. The cartridge, which will be one time use only, will

contain the chemicals necessary for the device to work. The chemicals will be contaminated

after each usage, which warrants the one time use.

Marketing

The Peanut Detective is targeted towards children and teens, ages 2‐17, and adults 18 and

older. These two markets are made up of 2.5 million people, whose reactions to peanut

ingestion lead to hives, vomiting, and anaphylaxis. Marketing towards the first segment will

target parents and guardians, for they will be the buyers. These advertisements will appeal

towards a mother’s maternal instincts. Advertisements targeting the adult segment will be

more light hearted, portraying slightly comical situations. The Peanut Detective will be

distributed through major drug stores including CVS, Walgreens, and Rite Aid. Consumers

will also be able to purchase the Peanut Detective online (www.bsuredd.com), where a

subscription plan can be set up and customized to the consumers’ needs. The holder will

sell for $41.99, assuming a 39% retailer markup. The cartridge will sell in boxes of 16, for

$58.40, and boxes of eight for $29.20, assuming a 35% retailer markup. $8 rebates will be

included with the larger cartridge boxes, and can be redeemed at the BSure website.

Executive Summary 2

Operations

All thirteen components needed for production will be purchased from suppliers. However,

none of the production process will be outsourced. The variable costs per cartridge unit are

$1.68 in year 1, where price breaks will not be available. Eventually, cartridge price will

drop to $1.62 per unit due to price breaks. The holder will cost $1.92 to produce in year 1,

dropping to $1.87 once demand enables price breaks on plastics and packaging. Labor

costs are minimized through the usage of part time labor. Machines, needed for cartridge

production, will cost $100K; one machine will be necessary in year 1 and eight machines in

year 7. BSure will use a chase strategy to keep inventory levels low, necessitated by

expiration dates on the cartridge and holder, which limit the amount of time each unit can

spend in finished goods holding.

Information Systems

Information systems will be used in order to achieve the following three critical success

factors: exceptional product reliability, rapid customer base expansion, and secure

intellectual capital management. IS will also integrate and monitor all aspects of inventory

management in order to keep inventory levels low and track quality throughout the

production process. A web site will be set up where consumers can learn about peanut

allergies as well as purchase the Peanut Detective.

Finance

BSure will provide investors with a rate of return of 55% and a net present value of $2.6

million. Within four years, investors will recover their initial investments and receive

increasing cash flows through year 7. To achieve these cash flows, investments of $1.4

million are needed from investors over a three year period. By the end of year 7, 286K

holders and over 30 million cartridges will have been sold. After year 7, with a terminal

value of $15 million dollars, BSure will explore the option of expansion into diagnostic

devices for other food allergies such as tree nuts and egg, which are two of the more

prominent food allergies.

Introduction

Introduction 3

Introduction

Food Allergies

Food allergies are irregular responses to food that are triggered by a reaction in the

immune system.1 They are characterized by symptoms ranging from hives to anaphylaxis,

which is a severe respiratory reaction involving the closing of the throat. According to the

Food Allergies Initiative, over 11 million people in the United States are affected by some

form of food allergy, and that number is growing.2

Peanut Allergies

Peanut allergies are characterized by reactions to peanuts or peanut bi‐products. They are

the most common form of food allergies in the United States—of the 11 million food allergy

sufferers, an estimated three million people are diagnosed with peanut allergies.3 The

biggest concern with this allergy is the severity of its reactions: “As the most common cause

of life‐threatening allergic reactions, peanut allergies account for 80 percent of fatal or

near‐fatal allergic reactions each year.”4

At this time, peanut allergy sufferers have unreliable ways to prevent these potentially

deadly allergic reactions. There are no preventative medications or devices currently

available on the market. Reactionary medications currently available include Merck’s

EpiPen, Pfizer’s Benadryl, and calamine lotion (see Competitive Environment for further

information). Other alternative methods include examining food labels for packaged foods,

asking restaurant waiting staff for assistance about ingredients in the meal, and avoidance

altogether.

1 "food allergy." MedicineNet. MedicineNet Inc., 2001. Answers.com 11 Apr. 2007. http://www.answers.com /topic/food‐allergy‐2 2 “food allergy information.” Food Allergy Initiative, Food Allergy Initiative (FAI)., 1970. 11 Apr. 2007. http://www.foodallergyinitiative.org/section_home.cfm?section_id=3 3“Peanut Allergy, the shocking facts.” MecicineNet, MedicineNet Inc., 2002. PeanutAllergyResource.com 11 Apr. 2007. http://www.medicinenet.com/script/main/art.asp?articlekey=15618 4 “Peanut Allergy” Mayo Clinic, 2006. Mayoclinic.com 11 Apr. 2007. http://www.mayoclinic.com/health/peanut‐allergy/DS00710

BSure Diagnostic Devices, Inc. 4

BSure Diagnostic Devices, Inc.

Organizational Goal

The organization’s overall goal is to capitalize on the unmet market need for a reliable,

preventative measure against peanut‐related allergic reactions. To achieve this goal, BSure

has developed the Peanut Detective, a consumer device that detects peanut traces in foods.

The organization’s success also depends on the Peanut Detective’s ability to become the

leading prevention method in the United States within five years.

The BSure Peanut Detective

With the Peanut Detective, consumers will be able to test a large variety of foods before

consumption to verify that there are no peanut traces present. The product will enable

users to avoid allergic reactions and help prevent uncomfortable or painful usage of

medication or unnecessary hospital visits. Key attributes of the product include:

• 99.99% accuracy • Easiness of use, can be taught to children five and older • Ability to test a large variety of foods • 45 second response time • Discrete size

General Exhibit 1: Product Image


Product Usage

To test foods, the consumer inserts a disposable Peanut Detective cartridge into a reusable

holder. Next, he or she takes off the cartridge cap, brushes the device over the food, snaps

the cap back on, and pushes the “test” button. In 45 seconds, the Peanut Detective holder

will indicate, with either a green or red light, whether the food contains traces of peanuts. A

red light indicates that the food has traces of peanut bi‐products and should therefore not

be consumed, while a green light indicates that the food is safe to eat. In a situation where

there is not a proper sample size or the test is inconclusive, the test will show a red light,

indicating the presence of peanut. This default feature is to prevent false negative results.

However, with an accuracy of 99.99%, consumers will be able to trust the outcome in all

but very rare cases.

Consumer research has indicated that over 76% of people diagnosed with peanut allergies

alter their frequency of eating outside their home to avoid potential reactions.5 The Peanut

Detective will help alleviate this problem, allowing consumers to feel safe in many locations

such as restaurants, camps, friend’s or relative’s houses, and their child’s school, among

other desired locations. The Peanut Detective will be able to test a large variety of foods at

these locations, including cookies, pasta, sauces, and meats. Generally, any food with a

consistency similar to or thicker than oil can be tested with the product.

Consumers using this product will be able to ease food‐related anxiety and experience a

tremendous positive lifestyle change. Worrying about a peanut allergy influences many

daily decisions; with the Peanut Detective, consumers will be able to trust the foods they eat

knowing that they can use a device that can protect them against the consequences of an

allergic reaction. There are currently no preventative products on the market, and the need

for protection against these severe reactions is growing.

5 Peanut Allergy Survey. WebSurveyor.<http://desktop.vovici.com/Default.aspx>


Revenue Sources

The Peanut Detective will generate revenues through two distinct channels. The product

will mainly be sold in traditional drug stores such as CVS and Walgreens. Direct internet

sales, which will include refill subscription plans, will provide a steady alternate revenue

stream.

Critical Success Factors

The Peanut Detective’s, and consequently the organization’s, success depends

tremendously on a variety of critical success factors, each relying on different functional

areas of the organization. Product reliability, consumer base expansion, and intellectual

capital management were each carefully considered in the development of the Peanut

Detective plan.

Exceptional Product Reliability (Operations, IS)

The Peanut Detective must maintain 99.99% accuracy for each usage of the product

because of the potentially deadly consequences of false negative results for customers.

Although both the holder and cartridge are designed for high accuracy, effective supply

chain management and meticulous manufacturing control will be crucial to achieving high

reliability.

Rapid Customer Base Expansion (Marketing, IS)

Because the market for peanut allergy products is relatively small, it is important for a

company in this industry to achieve high segment awareness levels to generate sufficient

revenues. BSure will strive to achieve 25% segment awareness by its peak year of demand.

More specifically, the goal will be to increase awareness anywhere from 3‐5% each year.

The organization will also strive to achieve a 95% customer satisfaction level by the second

year of operations. Satisfied customers will contribute word‐of‐mouth awareness thus

increasing sales.


Secure Intellectual Capital Management (Information Systems)

In a such a high technology operation, intellectual property must be carefully managed.

BSure will aim to stay ahead of the technology curve by obtaining at least one medical

technology patent per year after year 1.

To keep human and structural capital within the organization, BSure will focus on retaining

its employees and keeping its data secure.

Industry, Trends and Competitive Analysis 8

Industry, Trends and Competitive Analysis

Industry

The Peanut Detective will be classified in the Chemicals and Allied Products industry under

the sub category of In Vitro6 and In Vivo7 Diagnostic Substances. This category is SIC code

28358 and NAICS code 3254139. The device is classified as an in vitro device as it performs

the chemical test inside a controlled environment and outside a living organism (e.g. after

the airtight cap is applied and the chemical pouch is pierced). The product however will be

categorized as a self diagnostic device.

The self diagnostics device industry has grown over the past few years as the population in

general has become more health conscious and comfortable using technology. It has also

grown due to lower prices and easier to use product designs.10 Many large corporations are

part of this industry. Among the largest is Switzerland’s Roche Group with a 17% market

share of global diagnostic devices. Closely following is Abbott Laboratories with a 15%

market share and Johnson & Johnson with an 11% market share.11 While all of these

companies manufacture self diagnostic devices, none make a peanut detection device.

BSure will therefore be creating a new niche sub industry within the self diagnostic device

industry.

Trends

There are a variety of socioeconomic trends that will impact the success of the Peanut

Detective. Immigration into the United States has been steadily increasing and has brought

with it exposure to new cultures and subsequently new cuisines. Asian influence in the

6 Reaction occurs outside of the body 7 Reaction occurs inside the body 8 "In Vitro and in Vivo Diagnostic Substances." Standard Industrial Classification. U.S. Department of Labor. 1 Apr. 2007 <http://www.osha.gov/pls/imis/sic_manual.display?id=609&tab=description>. 9 "In Vitro Diagnostic Substance Manufacuring." 2002 NAICS Definitions. 5 May 2003. U.S. Census Bureau. 1 Apr. 2007 <http://www.census.gov/epcd/naics02/def/ND325413.HTM>. 10 Marquez, Rachelle C. "Home Self‐Testing Market Grows as Medial Costs Rise." The Business Journal 15 (1997): 6. 11 Pearce, Lynn, ed. "In Vitro and in Vivo Diagnostic Substances." Encyclopedia of American Industries. 4th ed. 2 vols. Thomas Gale, 2005.


United States is growing, as 200 to 300 thousand people from Asian countries immigrate to

the United States each year. As a result of this immigration influx, sales of Japanese, Thai,

Vietnamese and other pan‐Asian cuisines rose 250% between 1996 and 200012. BSure has

found through market research that people with peanut allergies avoid Thai and other

Asian restaurants because of the high concentration of peanuts in such cuisines.

Travel also has a big impact on the Peanut Detective. In 2000, 61 million Americans made

trips overseas, representing over 20% of the United States population.12 Less regulation of

food labels in foreign countries represent a vital time in which the Peanut Detective can be

used to test foreign and unknown foods. In some European countries for example, an

ingredient is required to appear on a label only if it constitutes more than 25%13 of the

product. Ingredients like peanuts that are usually used in small quantities are many times

omitted. In other foreign countries, regulation is even more lax.

Competitive Environment

The product’s chief competitors will be those who make products that are reactionary, as

there are no currently available preventative products against peanuts. A company named

Tanox was recently developing a preventative drug named TNX‐901 that they hoped would

increase sufferers’ resistance to peanuts14. Legal issues, however, prevented the drug from

entering the market15. Future competitors for the Peanut Detective are those companies

developing similar drugs that will fight allergic reaction to peanuts. BSure does not believe

that such drugs will be released and widely adopted during the main years of operations. A

comparison of current competitive products can be found in General Exhibit 2, followed by

a brief description of each.

12 "Emerging Ethnic Foods." Mintel Reports. Mintel, 2002. 1 Apr. 2007. 13 Nicolas, Nathalie, Joyce W. Yu, Ann Clarke, Rhonda Kagan, Nina Verrault, Lawrence Joseph, and Yvan St. Pierre. "Accidental Ingestions in Children with Peanut Allergy." The Journal of Allergy and Clinical Immunology 118 (2006): 471. 14 Merz, Beverly. "Studying Peanut Anaphylaxis." The New England Journal of Medicine 348 (2003): 975‐976. 15 Pollack, Andrew. "Wrangling May Delay Peanut Allergy Drug." The New York Times 13 Mar. 2003, Late ed., sec. C: 1.

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This drug is currently being researched and developed by Tanox, a biotherapeutics

company. It will not be designed as a cure to peanuts allergies, but rather will defend

against a reaction when small quantities are consumed or touched. TNX 901 will not be

released within the lifetime of the Peanut Detective, however, it is still in the early stages of

development and the company behind the drug is currently facing legal problems.20

Positioning the Peanut Detective

Although the EpiPen is the most commonly used product21 to treat peanut‐related allergic

reactions, it is painful to use—this discomfort in usage is a quality of many reactive

treatments. Antihistamines such as Benadryl and skin lotions such as calamine lotion are

also slow to react and can only help if the reaction is not too severe. The Peanut Detective

will be positioned as the only reaction prevention method for consumers; it will also be

positioned for quick response time (45 seconds). A positioning map illustrating these

dimensions can be found in General Exhibit 3.

General Exhibit 3: Product Positioning A

19 , Beverly. "Studying Peanut Anaphylaxis." The New England Journal of Medicine 348 (2003): 975‐976. 20 Pollack, Andrew. "Wrangling May Delay Peanut Allergy Drug." The New York Times 13 Mar. 2003, Late ed., sec. C: 1. 21 "Allergic Reactions & Anaphylaxis Allergy." EpiPen. Merck & Co. 1 Apr. 2007 <http://www.epipen.com/>.


In comparison to other methods of coping with food allergies, the Peanut Detective is

reliable and gives fast results. Other coping methods such as asking restaurant wait staff

are less reliable because of human error and negligence. The Peanut Detective will be

99.99% accurate and thus extremely reliable. A positioning map for these dimensions can

be seen in General Exhibit 4.

General Exhibit 4: Product Positioning B

Competitor Response

The organization expects to be the only peanut detection device on the market until at least

the third year of operations, as it will take the competition time to develop a product

similar to the Peanut Detective. In the third year, the organization expects to have at least

one competitor enter the market. BSure will maintain the majority of the market share due

to the fact that by year 3 the product will have had built up consumer loyalty and trust

through proven reliability of the product and through the usage of the company’s

community‐driven website (see Web Strategy).

Another foreseeable response from potential competitors is the buyout of the company in

the future. The self diagnostics industry has witnessed a fair amount of consolidation over

the past few years involving larger companies acquiring smaller ones in order to provide


lesser known products with more marketing muscle.22 Larger corporations such as Johnson

& Johnson and Abbott Laboratories may acquire BSure Diagnostic Devices once the Peanut

Detective proves its profitability.

22 "Self Diagnostic." Mintel Reports (2004). 1 Apr. 2007.

Marketing Plan

Marketing Plan 14

Marketing Plan

Communication Objectives

BSure is focusing on four primary marketing objectives:

• Gain the target segments’ trust in the Peanut Detective by the end of year 2 • Achieve a national awareness of 25% by year 7 (spurring customer base expansion) • Develop the website as an information hub, partly by partnering with four doctors

by year 2 for web‐blogging • Have online revenues account for 20% of total sales by the end of year 7

The success of the Peanut Detective will be dependent upon BSure’s ability to build trust

with its consumer base by gaining the support of respected doctors. Through an effective

marketing campaign, the Peanut Detective will gain the trust needed to build consumer

loyalty among peanut allergy sufferers and their guardians.

Segment Analysis

BSure identified three market partitions in the category of peanut allergy sufferers; those

who experience mild irritations, such as an itchy throat or small rashes, those who

experience hives, vomiting, and anaphylaxis if peanuts are ingested, and those who

experience severe reactions from touching or smelling peanuts. BSure plans to target those

who experience hives, vomiting and anaphylaxis if peanuts are ingested. This is the largest

target market, with 2.5 million people. The Peanut Detective will not be targeting the other

two categories because research analysis has indicated that people with mild irritations are

not concerned enough with their allergy to purchase the Peanut Detective. In contrast,

those who experience a severe reaction by merely touching or smelling traces of peanut

would not use this device because it would not fulfill their needs (see MK Appendix 1).

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Marketing Plan 16

is also likely to use the Peanut Detective at a variety of locations from schools and camps to

restaurants and malls.

Adults

With a population size of over 1.6 million people and a growth rate of 1%, this segment is

categorized as being self‐purchasers, indicating they will purchase the Peanut Detective for

themselves or someone in their demographic, such as a spouse. Consumer research has

shown that 75% of those who eat out are influenced by their peanut allergy. Survey data

also indicates that half of this target segment eats at restaurants about four times per week.

The Peanut Detective is specially positioned and marketed to capitalize on these lifestyle

needs by advertising its minimalistic design, quick response time, and portability (see MK

Appendix 10).

Promotional Plan

Marketing Budget

BSure will begin rolling out the Peanut Detective nationally in January 2008. A summary of

promotional activities can be found in MK Exhibit 2. In year 1, BSure is setting aside $400K

for marketing and promotional purposes, which will be distributed amongst the push and

pull strategies highlighted below. For years 2 through 7, the marketing budget will increase

with sales, although at a lesser rate. The year 2 marketing budget will be $460K and

continue to grow to $1.1 million in year 7.

Marketing Plan 17

MK Exhibit 2: Promotional Plan (Year 1)

Push Strategies

Doctor Kits

The most effective way to reach allergists and related professionals is to send customized

doctor kits. Included within these doctor kits will be the product itself and a BSure

informational CD. The CD will include a thorough medical and scientific explanation of the

product as well as testimonials from respected allergists from around the country. It will

also educate doctors on the benefits of the Peanut Detective and how to use this product

correctly. Doctor kits will ship out until the end of year 3, at which point the Peanut

Detective will have built up enough trust and credibility among consumers.

Press Kits

In order to generate buzz and awareness, BSure will provide 150 low‐cost press kits to

large and small magazines as well as talk shows. At an annual cost of $200, these press kits

will build 0.65% awareness. Starting in year 1, BSure anticipates at least two annual write‐

ups from magazines with high circulations. An example press release that would be

packaged in press kits can be found in MK Appendix 2.

Jan Feb Mar April May June July Aug Sept Oct Nov DecPULL Magazines Web MD

Online Advertising Peanutallergy.com Allergykids.com Blogs Rebates PUSH Promotions Doctor's Kits Press Kits Eastern Allergy Conference MD&M East

Marketing Plan 18

Medical Conferences

BSure will enter two medical conferences each year. These medical conferences are held

once a year in different states across the country. In the first two years, BSure will set up

booths at the Medical Design and Manufacturing (MDM) conference as well as the Eastern

Allergy (EA) conference. These conferences showcase medical devices and other ways of

coping with different types of allergies. The MDM conference will be replaced in year 3 by

the larger and more respected Florida International Medical Expo (FIME) to reach new

audiences. Even though these three conferences only generate a total awareness of 0.31%,

they are a reputable way of getting the product noticed by doctors, allergists and medical

specialist.

Pull Strategies

Online Ads

Not only does PeanutAllergy.com reach a population magazines cannot, but it is also the

most cost‐effective and valuable outlet for advertising. Costing only 6% of the first year

marketing budget (see MK Appendix 7), it contributes over 35% of the total awareness

generated due to the fact that the website is accessed and read by many people in both

Peanut Detective target segments. Another inexpensive website BSure will be advertising

on is AllergyKids.com. This site has received national exposure on major media outlets.

Allergykids.com helps parents cope with their children’s food allergies. Advertising on

these two websites will be vital for the Peanut Detective in creating segment awareness and

thus boosting sales.

The BSure Website

Given the scope of the product’s distribution, the primary goal of the company website is to

become a trusted web resource for expert advice as well as the latest information about

peanut allergies. Accordingly, the website will include news, information, and discussion

sections that doctors are encouraged to participate in. Doctor web‐blogs about peanut

allergies will only amplify BSure’s credibility as a trustworthy brand (see Web Strategy).

Marketing Plan 19

An equally important goal of the website will be to sell the Peanut Detective directly to the

consumer. By selling directly to the customer, BSure will be able to obtain much higher

profits than if sold through retailers, whose markups nearing 40% require a lower

manufacturing selling price. The website will account for 5% of sales in year 1 and rise to

20% of sales by year 7.

However, BSure will make certain that the website’s public image centers around

distributing information and establishing community. To appear unbiased and impartial,

this website will feature alternative means of dealing with allergies, such as Benadryl,

EpiPen, and calamine lotion; further increasing the site’s credibility (see IS Appendix 5).

Magazines

Reaching a target market that is distributed on a national level can be expensive, especially

for a startup business. A solution to this problem is to communicate via far‐reaching and

expansive mediums such as magazines. The Peanut Detective will appear in highly

circulated magazines such as WebMD and Health.

WebMD is a medical magazine sent to 85% of medical waiting rooms across the United

States24. This magazine reaches millions of readers each month, many of them concerned

about their health and the health of others. It is very likely that users in the target segments

viewing a Peanut Detective advertisement in this magazine will ask their doctor about the

product during their visit.

Health magazine’s target audience includes young professionals as well as parents. Each

month the magazine publishes articles about allergies and methods to cope with them. As a

result many parents of children with peanut allergies read this publication each month.

Both WedMD and Health will hit the desired target segments generating awareness of

1.92% and 0.76% respectively. Health magazine will not be part of the promotional plan

until year 3 as their ads are costly and the organization’s budget will be tight. WebMD, on

24 Haskin, John. "Patients in waiting rooms throughout the United States".The Magazine Group. 9 April 2005 http://www.themagazinegroup.com/clients‐case‐studies‐webmd.asp

Marketing Plan 20

the other hand, will be part of the promotional strategy from the start as their ads are less

costly.

Advertisement Design

Since mothers have the final buying power and influence over the children and teens

segment, BSure will deploy a specialized campaign targeting maternal responsibilities and

instincts. The tone and mood for this campaign will be dramatic and emotional to

specifically attract the attention of mothers. Visually, this campaign will utilize images of

children, toddlers, and families to stimulate the connection between family members (see

MK Appendix 11). BSure expects mothers to respond passionately and become emotionally

attached to the Peanut Detective’s message. The focus is not just on the product’s immediate

benefits but also on whom the product is affecting and their lifestyle. In order to keep this

campaign fresh, ads will periodically be presented in a clever and light‐hearted tone.

Unlike the children and teens segment, the adult segment is difficult to reach due to media

saturation. Therefore, comical ads will be used to engage the 18‐24 year old age range,

which will have a stronger impact than a scientific or educational approach. Furthermore,

because this segment is young and computer savvy, online video advertisements will be

used at peanutallergy.com and allergykits.com (see MK Appendix 11). The objective will be

to reach as much of the adult segment as possible by differentiating the Peanut Detective as

a preventative device.

Brochures and Packaging

The Peanut Detective holder will come packaged with four cartridges and an instruction

manual. Both the holder and cartridge packaging will clearly indicate how to use the

product, the chemicals involved in the process, the name of the primary website

(www.bsuredd.com) and a phone number (1‐800‐2BE‐SURE) for customer service

available five days a week. The packaging will emphasize BSure’s token green and maroon

colors, which will be prevalent on most of BSure’s products and advertisements (see MK

Exhibit 3).

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Marketing Plan 22

has been declining at a steady rate, according to a recent Mintel industry report.25 Market

research has shown that consumers trust products that are purchased from drug stores

rather than supermarkets.26 Given the nature of the Peanut Detective and statistics from the

industry report, BSure has decided to retail solely through drug stores.

In year 1, BSure will target three of the major players in the drug store industry: CVS,

Walgreens and Rite Aid; selling through these stores will achieve an all‐commodities‐

volume (ACV) of 3.15%. This strategy was chosen because the biggest three drug stores,

with a market share of 47.3%, are the most effective outlets for reaching the peanut allergy

population. Furthermore, CVS, Walgreens, and Rite Aid all have nationwide stores; this

helps to enact the nationwide rollout.

In the subsequent years, BSure will strengthen its position on the coastlines. In year 3, the

Peanut Detective will be sold at Longs Drug Store, which has a prominent market share on

the west coast. In year 4, BSure will complement this position with more east coast

exposure by offering the product in Duane Reade, New York’s most popular drug store. The

estimated store penetration rate will be 20% in year 1 and will swell to 85% by year 7.

Sales Force

BSure will employ sales representatives to maintain relationships with individual retail

stores. To simplify sales force management, the organization will divide the country into

three regions: east, central, and west. The east and west coasts are top priorities due to

higher population densities; they will require two sales representatives to target “A” level

drug stores, which are the 20% of stores that generate 80% of total sales for a corporation.

The organization estimates that there are 912 “A” level drug stores nationwide.

Specially trained sales representatives are preferred over third party sales representatives

for a number of reasons. Trained sales representatives are paid a salary and bonuses,

ensuring their loyalty to the company. Third party sales reps on the other hand, depend

entirely on commission and usually work for multiple companies, often dedicating the

25 “Self Diagnostic." Mintel Reports (2004). 1 Apr. 2007. 26 Focus Group, MK Appendix 6: Focus Group Summary.

Marketing Plan 23

greatest effort to the employer offering the largest reward. Therefore, BSure will employ

two sales representatives for year 1, and three additional representatives in succeeding

years to meet increasing distribution requirements.

Pricing Strategy

The Peanut Detective consists of two parts: the holder and the cartridge. The holder is

priced at a revenue maximizing retail price of $41.99 (according to surveyed purchase

intent, see MK Exhibit 4) and includes four one‐time use cartridges. Each cartridge will be

priced at a revenue maximizing retail price of $3.65 (see MK Exhibit 5); therefore, 8 and 16

cartridge boxes will sell for $29.99 and $58.99, respectively.

As previously mentioned, the box of 16 cartridges will contain a coupon for an online

rebate of $8. According to customer research, 41% of buyers are willing to purchase the

packages of 16 cartridges.27 Of these buyers, an estimated 5% will fill out the online rebate.

To avoid channel conflict, website prices will reflect the estimated markup retailers will

use on the Peanut Detective, although retail and online sales events may differ in timing.

27 Peanut Allergy Survey. WebSurveyor.< http://desktop.vovici.com/Default.aspx>

MK Exhibit 4: Holder Purchase Intents

MK Exhibit 5: Cartridge Purchase Intents

R² = 0.993

0%5%

10%15%20%25%30%35%40%45%

$0 $20 $40 $60 $80

Expe

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Purchase Intent

Holder Price

R² = 0.852

0%

5%

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$0.00 $1.00 $2.00 $3.00 $4.00 $5.00 $6.00

Expe

cted

Purchase Intent

Cartridge Price

Marketing Plan 24

Starting in year 4, the price will drop by 5% for the holder and by 1% for the cartridge

every year to help battle entering competition in year 3 (see MK Exhibit 6 and MK Exhibit 7).

By year 7, peak product demand will be reached due to competition and the potential

entrance of competitive new drugs (see MK Exhibit 8).

MK Exhibit 6: Holder Price Points

MK Exhibit 7: Cartridge Price Points

MK Exhibit 8: Product Lifecycle

Due to the nature of the industry and the product, consumers have to trust the product

before using it. BSure will have by then established significant customer loyalty through its

reputable reliability as well as its community‐driven website. BSure will also have a

competitive edge over new similar products because of its industry experience and

obtainment of design patents. Furthermore, the declining pricing strategy will maintain

Holder Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7Retail Price per Unit $41.99 $41.99 $41.99 $39.89 $37.90 $36.00 $34.20Retail/Distribution Margin (39%) $11.78 $11.78 $11.78 $11.19 $10.63 $10.10 $9.60BSure Selling Price per Unit $30.21 $30.21 $30.21 $28.70 $27.26 $25.90 $24.61Variable Cost $8.61 $8.66 $8.75 $8.80 $8.85 $8.88 $8.91

Cartridges Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7Retail Price per Unit $3.65 $3.65 $3.65 $3.61 $3.58 $3.54 $3.51Retail/Distribution Margin (35%) $0.95 $0.95 $0.95 $0.94 $0.93 $0.92 $0.91BSure Selling Price per Unit $2.70 $2.70 $2.70 $2.68 $2.65 $2.62 $2.60Variable Cost $1.63 $1.63 $1.64 $1.65 $1.65 $1.65 $1.65

$0 M

$5 M

$10 M

$15 M

$20 M

$25 M

$30 M

$35 M

0 2 4 6 8 10 12 14 16

Revenu

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Year

Total Sales

Decline PhaseMaturity

Phase

Growth Phase

Intro Phase

Marketing Plan 25

growth by limiting competition‐related effects resulting in no higher than 20% of sales in

years five through seven.

Sales Projection

Base Case

The base case was calculated assuming that it takes four impressions to make a person

aware of a product. Furthermore, a 33.7% purchase intent was calculated by analyzing 277

surveys28 and based on the 80/30 rule of thumb. In addition, a repurchase rate of 37.5%

was projected for the holder and 76% for the cartridge. As shown in the BASES model (see

MK Exhibit 9), BSure will generate a demanded quantity of 2,661 for the holders and

281,931 cartridge units in year 1. These projections are calculated using the previously

determined 7.28% awareness rate and 3.15% ACV figures.

MK Exhibit 9: BASES Sales Forecast


Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Target Market

2,500,000 2,560,000 2,622,350 2,687,161 2,754,549 2,824,638 2,897,554

Purchase intent

34% 34% 34% 34% 34% 34% 34%

Adjusted Target Market

843,250 863,488 884,519 906,379 929,110 952,750 977,345

Awareness 7.28% 8.17% 11.50% 14.68% 17.63% 21.37% 27.66%

ACV 3.15% 7.09% 18.46% 22.49% 23.99% 32.98% 33.98%

Holder units 2,661 6,880 23,240 34,966 43,235 73,871 101,052

Cartridge Units

281,391 727,533 2,457,515 3,697,466 4,571,875 7,811,556 10,685,745

Marketing Plan 26

Optimistic Case

In the most optimal case, BSure expects that it would take three impressions to make a

person aware of the product. The repurchase rates in this case are estimated to increase

from 37.5 % to 45% for the holder and from 76% to 85% for the cartridge. Store

penetration used for ACV calculations is estimated to increase from the base figure of 20%

in year 1 to 25% in the best case. Thereafter best case penetration continues to increase at

a faster rate than base case. This results in a demand of 17.9 million cartridge units and

160K holders in year 7.

Pessimistic Case

In a pessimistic scenario, it would take five impressions to make a person aware of the

product. The repurchase rate could decrease from 76% to as low as 65% for the cartridge

and from 37.7% to 30% for the holder. Store penetration could be as low as 15% in year 1,

resulting in a worst case demand of approximately 1,500 holder units and 146K cartridges

in year 1. The pricing strategy would also differ in this scenario—beginning in year 3, the

price would begin to drop by 5% for the holder and 1% for cartridges.

Operations & Manufacturing Plan

Operations & Manufacturing Plan 27

Operations & Manufacturing Plan

Product Design

Customers purchasing a peanut detection device put their complete trust in the product.

The consequences of the products’ failure are severe, in some cases even fatal. Customers

therefore demand a product that not only tests a large variety of foods, is easy to use, quick

responding, portable, and visually appealing, but most importantly, customers require

extreme accuracy (see OM Exhibit 1). Accuracy is crucial to any device when false responses

could lead to severe side effects, ranging from hives to possible death in the more extreme

cases. While severely allergic people may not trust peanut detection devices, it is still

BSure’s number one priority to guarantee the product works flawlessly, every time,

without exception. Therefore, all aspects of the Peanut Detective, from initial design (the

details of which can be found in General Appendix 2), to the production process, to the final

shipping methods are designed with accuracy in mind.

OM Exhibit 1: Consumer Attribute Importance Preferences

Test Large Variety of Foods

Consumers highly prioritize the ability of the Peanut Detective to test a large variety of

foods. There are many different forms of peanuts found in everyday foods; from traces in

candy bars, to peanut oil in Asian cuisine, to the homemade cookies at a friend’s house. As a

result, the cartridges need to have a tip that is both capable of scraping a candy bar while

also having the ability to capture even the lightest pasta sauces. Therefore, each cartridge

tip (also referred to as “metal mesh”) is made of high grade sterilized steel wool. The steel


wool is strong enough to be rubbed against solids, coarse enough to take a bite out of a

candy bar, and yet airy enough to suspend sauces and other liquids. This ensures that the

tip can provide a large enough sample to provide the required device accuracy.

Minimize Parts

The BSure Peanut Detective is manufactured with as few pieces as possible, thus

minimizing complexity that can lead to product failure. Additionally, reducing excess parts

and complexity allows the Peanut Detective to be relatively inexpensive to construct, which

carries over to a lower cost to the consumer. This is a product that has the ability to change

the way people live by allowing them to feel confident while they eat. It was therefore of

upmost concern that the Peanut Detective be easily obtainable by the general public, which

is accomplished through a relatively low retail price compared with other self diagnostic

products, made possible by low manufacturing costs. In effect, the Peanut Detective can be

priced as a convenience item opposed to a shopping item.29

Small Inconspicuous Design

Through surveys, consumers between the ages 18‐24 indicated they do not want to be

liberated from their fear of an allergic reaction if it meant being embarrassed by public

attention. Therefore, the product was designed to be as small and inconspicuous as

possible (see General Appendix 1). The goal in the design was to make the holder no larger

than a USB flash drive. While certain requirements mandated a slightly thicker design, the

end product is not only small, but it is designed to fit on a keychain, thereby ensuring the

consumer never leaves home without it. As for the actual appearance of the Peanut

Detective, it is purposefully clean and minimalistic so as to minimize attention. Moreover,

the red and green LED lighting would most likely be mistaken for a computer device; this

will increase the designers’ attempts to have the Peanut Detective appear similar to an

ordinary USB Flash Drive, opposed to an attention grabbing medical device.

29 Kerin, Roger A, Steven W. Hardley, William Rudelius. Marketing The Core. 2. New York, McGraw‐Hill. 2007 p.215.


Ease of Use

Another advantage to the small minimalistic design is ease of use. There will be no buttons

to decipher, no assembly required, and symbols to decipher. Simply insert a cartridge into

the holder, which would be possible to insert in only one direction, press a clearly marked

button on the holder, and wait for a red or green LED light to illuminate, indicating the

presence of peanuts. It is simple, easy, and the true test—even a child can do it, as focus

groups demonstrated.

Quick Response Time

Designers at BSure acknowledge that even if the consumer slipped the device into their

food unnoticed, it might be obvious if he or she had to wait several minutes before eating,

especially with other people at the table starting to eat. Therefore, the compact design is

further utilized to guarantee results in less than forty‐five seconds. This is because with a

small design, chemicals do not have to move as far, thereby eliciting quicker reactions. As a

result, the consumer can be quickly informed of the presence of any allergens in the food

being tested. Minimal distances for chemicals to travel means the Peanut Detective requires

less chemicals per cartridge, thus each chemical will be even more diluted with the food

being sampled. This helps ensure 99.99% accurate results.

Patent Information

In order to protect the technology behind the Peanut Detective and maintain a competitive

advantage through intellectual capital and technology advancement, BSure will patent the

Peanut Detective and all subsequent products. BSure, which would apply as a small entity,

would have to pay an initial filing fee of $665, with an additional fee of $450 due in the

middle of year 3.30 The patent, which would last throughout the product life span, ensures

potential competitors will face the struggle of developing a similar product using an

alternative method, which would require significant time to develop and produce. This

30 United States. United States Patent and Trademark Office. FY 2007 Fee Schedule. 08 Dec. 2004. 30 Mar. 2007 <http://www.uspto.gov/web/offices/ac/qs/ope/fee2007february01.htm>.


would give the Peanut Detective ample time to generate awareness, and more importantly,

trust among consumers.

Plant Characteristics

All raw material suppliers, such as packaging, plastics, and chemicals, handle their own

shipments to the BSure factory at a price included in the cost of the raw materials they

supply. Therefore, BSure has chosen to minimize costs by choosing a plant location that is

central to the CVS, Walgreens, and Rite Aid distribution centers, with minimal

consideration for supplier locations. BSure will incur the cost of shipping to the

distributors, which make up the majority of its product destinations. CVS, Walgreens, and

Rite Aid distribution centers are located primarily on the East Coast, as is a concentration

of major cities. Accordingly, location analysis has projected that to minimize costs, optimal

location for the BSure headquarters and factory will be in Louisville, KY (see OM Exhibit 2).

Louisville, being a large city, offers access to major highways, the Louisville International

Airport and nearby railroad transportation centers. Having many different means of

transportation helps avoid the risk of transportation backup caused by unforeseen

circumstances affecting either road, rail, or air travel.

OM Exhibit 2: Distributor Locations

Space Allotment

The factory itself will be rented for $57,375 per year, with a five year lease to prevent rent

from increasing with inflation, property tax, and other fluctuations in the real estate

BSure


market. While this lease amount is significant, the cash required to purchase a factory

would be excessive for BSure to incur in its startup years. Of the total 135,000ft2 facility,

BSure will be renting an 11,250ft2 space, which includes 2500ft2 of air conditioned office

space. The remaining area, which is fan cooled, will be dedicated to the assembly areas,

inventory holding areas, a research and development center, and break rooms for the

factory workers. Adjacent to each of the three inventory holding areas—cartridge raw

materials, holder raw materials, and finished goods holding—is a dock high door for easy

loading and unloading of trucks. While holder demand will be small enough that only one

person is necessary for production, more thought had to go into the cartridge production

area where eight massive machines and over fifteen employees will be working by year 7. A

vibratory feeder will be placed in front of each machine, feeding raw materials through.

After the machine produces the cartridges, materials will be put onto conveyor belts lining

the outside walls, which will bring finished goods through the inspection department and

back to the final inventory holding area. This layout minimizes employee movement and

keeps all movements in the same direction as shown in OM Exhibit 3.

OM Exhibit 3: Factory Layout


Management Level Employees

Overseeing all operations at BSure will be the President, who will have an MBA degree and

extensive sales and marketing background. The president must have at least seven years of

experience, particularly in starting and running a small to midsize company. The manager

and director of operations will also require a college degree and a minimum of three years

of experience in running a production line. Another manager will be added in year 6 to

maintain close control over expanding production. All managers as well as the president

must be strong proponents of supply chain management so that lower level employees will

follow their example. All executives will undergo training in supply chain management,

especially in terms of integrating suppliers smoothly into the supply chain, since BSure

requires thirteen suppliers (see OM Appendix 3). Maintaining a competitive edge through

new technologies requires a scientist to head a research and development department. The

scientist must have a strong background in the food allergy field, so that BSure can

eventually expand into different types of food allergies. With the growth of the company,

the research and development department will also grow in order to continually stay ahead

of the competition by maintaining secure intellectual capital, which is one of BSure’s critical

success factors.

Supply Chain

With thirteen suppliers and only two distributors, the Peanut Detective’s supply chain has a

much larger supply component than demand component. Accordingly, most efforts have

been focused on streamlining the supply side of the supply chain, from the suppliers of raw

materials to production of the Peanut Detective. All efforts have been made to minimize the

costs of raw materials, production, and distribution in order to maintain an affordable

product.


OM Exhibit 4: Supply Chain Diagram

Choosing Suppliers

The first link of the Peanut Detective’s supply chain is the suppliers (see OM Exhibit 4).

BSure strategically chose suppliers based on key characteristics; suppliers were measured

and compared based on quality guarantees, location of facilities, cost of materials, lead

times, quantity discount programs, transportation methods to BSure’s factory, and lastly

whether or not the suppliers had open communication channels. These communication

channels include electronic data interchanges (EDI), which enable BSure’s ERP (see Core

Application Software) to have access to the suppliers’ purchase orders, shipment details,

and invoices.31

BSure has decided to keep all major suppliers within the

United States (see OM Exhibit 5). The decision to stay national

was based on quality assurance and lower lead times, both of

which are crucial to the key raw material, chemicals. Quality

assurance ultimately influences the product’s defect rate,

which must be kept low in order to reduce costs and build a

reliable reputation. Accordingly, BSure will maintain a

supplier policy of “3 Strikes, You’re Out.” This policy dictates

that when a supplier is responsible for defects in a production batch on three separate

occasions, it will be replaced by a secondary supplier. BSure’s information system will

allow the tracing of defective product batches by maintaining detailed records linking

finished goods to the raw material suppliers.

31 Stevenson, Willam. Operations Management. 8. USA: McGraw Hill, 2005. Pg 700

OM Exhibit 5: Supplier Map

BSure


Raw Materials: Make/Buy Analysis

Analysis has indicated that it would be more cost effective to buy all raw materials. Buying

raw materials also allows BSure to minimize inventory; complicating the production

process by manufacturing certain parts would make inventory management less precise

and allow more room for breakdowns. Because the chemicals involved have expiration

dates, delays in any one components’ production would possibly mean having to abandon

massive amounts of chemicals. While any manufacturing plant can have machine

breakdowns, factories specifically equipped to make certain raw materials will be better

equipped for machine failure and quality assurance. This will help ensure that all raw

materials arrive at BSure facilities on time and in functioning condition.

Raw Materials: Order Quantity

Raw material prices will fluctuate in years 2‐7 due to inflation and quantity discounts (see

OM Appendix 4). BSure has been able to utilize quantity discounts for plastics, packaging,

springs, and o‐rings. Using discounted pricing will decrease variable costs on both the

holder and the cartridge, thereby offsetting the additional holding cost associated with

larger ordering quantities. All other ordering quantities are based on the Economic Order

Quantity model (see OM Appendix 5), which assumes holding costs are 30% of the

manufacturers selling price, and order costs are 10% of the manufacturer selling price.

However, adjustments to ordering costs had to be made in order to get more accurate

quantities that include extensive quality inspection costs. Accordingly, year 1 ordering

costs for the holder are $104.98 and ordering costs for cartridge are $164.25. Because most

suppliers are small scale manufacturers, providing small initial order sizes is feasible,

especially since few of the raw materials require specialization with the exception of the

plastics. However, because plastics have the highest lead time of 30 days, holding excess

plastic inventory, mandated by minimum order sizes of 1,000 units, will help hedge against

inventory shortages. Chemicals used in the cartridge have a shelf life of approximately six

months. This constraint will require that contracts between BSure and chemical suppliers

ensure low lead times, fixed or fixed percentage increases of price, and guaranteed quality,

measured by defect rate. When the computer indicates inventory levels have reached the

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Quality Control: Holder

During assembly, employees will be encouraged to stop production of both the holder and

cartridge if they observe quality problems. They will then submit quick defect reports at

the nearest floor computer. At the end of the holder assembly line, each holder will go

through an inspection process. A quality technician will hold the unit under a portable

fluorescent light and confirm that the optic sensor is working properly. This test is to

ensure that the optic sensor can test for chemical reactions. Again, any problems will be

reported and entered into a computer so that the cause of the defects can be understood

and dealt with.

Cartridge Production: FDA Requirements

Because the Peanut Detective will require FDA approval as a medical diagnostic device,

many precautions must be taken in order to meet the FDA’s stringent requirements of a

Class II medical diagnostic device. A Class II device, which is a device used externally from

the body, requires special labeling that is carried out by the packaging and plastic

suppliers, performance standards, which are executed by BSure quality technicians, as well

as post market surveillance, which is done through customer feedback. Furthermore, the

FDA requires that chemicals in raw materials be kept in a freezer at all times until

production32. The production must be kept sterile, which is accomplished by separating the

holder production area from the cartridge production area to prevent contamination.

Additionally, workers must wear medical gloves at all times. Machines involved in

production must pass daily sanitary inspections.

Cartridge Production Process

The production of cartridges is completely automated, requiring a highly accurate custom

built Flow Animation machine for assembly. Materials include metal mesh, pins, springs,

32 United States. United States Food and Drug Administration. CBER Guidances / Guidelines / Points to Consider. 2007. 10 Apr. 2007 <http://www.fda.gov/cber/guidelines.htm>.

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Quality Control: Cartridge

At the end of each work day, a quality technician will prepare a viscous solution, consisting

of water, starch, peanuts, and a phosphate buffer. This mixture will test the accuracy,

sensitivity, and specificity of the cartridge. After boiling the solution, the mixture will be

placed in a refrigerator overnight to thicken. The following day, an employee will test one

cartridge in every batch of sixty, by inserting the trial cartridge into a holder and then

sticking the Peanut Detective into the viscous solution. The results should conclude that

there are peanut traces, turning the red light on. Should the cartridge fail this test, the

entire batch will be discarded. When cartridge defects are found at quality control, the

quality technician will generate a report at his or her workstation. Operations managers

will then be able to generate monthly defect reports to make decisions on supplier

reliability and manufacturing process tweaks. These quality check points are important to

measure the amount of defects as well as recognize any problems along each of the

assembly lines. Their proper implementation will allow managers to cut scrap costs and

prevent lawsuits by producing an accurate product.

Finished Goods

At the end of each production line, holders and cartridges will be placed into bar coded

boxes. An employee will scan each box, prompting the ERP system to enter the item into

the BSure database as finished goods. Employees will then place the appropriate number of

holder and cartridge boxes in a pallet according to each purchase order. From this point,

the inventory will sit in storage until proper shipping arrives to deliver batches to

distributors.

Meeting Demand Peaks with Finished Goods

BSure’s chase strategy was chosen to reduce excessive finished goods inventories, which is

necessitated by the expiration on the chemical components of the cartridge as well as the

holder battery; it is important to get the cartridges to the consumers as soon as possible.

Holding holders and cartridges in inventory for extended periods of time will mean each

unit will be less valuable to the consumer, for they will get the product for a smaller portion

of its six month lifespan. In order to properly meet seasonal demand forecasts, BSure has


made the assumption that May and August will require higher than usual finished goods

inventories in order to meet June and September demand peaks, brought about by children

leaving for camp and school, respectively. Production is therefore increased significantly

when necessary in the months preceding these demand peaks, ensuring there are always

finished goods ready to be shipped out when the orders come in. It is also expected that

during summer months while children are away at camp, demand will lessen slightly

compared with normal levels, which will allow finished goods inventories to rejuvenate for

the upcoming September demand peak. While most years do not require any inventory

buildup to meet the demand peaks, years of strong growth, such as years three and seven,

when marketing efforts and store distribution peak, will require a slight break from the

chase strategy in order to meet demand. However, slight inventory buildup avoids

needlessly increasing capacity through machine purchasing and hiring costs.

Backlog Policy

BSure will implement a zero‐backlog policy, ensuring consumers receive the product when

they need it. From a goodwill standpoint, consumers will come to rely on the Peanut

Detective, often for daily eating habits. Therefore, failure to provide the product on time

will result in an unfavorable reputation, which is especially harmful to a new company

trying to build trust among its consumers. From a financial standpoint, the backlog cost per

holder unit is nearly $125, and about $6 per cartridge, which includes lost margin per unit

plus additional lost margin of future sales. Distributors will also reduce their orders to

BSure if orders cannot be fulfilled on time. CVS imposes fines and the right to reject any

orders that are not complete. Because most of BSure’s lead is comprised of raw materials’

lead time opposed to the production and shipping process, keeping stringent inventory

records will help prevent any backlogs, as will the very high 98% service level.


Distribution

Distribution channels will handle the logistics involved in delivering the Peanut Detective to

appropriate retailers.33 CVS, Walgreens, and Rite Aid handle their own distribution, as do

the smaller drug stores which will be added later on in the product life cycle. These major

stores specify which carriers to use for shipment to different warehouses. When shipments

leave the BSure facility, employees will scan the pallets with bar code scanners, taking that

inventory out of the database, thereby indicating goods have been sold. As an inventory

policy, BSure loses ownership of the inventory upon delivery to distribution. BSure is not

liable for any damages to property once distributors receive their orders.

Direct Sales

In addition to distribution channels, BSure will be selling the Peanut Detective online

through the BSure website. The advantages of using this channel are that distribution

margins will be eliminated and the purchase orders will be directly connected to the

inventory system, ensuring accurate inventory numbers.

Consumers will go to www.bsuredd.com and select the amount of holders and cartridges

they would like to purchase. After submitting the order to the website, the purchase order

information will electronically transfer to the BSure database. After payment confirmation,

employees will either begin production of the order, or remove the purchase from finished

goods and arrange for appropriate shipment through FedEx, UPS, or the United States

Postal Service, depending on customer preference, since customers will incur the cost of

shipping.

Measurement of Supply Chain Efficiency

To ensure that the supply chain is maximizing revenues and helping to reduce costs, the

company will cross reference target numbers to actual ones in these areas:

• Amount of time it took to receive raw materials from suppliers

33 "Distribution Channels." Encyclopedia of Small Business. The Gale Group, Inc, 2002. Answers.com 11 Apr. 2007. http://www.answers.com/topic/distribution‐channels


• The amount of scrap in each of the raw materials • Inventory turnover • Finished goods scrap • Amount of time it took to ship finished goods to distribution

Situational Analysis

Base Case

Base case calculations were made assuming marketing is able to achieve all of its objectives

and forecasting is accurate, leading to demand that closely matches expectations. Price

breaks will be used to effectively reduce variable costs as demand increases based on the

forecasted numbers. Variable cost per cartridge unit should drop from $1.92 in year 1 to

$1.87 in year 7. Holder variable costs will be reduced from $1.68 in year 1 to $1.61 in year

7. In the base case model, initial capital investments, which include the factory, equipment,

and other factory furnishings, will be more than sufficient to meet demand through year 7.

As the factory layout plan shows (see OM Exhibit 3), there will be excess room, even in year

7, for cartridge production as well as excess office space. The holder production area also

has excess room throughout the Peanut Detective life cycle.

Optimistic Case

The best case scenario projection is cartridge demand of 18 million and holder demand of

160K in year 7, which assumes 9% increase in repurchase rate for the holder and cartridge

as well as increased ACV and awareness. This results in a 50% increase in demand over the

base case scenario. In order to cope with the extra cartridge demand, four more cartridge

manufacturing machines, at a total cost of $400K, will be required. However, the factory

already has space built in for cartridge production expansion, thereby negating the need to

expand the BSure facilities. Each new machine will require an operator, at a total annual

cost of $80K. Also, as in the base case scenario, quantity discounts will reduce variable

costs, although the discounts will be active earlier on in the Peanut Detective life cycle.

Holder requirements will easily be met by adding an additional worker to the already

abundant workspace provided for holder production, adding an additional $7K in labor,

which is relatively low because part time workers handle holder production. However,

because all added capital is a direct cost of production and costs such as machine


mechanics will now be dispersed over a larger quantity of production, contribution margin

per unit will increase with the increased demand.

Pessimistic Case

Worst case estimates have year 1 production at 1,500 holders and 146K cartridges. While

very little of the factory would be utilized at this production level, production can easily

match low demand by varying the amount of part time workers, which will make up most

of the work force in year 1. Capital requirements in factory equipment will not change

because year 1 is already using the minimum of one cartridge production machine. Price

breaks on the O‐ring and packaging will not be feasible until year 4, thereby keeping

variable cost for holders at $1.92 and for cartridges at $1.68.

Continued Development

As previously mentioned, an integral part of BSure is its value on patents, shown through

extensive research and development costs. The goal is to have as many products patented

as possible, in order to maintain the technological advances on which BSure is founded.

Therefore, future products, which include detectors for other types of allergens, will be the

main objective of the research and development department, as will be improving the

existing Peanut Detective design based on customer feedback. While the product has an

estimated life cycle of seven years, development of new products ensures the life of the

organization will far exceed that of the Peanut Detective. Given the similarities between the

Peanut Detective and further products, it will be easy to convert production in the main

factory from one product to another. Furthermore, the machines used to produce the

Peanut Detective will be able to construct other detection devices as well, with minimal

changes required. Therefore, the factory is very well equipped for the diverse future of

BSure products.

Information Systems Plan

Information Systems Plan 44

Information Systems Plan

Plan Overview

BSure will utilize information systems to integrate the main functional areas—marketing,

operations management, and finance—as well as help them in making the best decisions

possible. An effective IS implementation requires the right combination of application

software, hardware, telecommunications infrastructure, and personnel. A brief summary of

BSure’s information systems plan can be seen in IS Exhibit 1.

IS Exhibit 1: Information Systems Plan Summary

System Component

Selection Reasons for Selection Feature Highlights

Application Software

Microsoft Dynamics GP 9.0

• Implemented and serviced by industry‐tailored vendor

• Tight Office & Exchange integration • Familiar Outlook‐like UI minimizes

training costs, human error

• In‐house ERP • Runs on MSSQL backend • Fully supports EDI • Custom dashboards • Developer API for web site

linking

Server Hardware

Dell Servers and Workstations

• Proven industry standards • Top of the line, at fairly low costs

• Quad‐proc. servers • Desktop and laptop

workstations

Telecom. BellSouth DSL & Phone

• Available near plant location • Inexpensive (~$1,000/mo. will

handle all internet needs and 800 number customer service calls)

• 6 mbps DSL • < $0.10/min. for

800 number calls

Backup Solution

LiveVault 5GB backup

• Simple, proven off‐site backup solution

• Upgradeable for higher data volumes

Website Hosting

ASPwebhosting.com

• Vendor reputation • Supports ASP.NET (MS standard)

• $225/mo. • Dedicated server

Personnel 1 IS Manager + ERP partner support staff

• Small businesses do not usually require large IT/IS staffs

• ERP certified partner staff is experienced in mfg. solutions

• IS manager must be very well qualified


Achieving Critical Success Factors

BSure’s implementation of information systems will directly influence the achievability of

the organization’s critical success factors. Specifically, the chosen system must accurately

capture, store, process, and report certain data for use by functional area managers in their

analyses. Valuable metrics such as defect rates, website hit counts and poll data are

examples of data that must be easily accessible for the organization to realize its critical

success factors.

High Product Reliability

To achieve the reliability success factor’s objective of 99.99% accuracy, both the supply

chain and manufacturing process must be under complete control. For example, in order to

enforce the supplier policy of “3 Strikes, You’re Out” (for defective‐material prone

suppliers) BSure’s information system will trace defective product batches by maintaining

detailed records linking finished goods to work in process inventory. As the operations‐

specific ERD depicts (see IS Appendix 1), each Production Batch “uses” multiple Material

Batches; both entities are referenced by their unique ID numbers, which are tracked by

barcode scanners. This simple tracking mechanism would be impossible without

information systems in place because of massive volumes.

Holder assembly and cartridge QA employees will have the ability to submit quick defect

reports at their closest floor computers. Operations managers will then be able to generate

monthly defect reports to measure the reliability success factor and make decisions on

supplier dependability.

Rapid Customer Base Expansion

BSure’s web presence will be very important in gaining product awareness and thus

expanding the customer base. To contribute in achieving the demanded 3‐5% annual

growth in awareness, the website will aim to reach 100K monthly page hits by the peak

year of demand. Website‐related market research consisting of weekly user poll and web

analytics metrics will also help measure awareness growth (see Tracking Segment

Awareness in Web Strategy for details).


Intellectual Capital Superiority

BSure will aim to hire two full time research scientists by year 4 to be on the forefront of

new technology exploration to revise the product design and lower costs. The research and

development team will be provided with industry‐leading software such as Wolfram

Research’s Mathematica 5 and Adobe’s Creative Suite 3 to help develop their ideas.

Value‐Adding Activities

The primary activities in the organization’s value chain, which are shown in IS Exhibit 2,

are described in accordance to the Porter’s value chain model34.

IS Exhibit 2: Information Systems Value Chain

Operations and manufacturing adds the most value (40%) to the organization because it

determines the quality and thus the reliability of the product, which is one of the

organization’s critical success factors. Inbound logistics (15% value added) also plays an

important role in product reliability because suppliers must deliver chemical materials on

time to keep cartridge shelf lives long. Marketing and Sales (30%) will largely determine

the organization’s ability to expand its customer base and thus generate revenues.

Marketing and sales activities are similarly crucial to the success of the business.

34 The Value Chain. 2006. 11 April 2007 <http://www.netmba.com/strategy/value‐chain/>.

Technology

Human Resources

Procurement

Research & Development

Inbound Logistics (15%)

Operations & Mfg.(40%)

Outbound Logistics (5%)

Marketing & Sales(30%)

Customer Service(10%)


Supporting Activities

Each of the supporting value chain activities influences different primary activities, as is

depicted by the colored dots ( ) in IS Exhibit 2. The most important of the

supporting activities in the organization’s value chain is technology, which affects all

primary activities, as well as secondary activities.

Core Application Software

Microsoft Dynamics GP

As shown in the information systems overview, BSure will use Microsoft Dynamics GP 9.0

to manage core electronic business processes. Dynamics GP is an in‐house ERP solution

that Microsoft purchased and redesigned in 2000. The software is customized,

implemented and serviced through Microsoft Certified Partners; BSure will employ

JourneyTEAM, LLC.35 as the Dynamics GP liaison because of the company’s excellent track

record with organizations dealing with manufacturing of durable consumer goods36.

Dynamics GP, like many other ERP solutions, is capable of handling all aspects and

functional areas involved in BSure’s Peanut Detective operations.

Contribution to High Product Reliability

Dynamics GP allows users to create custom views and “dashboards” (screens with

customized pieces of information chosen per user), giving managers the ability to have the

information they use most often readily available37. This functionality will allow operations

managers to track progress for achieving high product reliability. OM managers will have

single‐screen access to current production rates in comparison to aggregate planning

forecasts, as well as supplier‐specific defect summaries for effective three‐strike supplier

policy enforcement. Dynamics GP’s standardized data export functionality will also allow

OM managers to run statistical analysis on quality levels in MS Excel when needed.

35 JourneyTEAM Homepage. 5 April 2007 <http://www.journeyteam.com/>. 36 Solutions Directory. 12 April 2007 <https://solutionfinder.microsoft.com/SDK/Solutions/ SolutionsDirecto ry.aspx?vertical=45d6efe1cdda4cd492992514d3114584&location=e0766ffbae1c4668a2e1826e6008cf94>. 37Microsoft Dynamics GP for construction companies. 9 April 2007 <http://www.microsoft.com/dy namics/gp/ product/construction.mspx>.


Software Selection Process

The major choices for core application software types were: separate best‐of‐breed

systems, a SaaS ERP system and an in‐house ERP system. Best‐of‐breed systems were

eliminated because of the unnecessary overhead costs involved and the lack of a unified

user interface across business processes. Overhead would include separate

implementation, training, and maintenance costs for each package. A more advanced IT

department would also be required for best‐of‐breed system implementations38. Integrated

systems are also more streamlined, giving managers quicker access to cross‐functional

data.

Software‐as‐a‐Service (SaaS) ERP systems were also eliminated because of their reliance

on internet up‐time. Internet service providers that could provide adequate bandwidth and

reliability levels would cost thousands of dollars each month. It would not make sense for a

manufacturing firm to run daily operations over the internet. Thus, it was determined that

an in‐house ERP was the best solution for the BSure business.

In‐house ERP Decision

The two candidates considered were Microsoft Dynamics GP and

SAP Business One. Other Dynamics and SAP products (Dynamics AX,

CRM, SAP All‐in‐One) were not considered because of either lack of

experience or too large of a scope.39 Although SAP is the world renowned leader in ERP

solutions, Dynamics proved to be a more ideal solution for the organization because of its

extremely familiar and consistent user interface and tighter MS Office integration. The

primary reason that BSure will be using Dynamics GP over SAP Business One, which is a

slimmed down version of All‐in‐One, is its user interface. Axel Angeli, an expert in ERP

packages, states:

Dynamics looks fresh and attractive and navigating around it is easy for everybody familiar with applications like Microsoft Outlook… Beyond the look and feel, the way

38 Best of Breed Vs. Integrated Systems. 2 April 2007 <http://olcsoft.com/select_0800.htm>. 39 Karasev, Andrew. Microsoft Dynamics: GP, AX, NAV, SL, CRM – Merge or Coexistence? 1 June 2006. 11 April 2007 <http://ezinearticles.com/?Microsoft‐Dynamics:‐GP,‐AX,‐NAV,‐SL,‐CRM‐‐‐Merge‐or‐Coexistenc e? &id=211028>.


individual program components are controlled is pretty homogeneous within Dynamics, while every transaction within [SAP] R/3 sports a high degree of individualism.40

Joe Gulino, another expert in the field, also states in the same article:

Most employees who work for midmarket companies use Microsoft Outlook… How many of these employees have had formal training in Outlook? The answer is very few…One of the biggest reasons ERP implementations fail is the inability to get employees to adopt the system.40

A more familiar user interface will result in lower training costs and human error due to

confusion. Minimizing human error is a key method of ensuring that the organization’s high

reliability critical success factor is met. Dynamics GP also integrates more natively with all

MS Office products, as well as MS Exchange for e‐mailing purposes.41

Web Strategy

The organization’s core web strategy is to create a website, the “BSure Center for Peanut

Allergies,” to be an online community for people who are in some way affected by peanut

allergies. The website, which is currently located at http://peanut.nurik.net, will eventually

be located at www.bsurecfpa.org, www.bsuredd.com, and at www.peanutdetective.com. The

strategy focuses on the critical success factor of rapid customer base expansion as well as

customer retention. There are few active web sites that provide information and

community resources for the Peanut Detective’s target segments. Of those few,

peanutallergy.com is the most highly visited, based on their own estimates (7‐35 thousand

hits per month) as well as their Google’s search ranking.42 For screenshots of

peanutallergy.com, please see IS Appendix 4.

The BSure Center for Peanut Allergies website will also advertise the Peanut Detective

wherever possible. However, it will not push the product on users; instead, users will have

40 SAP All‐in‐One vs. MS Dynamics. 22 November 2005. 7 April 2007 <http://searchsm b.techtarget.c om/gen eric/0,295582,sid44_gci1225574,00.html>. 41 SAP Business One vs Microsoft Dynamics GP ‐ Highlights for Consultant. 3 April 2007 <http://ez inearticles.com/?SAP‐Business‐One‐vs‐Microsoft‐Dynamics‐GP‐‐‐Highlights‐for‐Consultant&id=102624>. 42 Google Search for "peanut allergy". 9 April 2007 <http://www.google. com/search?hl=en&q =peanut%20allergy>.


a variety of resources at their disposal that describe the benefits of various allergy coping

methods, cleverly promoting the benefits of the Peanut Detective.

Reaching the Target Segments

It is currently relatively difficult to find concrete information about the Peanut Detective’s

target segments; Consumers in the target segments are geographically spread out and are

not clustered in any specific region due to the ubiquitous nature of peanut allergies. This

makes it difficult to reach consumers for market research and product awareness

purposes. The community website will create a new, very valuable communications

channel between BSure and its consumers. This will greatly aid in providing marketing

managers with a new source of market research data. This data will empower managers to

make more accurate projections and thus make better decisions.

Tracking Segment Awareness

Because customer base expansion will be measured partially by segment awareness, it will

be important to have access to accurate metrics for this data. The website will utilize the

free Google Analytics web software to track page views and unique hits.43 Information

systems personnel will have daily access to see how well the website is progressing in

reaching the 100K page views/month goal. Web server logs will also provide user IP

addresses, which can then be cross‐referenced with a free online geo‐location database for

access to user geographical information.44 Weekly website user polls, controlled mostly by

the marketing department, will also provide valuable market research useful for calculating

the product’s customer satisfaction rates and product awareness.

Conveying Product Information

The website will also contain content describing the Peanut Detective family of products

under the “BSure Products” section. Product usage videos and reference information such

as the instruction manual and customer service phone number will be available at this

43 Google Analytics Homepage. 23 March 2007 <http://www.google.com/analytics/>. 44 “Map of Peanut Allergy Meetups." Meetups. 12 Feb. 2007 <http://peanutallergy.me etup.com/about/>.MaxMind Homepage. 2 April 2007 <http://www.maxmind.com>.


location. “Add to cart” links will also be visible on the product pages for easy online

ordering.

Website Structure

The basic website structure, which is detailed in IS Appendix 5, is positioned as an

information resource. The homepage will aggregate industry news and doctor articles (see

DocBlog below) to compel visitors to bookmark the page. The homepage content will also

be available in newsletter and RSS45 forms to maximum circulation and availability.

FeedBurner will be used to monitor RSS usage rates for market research purposes.46 The

homepage will always contain advertisements for the BSure Peanut Detective so that users

are aware of the organization supporting them.

DocBlog (doctor’s blog) will be a weekly article posting (similar to a

blog post) by doctors that will partner with the organization. DocBlog

articles will promote doctors’ opinions about how to deal with peanut

allergies; the marketing department’s distribution of doctor’s kits will

provide incentives for doctors to promote the Peanut Detective. An

example of DocBlog is shown in IS Appendix 5.

The community aspect of the website will allow users to communicate with each other by

discussing their stories in forums (message boards). Each user will have the ability to share

their relationship to peanut allergies (“My Story”) by editing their user profile. This will

provide a simple way for users to quickly become part of the community.

Other website resources will include comparisons of various peanut allergy coping

methods as well as links to internet articles on peanut allergies. This will promote the

website’s position in Google’s PageRank search rankings because it will act as a “hub” site

by hosting useful outbound links.47

45 RSS (Really Simple Syndication) allows users to embed live content on their personal homepages and in other news aggregation software. 46 FeedBurner Homepage. 4 April 2007 <http://www.feedburner.com/fb/a/home>. 47 Google Technology. 25 March 2007 <http://www.google.com/technology/>.


Building Competitive Advantage

BSure’s main competitive advantage will be the amassment of consumer trust in the Peanut

Detective. Consumer trust is crucial to the success of customer base expansion and the

overall success of the firm. Doctor sponsorship via the DocBlog will help tremendously in

gaining this necessary trust. Consumer trust is also vital to the growth of word‐of‐mouth

awareness. Because none of the Peanut Detective competitors have great online presences,

providing a community‐intensive website and thus earning consumer trust will promote

the BSure brand and provide a significant competitive advantage.

Web Site Implementation

BSure will enlist the services of a contracted web developer experienced in ASP.NET and

other Microsoft technologies such as IIS to develop and maintain the website. The website

will be hosted at ASPwebhosting.com on a dedicated server, guaranteed with 99.95%

uptime, and allowing for 100 gigabits/mo. throughput.48 The web developer will also be in

charge of developing the shopping cart module and subscription services. ASP.NET will be

the core web technology used because of its ability to integrate with Dynamics GP’s

developer API (application programming interface).

Finally, the web developer will be asked to create a simple content management system

(CMS) to provide easy web content control to other managers in the organization. One

example of a CMS‐enabled process is marketing managers’ creation and monitoring of user

polls. Because the web developer will be contracted for maintenance as well as

development, managers will easily be able to request more dynamic content updates as

well.

Supporting the Business Model

The BSure Peanut Detective business model offers a robust variety of revenue streams and

distribution channels, including drug store distribution, direct online sales, and even a

48 Dedicated Server Hosting from ASPwebhosting.com. 11 April 2007 <http://www.asp webhosting.c om/dedicated serverhosting.htm>.


product replenishment subscription service. The organization’s information systems were

coordinated to handle and deliver data from and to all of these sources.

Retail Drug Store Sales

Because drug store retail sales will be the primary source of revenue for the Peanut

Detective, the organization’s information system was coordinated to best handle large

volumes of external data. Microsoft Dynamics GP has built‐in electronic data interchange

(EDI) support that fully meets the requirements of BSure retailers such as CVS and

Walgreens.

Internet Sales

Because only 5% of those surveyed said that they would initially purchase allergy‐related

products over the internet49, BSure will not concentrate on single purchase online sales;

instead, web marketing efforts will be focused on pushing direct subscription sales,

orderable by internet or phone, which will be one of BSure’s top revenue streams. Survey

data shows that 25‐50% of the target segments would be interested in purchasing such a

plan. Users will receive paper statements or online statements made available under the

“My Account” section of the website.

Both types of online‐submitted orders will be communicated from the web server to the

organization’s in‐house application servers via a secure line. The contracted web developer

will work in coordination with the marketing and information systems managers to ensure

that both types of internet sales run smoothly. Subscription plans benefit both the

consumer and the organization—consumers have the comfort and security of quick and

easy home delivery and the organization secures a profitable customer relationship.

Hardware and Telecommunications

The organization’s IT infrastructure is designed around the chosen ERP solution, Microsoft

Dynamics GP. Dynamics GP requires at least two servers—an application/transaction



server, and a dedicated MS SQL server.50 These servers will sit behind two APC Smart‐UPS

(uninterruptable power supply) systems to prevent damage due to power outages. The

factory floor will also require five or more client workstations for USB‐connected barcode

scanning and manual data entry. Managers will require laptops for both in‐office and from‐

home work.

Dell was chosen to satisfy all server and workstation computing requirements because of

their long standing reputation for cost effectiveness, on‐site support, and B2B expertise. All

supporting hardware will be purchased over the internet from CDW, a well‐known

business computing retailer. All machines will be networked together using a business‐

ready 16‐port Cisco VPN router, which also provides firewall security. Wireless routing can

quickly and easily be implemented if necessary and if it is allowed by FDA regulations.

BellSouth (now AT&T) business DSL and local/long distance phone service will be

purchased to handle the organization’s telecommunications needs. The long distance

phone service provides access to an 800 number at a very affordable cost ($0.10/min.).

This line will be used for supplier and retailer relations, customer service and for taking

direct consumer purchase orders. Carroll Communications’ Partner Phone System will be

purchased for the phone system’s hardware components—the system is designed for small

businesses with up to 20 phones.

Data Security

There are inherent security benefits when using software from Microsoft. Automatically

installed software patches provide up‐to‐date security for the operating systems and

productivity software installed on servers and workstations. Microsoft has a colossal

reputation of dedicating extensive development efforts towards security of their products.

Also, the tighter integration that comes with having a single software vendor implies

smaller chances of security leakages. The organization will also standardize the usage of

50 System requirements for Microsoft Dynamics GP 9.0. 12 April 2007 <http://www .micro soft.com/dyn amics /gp /pr oduct /90s yst e mrequirements.mspx>.


Symantec AntiVirus Corporate Edition on all servers and workstations. For offsite data

backups, LiveVault’s 5GB backup service will be used and incremental data will be backed

up nightly, with full backups weekly.

Personnel

A single information systems manager with significant MIS and IT (troubleshooting,

networking) experience will be sufficient maintenance personnel throughout BSure’s years

of operations. The reason is that the bulk of application support can be handled by the

Dynamics GP liaison, JourneyTEAM, and hardware support will be enacted by Dell via three

year on‐site warranties and upgrades. The IS manager, who will be promoted to chief

information officer in later years, will communicate with the servicing departments of

these organizations whenever trouble arises. The IS manager will also be in charge of

ensuring that employees are familiar with the system and that they can positively exploit

all of the available features of the ERP for maximum efficiency. As mentioned in the

organization’s web strategy, a web developer will be contracted for initial web

development as well as continued maintenance and upgrades. BSure’s IS manager will also

support this web developer in meeting hardware and data access needs.

Implementation Schedule

The implementation of the system will begin seven months before launching the product.

First, the founding IS manager will order Dynamics GP and work with JourneyTEAM to

customize the ERP solution. Hardware and other software will also be purchased at this

time. System testing will then be performed by JourneyTEAM and the IS manager to ensure

that all business needs are met and that business processes are operating smoothly.

After the product launches, the IS manager will continue to work closely with JourneyTeam

to enact IS system servicing. The IS manager will also be in charge of basic network

administration. Over the first few years of operations, hardware will be upgraded and new

servers and workstations will be purchased from Dell as necessary. IS Exhibit 3 illustrates

BSure’s basic information systems implementation schedule.


IS Exhibit 3: Implementation Schedule

Costs

Because information systems will be such an integral part of BSure’s Peanut Detective

operation, the costs will be relatively high. Pre‐launch costs will be around $86K and total

costs after a single year of operation, including the IS manager’s salary and benefits, come

close to $205K. Web developer contracted work was estimated at $50/hr for 50 hours to

develop the initial web site. The cost of maintenance was also estimated at $300‐$500

monthly (average of 6‐10 hours per month of minor updates). A summary of pre‐launch

and year 1 IS costs are presented in IS Exhibit 4.

IS Exhibit 4: Pre‐launch IS Costs (w/o $60K in Salaries)

Component Total Cost

Core Application Software $42,755

Core Hardware $19,600

Support Hardware $5,147

Add new hardware, upgrade software,

request new features as business grows

1‐2 year after launch

Analyze system performance and request changes as necessary

1 month after launchLaunch product and website

Train employees and test system

L‐2 mo.

Hire web developer and communicate requirements

L‐4 mo.

Order and install

computer hardware

L‐6 mo.

Order Dynamics GP and install

with JourneyTEAM

L‐7 mo.


Component Total Cost

Support Software $5,048

Services & Resources $13,634

Total $86,184

After the first year, information systems costs fluctuate due to bi‐annual hardware

upgrades and new purchases due to estimated workforce and operation expansion. An IS

costing schedule for the first seven years of BSure’s operations can be seen in IS Appendix

6.

Summary

Information systems play a crucial role in the success of BSure’s Peanut Detective product.

If the product is to become the leading preventative measure against peanut‐related

allergic reactions, the implemented information system must run smoothly. The system

must be able to facilitate, support, and monitor the organization’s critical success factors of

reliability, customer base expansion, and intellectual capital security. The founders of

BSure Diagnostic Devices, Inc. are confident that these requirements will be satisfied and

exceeded with the described information systems plan.

Financial Analysis & Plan

Financial Analysis & Plan 58

Financial Analysis & Plan

Internal Rate of Return & Net Present Value

Company

BSure Diagnostic Devices will have a healthy internal rate of return of 61% and a net

present value of $4.7 million based on a 25% discount rate (FE Exhibit 1).

FE Exhibit 1: IRR & NPV

IRR NPV

Total 61% $4.73M

Investors 55% $2.60M

Friends, Family & Management

76% $2.13M

Investors

Investors will receive an internal rate of return of 55% and have a net present value of $2.6

million. The investor will receive positive cash inflows by year 3 and every year thereafter.

Friends, Family & Management

Friends, family and management will receive an internal rate of return of 76% and have a

net present value of $2.1 million (see FE Exhibit 1).

Investment

Ownership

Share for investors will be 60% while friends, family and management will receive a 40%

stake (see FE Exhibit 2). BSure believes this is a reasonable ratio since friends, family and

management invented and developed the Peanut Detective, but feel outside investors

should get majority ownership since their investment is ¾ of the total cash needed and the

investment has significant risks associated with it.

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Profitability and Breakeven

BSure will experience negative net income in years 0 through 2 (see FE Exhibit 5).

Breakeven analysis shows that for years 1 and 2 the company would need to sell an excess

of 1 million cartridges in order to turn a profit (see FE Exhibit 6). Only cartridge breakeven

has been analyzed as holder sales are much less relevant.

By year 3, the company will turn a profit of $0.8 million, due to sales more than doubling

between years 2 and 3. This large increase in sales is mainly due to an aggressive

marketing campaign in the first three years that builds up both brand awareness and

reputation while also increasing customer retention. Thereafter net income continues to

increase, surpassing the breakeven point by a large margin as a larger quantity of both

holders and cartridges get sold.

FE Exhibit 5: Summarized Income Statement

Year 0 1 2 3 4 5 6 7

Total Sales $0K $856K $2,233K $7,606K $11,382K $13,999K $23,792K $32,376K

Total COGS 86K 645K 1,416K 4,416K 6,570K 8,098K 13,727K 18,737K

Gross Profit 0K 211K 817K 3,191K 4,812K 5,901K 10,065K 13,639K

Start up Costs 371K

SGA 0K 941K 1,227K 1,814K 1,986K 2,236K 2,534K 2,749K

Depreciation 0K 18K 18K 32K 47K 61K 71K 118K

EBT (371K) (748K) (428K) 1,344K 2,780K 3,605K 7,459K 10,772K

Taxes 0K 0K 0K 537K 1,112K 1,442K 2,984K 4,309K

Net Income ($371K) ($748K) ($428K) $806K $1,668K $2,163K $4,476K $6,463K

FE Exhibit 6: Breakeven for Cartridges

Year 1 2 3 4 5 6 7

Breakeven Units (Cartridge) 1,029 1,303 1,875 2,099 2,414 2,796 3,112

Forecast Units (Cartridge) 281 738 2,458 3,697 4,572 7,812 10,686

Breakeven Total Revenue $2,913 $3,829 $5,976 $6,917 $7,979 $9,829 $11,329

Forecast Total Revenue $856 $2,233 7,606 $11,382 $13,999 $23,792 $32,376


Ratios Analysis

The product team has conducted extensive analysis of both industry ratios in the diagnostic

substances industry (SIC 2835) as well as ratios of two leading companies in the self

diagnostic business: Roche Pharmaceuticals and Abbott Laboratories (see FE Exhibit 7).

Roche is a Swiss‐based company and the leader in diagnostic products.51 Abbott

Laboratories is a U.S. based company and second in terms of its market share of diagnostic

devices.52 Unlike Roche, Abbott is not performing as well year‐to‐year. While both

companies make products similar to the Peanut Detective, neither makes a product to

detect the presence of peanut and thus they are indirect competitors, but may become

competitors in the future.

FE Exhibit 7: Company & Industry Ratios

BSure Industry Roche Abbott

Cash % of Sales 7% 20% 7% 6%

Current Ratio 3.12 3.6 3.22 0.94

Quick Ratio 3.08 1.7 2.78 0.71

Gross Margin 39% 61% 73% 56%

Profit Margin 16% (6.3%) 18% 7.6%

Cash to Sales Ratio

BSure Diagnostic Devices will hold a cash to sales ratio of 7%. This is similar to the cash to

sales ratio of both Roche Pharmaceuticals as well as Abbott Laboratories which are 8% and

6% respectively. The industry however holds on to 20% of cash, the reason being that they

want high liquidity in case of litigations or recalls. While the organization expects to hold

more cash in later years, the first few years will require investments in new machines and

51 Figures and Reports. Roche. Annual report, 2006. 10 Apr. 2007 <http://www.roche.com/ home/inv_fin_link>. 52 Annual Report. Abbott. Providence, RI, 2006. 12 Apr. 2007 <http://www.abbottinvestor.com/phoenix.zhtml?c=94004&p=irol‐irhome>.


equipment, employment of new workers and aggressive spending in marketing in order for

the product to turn a profit.

Current/Quick Ratio

BSure Diagnostic Device’s current ratio is 3.12 and a quick ratio of 3.08. This compares

favorably with Roche which has a current ratio of 3.22 and a quick of 2.78. Abbott’s current

and quick ratios are both below zero, indicating that their liabilities are weighing heavily

on the company. The industry as a whole has a current ratio of 3.7 and a quick of 1.7. This

indicates that there is a large amount of inventory accounted for on the balance sheet. To

deal with this problem, BSure is utilizing a chase strategy and thus its inventories are

efficiently used and kept in small quantities.

Gross/Profit Margin

BSure’s gross profit margin is 39% while its net profit margin is 16%. Gross profit margins

in both the industry, Roche and Abbott Laboratories are high at 61%, 74% and 56%

respectively. BSure’s gross margin is significantly less because it is a startup company with

high variable costs and less bargaining power then its indirect competitors. The 16% net

margins, however, are in line with Roche and Abbott at 18% and 7% respectively and are

well above the industry at ‐6.3%. The industries negative net margin is due to large fixed

assets and the fact that many of these companies have a diversified line of diagnostic

devices. The company’s net margin will remain positive by focusing efforts on the Peanut

Detective in the first few years thus maximizing factory and administrative efficiency in that

one product.

Risks

BSure Diagnostic Devices has analyzed some of the greatest risks that will adversely affect

the company. They include four cartridge variable costs, the distribution price for

cartridges, repurchase rate and entering competition (see FE Exhibit 8).


Cartridge Variable Costs

There are four variable costs that go into making the cartridge that if changed could have a

hefty negative impact on the company’s financials. These four costs in order of biggest

impact are the antibody, plastic shell, substrate and enzyme. The antibody, substrate and

enzyme are the series of chemicals inside the cartridge that combine to create the chemical

reaction needed to detect peanut traces. The plastic shell encloses all of the chemicals

inside the holder. These four materials are the most expensive variable costs; as a result, a

very slight change in the price of any of these chemicals or plastics can have a large impact

on cartridge profit margins. Because the cartridge represents the majority of revenues,

these price changes can indeed negatively affect all of the financial statements. The

company currently plans to hedge prices with its suppliers in order to minimize this risk;

however, unexpected problems with one of the suppliers could hinder the organization’s

ability to maximize margins.

Cartridge Pricing

Another variable that can have a large effect on the health of the company is the cartridge

selling price. Because each cartridge has a low margin, a small change in the manufacturing

price can have an adverse effect on sales. If competition increases their cartridge margins

more effectively than BSure, forcing the company to cut its distribution costs, this will have

FE Exhibit 8: Sensitivity Analysis

Legend Cartridge Chemicals Other

Variable Original New % Change

Cartridge Selling Price $2.70 $2.40 11%

Repurchase Rate (Cartridge) 190 134 ‐29%

Antibody $0.80 $1.71 114%

Competition (years 5‐7) 20% 47% 135%

Shell/Window $0.24 $1.10 358%

Substrate $0.24 $1.15 380%

Enzyme $0.21 $1.12 434%


a negative impact on the company’s financials. BSure will minimize this risk by gaining

more purchasing power by years 3 and 4 when competition enters, by establishing

relationships with suppliers as price setters rather than price takers.

Repurchase Rate

BSure projects repurchase rates of cartridges to be 190 per person per year. Sensitivity

analysis concludes that the project NPV would be zero if the repurchase rate fell to 134.

This 29% drop is significant—if the product’s marketing strategy is not able to convince

peanut allergy sufferers to trust the Peanut Detective’s testing accuracy and promote repeat

usage, this decrease in repurchases could dampen financials. The organization must

therefore make certain that the Peanut Detective meets customer requirements so that

repeat purchases increase, thereby increasing cartridge sales.

Competition

An unexpected rise in competition in years 5 through 7 could have significant effects on

financial figures. A spike from 20% to 47% lost revenue from competing products will

result in a zero NPV. To hedge this risk, BSure will invest in design patents, making it

difficult for competition to make a product similar to the Peanut Detective.

Scenarios

Throughout this report, estimates have been discussed as to how BSure will grow, turn a

profit and then divide ever increasing returns to its shareholders. In addition, optimistic

and pessimistic company financials will be analyzed.

Optimistic Scenario

Under the optimistic scenario BSure Diagnostic

Devices’ internal rate of return will be 105% and its net

present value will be $13.7 million (see FE Exhibit 9).

This leaves the investor with an IRR of 96% and an NPV

of $8.1 million (see FE Exhibit 10). The reason for the

jump in both IRR and NPV in the optimistic scenario

FE Exhibit 9: IRR & NPV for Optimistic, Base, and Pessimistic

Cases

IRR NPV

Optimistic 105% $13.70M

Base 61% $4.73M

Pessimistic ‐14% ($1.89M)


is that the Peanut Detective will both increase store

penetration and retail acceptance. In the first few

years retailers will be more willing to stock the

product on store shelves as they will have gained trust

in the product quicker than expected. End users will

also trust the product more readily than expected and

repurchase rates will be higher than expected, from

37.5% to 45%. Furthermore, accounts receivable days will decrease from 40 days to 30

days as BSure Diagnostic Devices will have more purchasing power and retailers will want

to keep BSure’s business, so in turn will payback short term debts quicker. The company’s

accounts payable days will increase from 35 to 40 days because it will have stable

relationships with suppliers and they will allow the organization to pay back short term

debts at later dates.

Investors’ cash flows will remain negative until year 3, similar to the base scenario,

however by the end of year 3 cash outflows will be significantly increased, from $0.02

million to $0.7 million. Investments will be paid back to investors in exactly 3.0 years from

the initial investment date.

Pessimistic Scenario

Under the pessimistic scenario, BSure Diagnostic Devices’ net present value will be ‐$1.9

million and an internal rate of return of ‐14% (see FE Exhibit 9). This will leave investors

with an NPV of ‐$1.5 million and a loss of $1.4 million of their investment (see FE Exhibit

10). A positive point to note is that despite the negative IRR and NPV, cash flows will

become positive in year 4 and thus investors will be able to recoup some of their losses. In

this unlikely scenario, it is possible that Peanut Detective will not be easily trusted by store

retailers and thus there will be both a decrease in store penetration as well as acceptance.

This will be compounded by increased competition in year 3 and 4 that will take market

share at a more aggressive and faster rate than predicted. Furthermore, customer retention

will decline and this will affect the repurchase rate declining the holder rate from 37% to

30% and cartridge rate from 76% to 65%. While these numbers seem unfavorable to the

investor the chances of such an event occurring is very slight.

FE Exhibit 10: IRR & NPV for Investors (Opt./Base/Pess.)

IRR NPV

Optimistic 96% $8.06M

Base 55% $2.60M

Pessimistic ‐18% ($1.47M)


FE Exhibit 11: Cash Flows for Optimistic, Base and Pessimistic

Year 0 1 2 3 4 5 6 7+

Optimistic ($548K) ($540K) ($115K) $1,120K $3,090K $5,454K $8,369K $42,579K

Base ($548K) ($783K) ($629K) $36K $1,337K $1,765K $3,329K $20,460K

Pessim. ($548K) ($907K) ($1,007K) ($703K) $104K $213K $325K $950K

Investors will lose money if these unfavorable circumstances take shape and there seems

to be no positive outlook in the future barring significant events such as a major increase in

demand or an interested party acquiring the BSure brand and facilities. If these conditions

do take place, the company will cease operations and salvage equipment and raw materials

in order to payback investors.

Why Invest? 68

Why Invest?

When you invest in BSure Diagnostic Device’s Peanut Detective, you are investing in a

product that can potentially save lives. The product will satisfy an unmet need by

pioneering a new reaction prevention method for peanut allergy sufferers.

The investment does come with a fair amount of risk. The main revenue stream comes

from selling cartridges. The company’s margins are significantly lower on cartridges than

they are on holder units. Variable price fluctuations or a decreased cartridge distribution

price could put a significant strain on the operation.

However, with these risks come substantial financial rewards. If the product does indeed

follow estimated projections, investors will reap the majority of the benefits. The project’s

current IRR is high (61%), so it inherently allows for volatile deviations from estimates.

Beyond Year Seven

The long‐term effects of competition will begin to decrease demand starting in year 7. After

reaching peak demand levels, the Peanut Detective will be in the decline stage. At this point,

the product will have an estimated terminal value of $15.2 million (assuming a ‐10%

growth rate and a 25% demanded rate of return). The Peanut Detective itself will be

harvested while new spin‐off products such as the Tree Nut Detective and Egg Detective

(other top prominent food allergies) are developed and prepared for launch.

Conclusion

While there are definite risks in this investment, the upside exceedingly outweighs the

downside. Investing in the Peanut Detective is a great opportunity to profit from an

innovative product while improving the quality of life for millions of people.

Appendices

General Appendices 69

Appendices

General Appendices

General Appendix 1: External Product Design

Holder and Cartridge Cap

(Cartridge hidden)Holder and Cartridge

Test Button

Eject Button not shown

(on other side)

¾”

3”

½”

Cartridge

1 ¾”

⅔”

General Appendices 70 General Appendix 2: Internal Product Design

Peanut Proteins

Peanuts and peanut by‐products contain universal proteins called Ara H 1. This protein, also

known as an antigen or allergen, has a high resilience to heated environments and therefore can

survive normal cooking or baking temperatures.53 Ara H 1 can be found in common foods ranging

from cupcakes to soups. Even peanut residue on a dinner table can be effectively dangerous to

anyone who is sensitive enough to it.

Extraction

Ara H 1 is relatively easy to extract, even after having been processed. Peanut antigens are

particularly prone to a saline solution called NaCl—sodium chloride. Once this antigen has been

extracted, a widely used technique, called ELISA, which short for Enzyme‐Linked ImmunoSorbent

Assay, can be used to visually identify these proteins.54

ELISA

There are three main methods to ELISA; indirect, sandwich, and competitive. Due to procedural

restraints of indirect and sandwich methods, the Peanut Detective employs a variation of the

competitive technique. Essentially, this technique traps Ara H 1 and restricts it from proceeding

further. Once Ara H 1 is trapped, further steps can be to taken to quantify the presence of this

antigen.

Detecting Ara H 1

The competitive technique requires the use and preparation of three separate chemicals. The first

of these substances is called an antibody. Antibodies are cells that can be specially cultured to

locate and attach to Ara H 1. The next chemical required comes in a pair, enzymes and substrates.

These chemicals are useless without one another; enzymes react to substrates by releasing

energy. Depending on the type of enzyme and substrate used, this energy can be visible to the

53 Pomes, A, R Vinton, and M.d. Chapman. "Peanut Allergen (Ara H 1) Detection in Food Containing Chocolate." Journal of Food Protection 67 (2004): 793‐798. 54 Pomes, Anna, Ricki M. Helm, Gary A. Bannon, Wesley A. Burks, Amy Tsay, and Martin Chapman. "Monitoring Peanut Allergens in Food Products by Measuring Ara H 1." Journal of Allergy and Clinical Immunology 111 (2003): 640‐645.

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General Appendices 72 result, the solution within the bag flows through the tube and through the mesh. In step (3), the

solution dissolves the sample stuck on the mesh.

There are now two different scenarios.

Sample with Peanuts

If there are any antigens present, enzyme‐linked antibodies will attach to them. Step (4) is where

the solution/sample mix gets absorbed in the exposed strip. Assuming again the sample has Ara H

1, the enzyme‐linked antibodies will not advance beyond this strip. The rest of the solution then

moves onto step (5). Since the antigens, along with enzyme‐linked antibodies, were filtered in the

first strip, there will not be any kind of glow. In step (6) the optic reader analyzes the last strip for

signs of fluorescence. In this case there is no glow therefore indicating that the food does contain

traces of peanuts.

Sample without Peanuts

Assume now, that in step (3), the sample had no antigens. The solution with the sample dissolved

will continue to get absorbed by the first strip. However, since there is no Ara H 1 to become

attached, the enzyme‐linked antibody will make it to the last strip. In step (6) the optic reader

analyzes the last strip for signs of fluorescence. At this point, the enzyme‐linked antibody will

react with the substrate and release a fluorescent glow indicating that the food does not contain

traces of peanuts.

Visual Detection

The detection of fluorescence is fairly simple. It is a technology widely used among pregnancy

tests and other function‐similar applications.55 Optical sensors scan the last strip of the cartridge.

Even the minutest glow is detectable.

55 "Clear Blue ‐‐ How Pregnancy Tests Work." Clearblue. <http://www.clearblue.info/uk/NewDigitalPregnancyTest.cfm>

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press the Eject Button on the Test Holder. The Test Cartridge will automatically be released. When you eject the Test Cartridge you may notice a color due to the chemical reaction that took place on the test strip. This must be disregarded; only refer to the Green or Red indication light on the Test Holder. Using the Test Holder Again If you have bought a pack containing a Test Holder and more than one Test Cartridge, you can use the Test Holder again. While testing the Test Holder may have been splashed with some of the previous food sample. Ensure that you wipe it clean. A further test is not possible during the initial 15 minutes after the previous test was conducted. The result from the previous test will remain lit for 15 minutes after the test was taken. When you are ready to use the Test Holder again, repeat the instructions from step 1. Refill Test Cartridges are available for use with the Test Holder. Frequently Asked Questions 1. How accurate is the BSure Peanut Detective?

The BSure Peanut Detective is 99.99% accurate in laboratory tests.

2. How does BSure Peanut Detective work?

Peanuts contain a universal protein called Ara H 1, which causes allergic reactions in sufferers. This protein, also known as an antigen, can be detected using a highly sophisticated method called ELISA (enzyme‐linked immunosorbent assay). When you swipe the cartridge over your sample and hit the “Test” button, in 45 seconds you will receive a red or green light indicating the presence of Ara H 1 or not.

3. What might affect the accuracy of the result?

The food tested must have a high enough consistency to be sufficiently sampled by the cartridge’s metal mesh. If the mesh does not pick up enough of the food, the test will result in an error and the red light will flash.

4. Can I use the Test Holder with any other Test Cartridge?

No. The Test Holder can only be used with the Test Cartridges made by BSure Diagnostic Devices Inc., specific to the relevant food allergy.

5. I have used the Test, but no result has started flashing for over 45 seconds. What does this mean?

The test has not been performed correctly. The red light will start flashing, indicating an error, within 10 minutes of testing.

6. What if the Test Holder gets wet?

Some splashing of food or liquid will not damage the Test Holder, but if it becomes very wet it may be damaged. If so, both lights will start to flash indicating an error.

7. My result is still flashing. I have another Test Cartridge in the pack; can I insert this and do another test?

No. Wait until the light stops flashing before testing again. Please refer to ‘Using Test Holder again’.

The BSure Peanut Detective is specially designed for easy use at home, restaurants, day school etc. However, if you have any questions about the Test, please call the BSure helpline at 1‐800‐2BE‐SURE 24 hours/ 7 days a week. Our specially trained staff will be glad to give you confidential and helpful advice.

Disclaimer

The customer service phone number is 18002BESURE.

Visit us on the web at www.bsuredd.com.

Store at 36° 86°F (2°30°C). Do not freeze. Child safe. Do not use if foil containing test cartridge is damaged. Do not use Test Cartridge past its expiration date.

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Marketing Appendices 77 1 (0.8%) 2 (0.6%) 3 (2.8%) 4 (5.4%) 5 (90.4%)

8) What worries you most about your peanut allergy? (Please check all that apply) Consequences of an allergic reaction (98.1%) Embarrassment caused by an outbreak (11.7%) Boredom from eating the same foods (14.5%) My allergy does not worry me (1.9%)

9) How frequently do you eat outside of your home? Frequently (8+ times a week) (8.1%) Somewhat frequently (4‐7 times a week) (21.3%) Not frequently (1‐3 times a week) (57.9%) I never go out to eat (12.9%)

10) Does your allergy influence the frequency of eating outside of your home? Yes (76.1%) No (23.9%)

11) Where do you eat out most often? Restaurants (47%) Friend's house (4.3%) Relative's house (14.3%) School (24.6%) Work (2%) Other (please specify) (7.7%)

If you selected other, please specify:

Product Description In development is a device that can accurately detect traces of peanuts in foods as a precautionary measure for those who suffer from peanut allergies. The device, which would be slightly larger than a tube of lipstick (and able to fit onto a keychain), would quickly identify peanut traces in foods after sticking the tip of the device into the food. After less than a minute, a green or red light would indicate either no peanuts or peanuts in the food, respectively, thereby avoiding an allergic reaction while still enabling people to try new foods. This product would expire every six months through usage.

12) After reading the above description, how likely are you to buy this product? Definitely would buy (43.1%) Probably would buy (23.2%) Maybe would buy (25.5%) Probably would not buy (6.7%) Definitely would not buy (1.4%)

13) Would the six month expiration on the holder deter you from buying this product? Yes (55.3%) No (35.4%) Maybe (9.3%)

14) How much would you be willing to pay for this product? $30‐39 (45%) $40‐49 (20.6%) $50‐59 (16%) $60‐69 (4%) $70+ (14.3%)

15) What is the maximum price you would pay for this product in dollars?

Mean = 69.28 Median = 50.00 Min = 10.00 Max = 999.99

16) Where would you use this product? (Please check all that apply) Restaurants (91.1%) Friend's house (68.8%) Relative's house (64.6%) School (62.4%) Work (28.7%) Other (please specify) (12.8%)

If you selected other, please specify:

17) What attributes (listed on the right) would be the most important for this product to contain? (Rank by importance, 1st = Most important, 6th = Least important)

1) Portability (14.1%) 2) Accuracy (28.7%) 3) Response Time (16.5%)

Marketing Appendices 78

4) Ease of Use (17.5%) 5) Tests Large Variety of Foods (18.2%) 6) Appearance (5%)

18) How often would you expect to use this product on a weekly basis? 5+ days a week (28.1%) Less than once a week (15.4%) 3‐4 days a week (27%) I would not use this product (2.5%) 1‐2 days a week (27%)

19) Would you feel uncomfortable using a peanut detection device in public? Yes, I would only use it in private (3.1%) Yes, but I would still use it (23.2%) No, not at all (73.7%)

20) Which of the following attributes would increase the likeliness of your child using this product? (choose N/A if not applicable) Bright colors (9%) Cartoon prints (9%) My child would use it regardless (51.5%) N/A (30.4%)

Cartridge Description This product would require the use of disposable cartridges that would be inserted into the device because chemicals involved are not reusable and each cartridge must remain sterile. The cartridge tip is what is actually inserted into the food. Each cartridge could only be used one at a time, but they would be small enough that you can carry many at once.

21) How many cartridges would you want in a pack? (Based on usage) 4 (10%) 8 (19.4%) 12 (28.8%) 16+ (41.9%)

22) What is the maximum price you are willing to pay for a refill cartridge a.k.a per usage? Mean (all responses) = 3.30 Median = 4.00 Min = 1.00 Max = 5.00

23) How interested are you in an "Automatic Refill Plan" where a certain amount of refills and a holder are sent to you at intervals chosen by you through the company website? I would use this plan for holder repurchasing (7.5%) I would use this plan for cartridge repurchasing (10.4%) I would use this plan for holder and cartridge repurchasing (31.7%) I would prefer to buy this product through a store (50.4%)

24) Would you have more than one peanut detection device for multiple locations, such as one at home and one in a child's backpack? Yes (33%) No (24.6%) Maybe (42.4%)

The following questions are for statistical purposes only. Please fill them out for yourself, not for your child or dependent.

25) Age 18‐24 (22.9%) 25‐34 (23.7%) 35‐44 (42.4%) 45‐54 (9.9%) 55+ (1.1%)

26) Gender Male (13.2%) Female (86.8%)

27) Marital Status Married (69.5%) Divorced (2.8%) Single (27.7%)

28) City and State

Thank you for participating in our survey. We greatly appreciate your input.

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Marketing Apppendices 779

Marketing Appendices 80 MK Appendix 6: Focus Group Summary

Focus Group 1

Date: February 11, 2007 Age of Participant: 18+, Independent Time: 4:00 PM Location: Dexter Part, 175 Freeman St.

• Benadryl is not effective enough, usually takes 20 minutes before relief. • Usually eat our everyday – checking pasta oil would be very helpful. • Always concerned about a potential allergic reaction when eating out. • Trust is a factor – if 99.99% is truly the accuracy rate then yes they would try the product. • Would rather buy holder at a drug store – cartridges may be purchased on line. • Liked BSure logo – very appealing.

Focus Group 2

Date: February 21, 2007 Age of Participant: Guardians of Dependents Time: 11:00 AM Location: Boston University School of Management

• Always worried about an allergic reaction, especially when they are not present to watch their child. (School, friend’s house, camp)

• Child carries an EpiPen in their backpack in case of an emergency. School nurse is notified of this medication. Children have been taught which foods they should not eat.

• Trust is a major issue – However, if a product like this worked it would reduce anxiety. • Needs to be kid friendly, easy to use is important – quick testing results, less than 2 minutes. • Design needs – small enough to fit on a key chain. • Lacking precautionary devices for food allergies.

Focus Group 3

Date: March 9, 2007 Age of Participant: 18+, Independent Time: 2:00 PM Location: University of California, San Diego

• Main line of defense: EpiPen. Using it is a scary and painful experience. • Trust factor – would it really work? Doubtful of product at first glance. • Has to be small – it is embarrassing to be testing food in a restaurant. • Always concerned about an allergic reaction when eating out. • If this product came out, they would like to use it in restaurants. • Logo response – They liked the logo BSure. • Price – one individual was willing to pay up to $1000 for product. Another individual did not have

serious allergies and was not willing to spend more than $10.

Marketing Appendices 81 MK Appendix 7: Marketing Budget Expenses

Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Push Strategy

Kits

Press Kits $208 $208 $208 $208 $208 $208 $208

Doctor Kits $118,258 $118,258 $118,258 $0 $0 $0 $0

Conferences

MDM East $2,835 $2,835 $0 $0 $0 $0 $0

FIME $0 $0 $7,000 $7,000 $7,000 $7,000 $7,000

Eastern Allergy $2,150 $2,150 $2,150 $2,150 $2,150 $2,150 $2,150

Pull Strategy

Magazine

WebMD $240,000 $306,000 $374,544 $445,707 $519,567 $596,204 $675,697

Health $0 $0 $353,736 $360,811 $460,034 $469,234 $478,619

Web

peanutallergy.com $24,000 $24,480 $24,970 $25,469 $25,978 $26,498 $27,028

allergykids.com $6,480 $6,610 $6,742 $6,877 $7,014 $7,154 $7,298

Other

Word of Mouth $0 $0 $0 $0 $0 $0 $0

Total Cost $393,930 $460,540 $887,607 $848,221 $1,021,951 $1,108,448 $1,198,000

Marketing Appendices 82 MK Appendix 8: Base Case Sales Forecast

Year 1 2 3 4 5 6 7Competition % 0% 0% 10% 15% 20% 20% 20%Online Demand % 5% 8% 10% 13% 15% 18% 20%Child, Teen Segment 875,000 918,750 964,688 1,012,922 1,063,568 1,116,746 1,172,584Adult Segment 1,625,000 1,641,250 1,657,663 1,674,239 1,690,982 1,707,891 1,724,970Total Segment Size 2,500,000 2,560,000 2,622,350 2,687,161 2,754,549 2,824,638 2,897,554Purchase Intent 34% 843,250 863,488 884,519 906,379 929,110 952,750 977,345ACV 3.15% 7.09% 18.46% 22.49% 23.99% 32.98% 33.98%Awareness 7.28% 8.17% 11.50% 14.68% 17.63% 21.37% 27.66%Initial Buyers 1,935 5,004 18,780 29,917 39,304 67,156 91,865HolderRepurchase Rate 37.5% 726 1,876 7,042 11,219 14,739 25,183 34,449Repurchases/Year 1 726 1,876 7,042 11,219 14,739 25,183 34,449Subtotal Holder Demand 2,661 6,880 25,822 41,136 54,043 92,339 126,314Demand Lost (Competition) 0 0 2,582 6,170 10,809 18,468 25,263Total Holder Demand 2,661 6,880 23,240 34,966 43,235 73,871 101,052Target Retail Price 39% $41.99 $41.99 $41.99 $39.89 $37.90 $36.00 $34.20Manufacture Price $30.21 $30.21 $30.21 $28.70 $27.26 $25.90 $24.61Online Demand 133 516 2,324 4,371 6,485 12,927 20,210Total Holder Retail Revenue $106,149.62 $267,225.77 $878,259.33 $1,220,450.07 $1,392,658.54 $2,194,049.90 $2,764,861.56Total Holder Revenue $85,972.75 $229,503.45 $799,630.20 $1,177,803.30 $1,424,484.00 $2,378,681.09 $3,177,601.69CartridgeRepurchase Rate 76% 1,471 3,803 14,273 22,737 29,871 51,038 69,817Repurchases/Year 190 279,456 722,529 2,711,792 4,320,043 5,675,539 9,697,290 13,265,316Subtotal Cartridge Demand 281,391 727,533 2,730,572 4,349,960 5,714,844 9,764,445 13,357,182Demand Lost (Competition) 0 0 273,057 652,494 1,142,969 1,952,889 2,671,436Total Cartridge Demand 281,391 727,533 2,457,515 3,697,466 4,571,875 7,811,556 10,685,745Target Retail Price 35% $3.65 $3.65 $3.65 $3.61 $3.58 $3.54 $3.51Manufacture Price $2.70 $2.70 $2.70 $2.68 $2.65 $2.62 $2.60Online Demand 14,070 54,565 245,751 462,183 685,781 1,367,022 2,137,149Total Cartridge Retail Revenue $975,724 $2,456,332 $8,072,935 $11,690,694 $13,901,976 $22,823,906 $29,972,878Total Cartridge Revenue $774,113 $2,018,667 $6,876,945 $10,329,873 $12,751,050 $21,748,031 $29,695,351Total Retail Revenue $1,081,874 $2,723,558 $8,951,195 $12,911,144 $15,294,634 $25,017,956 $32,737,740Total Revenue $860,085 $2,248,171 $7,676,575 $11,507,676 $14,175,534 $24,126,713 $32,872,953Total Costs of Goods Sold $482,761 $1,222,252 $4,106,907 $6,125,518 $7,571,438 $13,043,251 $18,172,849Gross Margin $377,324 $1,025,918 $3,569,668 $5,382,158 $6,604,095 $11,083,461 $14,700,104

Marketing Appendices 83 MK Appendix 9: Online Rebate

MK Appendix 10: Introductory Advertisement

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Marketing Appendices 85 MK Appendix 12: Magazine Advertisements

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* Image Credits: “Cookies for Santa” via Microsoft Clipart

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Component Supplier Location

Holde

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Plastic Shell DA Pro Rubber Newburyport, MA

Circuit Board Holtek Semiconductor Davenport, FL

Optic Sensor Holtek Semiconductor Davenport, FL

Battery Dantona Battery Wantagh, NY

Packaging Multi Packaging Solutions Louisville, KY

Cartridge

Metal Mesh Sunny Metal Inc Fairborn, OH

Shell/Window DA Pro Rubber Newburyport, MA

Antibody AbD Serotec Raleigh, NC

Enzyme R&D Systems Minneapolis, MN

Substrate AbD Serotec Raleigh, NC

Buffer Fisher Chemicals Agawam, MA

Spring Murphy and Spring Palmyra, NJ

Pin W.H. Bagshaw Nashua, NH

O‐Ring Apple Rubber Products Lancaster, NY

Packaging Multi Packaging Solutions Louisville, KY

OM Appendix 4: Component Price Breaks

Holder Component Unit Cost (0‐100K) Unit Cost (100‐250K) Unit Cost (250K+)

Plastic Shell $0.5670 $0.5470 $0.5270

Circuit Board $0.8793 $0.8793 $0.8793

Battery $0.4000 $0.4000 $0.4000

Packaging $0.0700 $0.0650 $0.0600

Cartridge Component Unit Cost (0‐100K) Unit Cost (100‐250K) Unit Cost (250K +)

Metal Mesh $0.0019 $0.0019 $0.0019

Cotton Strip $0.0025 $0.0025 $0.0025

Plastic Shell $0.2406 $0.2106 $0.1906

Antibody $0.8000 $0.8000 $0.8000

Enzyme $0.2100 $0.2100 $0.2100

Substrate $0.2400 $0.2400 $0.2400

Buffer $0.0100 $0.0100 $0.0100

Spring $0.0500 $0.0450 $0.0400

Pin $0.0050 $0.0050 $0.0050

O‐Ring $0.1200 $0.1200 $0.1150

Packaging $0.0050 $0.0044 $0.0038

Operations Management Appendices 88 OM Appendix 5: Economic Order Quantities

Holder EOQ1 EOQ2 EOQ3 EOQ4 EOQ5 EOQ6 EOQ7

Plastic Shell 249 401 736 903 1,004 1,313 1,536

Circuit Board 249 401 736 903 1,004 1,313 1,536

Battery 249 401 736 903 1,004 1,313 1,536

Packaging 249 401 736 903 1,004 1,313 1,536

Cartridge EOQ1 EOQ2 EOQ3 EOQ4 EOQ5 EOQ6 EOQ7

Metal Mesh 18,830 30,277 55,646 68,255 75,898 99,210 116,035

Cotton Strip 18,830 30,277 55,646 68,255 75,898 99,210 116,035

Plastic Shell 18,830 100,000 250,000 250,000 250,000 250,000 250,000

Antibody 18,830 30,277 55,646 68,255 75,898 99,210 116,035

Enzyme 18,830 30,277 55,646 68,255 75,898 99,210 116,035

Substrate 18,830 30,277 55,646 68,255 75,898 99,210 116,035

Buffer 18,830 30,277 55,646 68,255 75,898 99,210 116,035

Spring 18,830 30,277 100,000 250,000 250,000 250,000 250,000

Pin 18,830 30,277 55,646 68,255 75,898 99,210 116,035

O‐Ring 18,830 30,277 55,646 68,255 75,898 99,210 250,000

Packaging 9,415 15,138 27,823 100,000 100,000 100,000 100,000

Information Systems Appendices 89 Information Systems Appendices

IS Appendix 1: Preliminary Operations/Manufacturing ERD

Data Dictionary Excerpt

Production Batch – one batch of product • Type – holder, cartridge • Status – work in process, finished inventory, sold

Equipment – one production machine • Type – type and function of machine • Location – where it is in the plant • Training Required – level of employee training required

IS Appendix 2: Preliminary Data Flow Diagram

Information Systems Appendices 90 IS Appendix 3: Microsoft Dynamics GP Resources

Desired Report Samples

Dynamics GP Screenshot (note the MS Outlook similarity)

Information Systems Appendices 91 Dynamics GP Inventory Report (continued previous Appendix)

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Information Systems Appendices 93 IS Appendix 6: Information System Cost Schedule (w/o IS Manager Salary)

Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 Year 6 Year 7

Core Software

Microsoft Dynamics GP $23,000 $5,658 $5,187 $6,601 $8,016 $9,430 $11,788 $14,145

JourneyTEAM Markup $17,250 $4,244 $3,890 $4,951 $6,012 $7,073 $8,841 $10,609

SQL Server 2005 Standard Ed. $2,505 $1,209 $1,047 $1,209 $1,371 $1,371 $1,695 $1,695

Core Hardware

Dell PowerEdge 2900 $5,900 ‐ ‐ $15,000 ‐ $25,000 ‐ $7,500

Dell PowerEdge SC1430 $2,900 ‐ ‐ ‐ ‐ $1,000 ‐ ‐

Dell Optiplex 320 Desktop $6,300 $1,800 $900 $1,800 $2,700 $2,700 $4,500 $4,500

Dell Latitude D620 Notebook $4,500 $1,500 ‐ $1,500 $1,500 $1,500 $4,500 $4,500

Support Hardware

Barcode Scanner $800 $320 $160 $320 $320 $320 $320 $320

Carroll Partner Phone System $2,000 ‐ ‐ ‐ ‐ ‐ ‐ ‐

Linksys 10/100 16‐Port VPN Router $435 $435 $435 $435 $435 $435 $435 $435

300’ Belkin CAT5e Network Cable $250 $150 $100 $150 $150 $150 $150 $150

50’ Belkin CAT5e Network Cable $200 $75 $50 $75 $75 $75 $75 $75

APC Smart‐UPS 750VA $832 $416 $416 $416 $416 $416 $416 $416

Samsung ML‐2510 Printer $130 ‐ ‐ ‐ ‐ ‐ ‐ ‐

Xerox Phaser Color Multifunction $500 $500 $500 $500 $500 $500 $500 $500

Support Software

Exchange Server 2007 $1,369 $134 $67 $134 $201 $201 $335 $335

Adobe CS3 Web Premium $1,799 ‐ ‐ ‐ ‐ ‐ ‐ ‐

Mathematica 5.2 $1,880 ‐ ‐ ‐ ‐ ‐ ‐ ‐

Services & Resources

Website & Online Store Dev. $2,500 ‐ ‐ ‐ ‐ ‐ ‐ ‐

BellSouth (AT&T) DSL Internet $660 $1,320 $1,320 $1,320 $1,320 $1,320 $1,320 $1,320

BellSouth (AT&T) Local Phone $300 $600 $600 $600 $600 $600 $600 $600

BellSouth (AT&T) Long Distance $5,424 $10,848 $10,848 $10,848 $10,848 $10,848 $10,848 $10,848

ASPwebhosting.com $1,750 $3,100 $3,100 $3,100 $3,100 $3,100 $3,100 $3,100

LiveVault data backup $1,200 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400 $2,400

Website Maintenance $1,800 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000 $6,000

Total $86,184 $40,709 $37,019 $57,359 $45,963 $74,439 $57,822 $69,448

Finance Appendices 94 Finance Appendices

FE Appendix 1: Cash Flows & Returns


Initial Investment in Fixed Assets

($127,459)

Net Income ($371,005) ($747,562) ($428,228) $806,233 $1,667,707 $2,162,703 $4,475,583 $6,463,256

+ Depreciation $0 $18,208 $18,208 $32,494 $46,780 $61,066 $71,429 $118,208

‐ ∆ Net Wkng. Cap. ($50,000) ($54,076) ($218,638) ($702,539) ($277,484) ($358,284) ($1,018,282) ($1,076,923)

‐ ∆ Fixed Assets $0 $0 $0 ($100,000) ($100,000) ($100,000) ($200,000) ($200,000)

Net Cash Flow ($421,005) ($783,430) ($628,658) $36,188 $1,337,002 $1,765,484 $3,328,730 $5,304,541

Terminal Value of Business Growth rate of ‐10%

$15,155,832

Returns NPV IRR

Project $4,730,587 61.33%

Investors $2,601,720 54.76%

Friends, Family and Mgmt

$2,128,867 76.26%

Finance Appendices 95 FE Appendix 2: Income Statement


Total Units For Holder 0 2,661 6,880 23,239 34,965 43,234 73,871 101,051

Price Per Holder 30.21 30.21 30.21 28.70 27.26 25.90 24.61

Internet 41.99 41.99 41.99 39.89 37.90 36.00 34.20

Variable Cost (Holder) 8.88 8.61 8.66 8.75 8.80 8.85 8.88 8.91

Total Holder Sales $81,953 $213,916 $729,426 $1,052,372 $1,247,676 $2,043,858 $2,680,324

Total Units For Cartri. 0 281,391 727,533 2,457,515 3,697,466 4,571,875 7,811,556 10,685,745

Price Per Cartridge 2.70 2.70 2.70 2.68 2.65 2.62 2.60

Internet 3.65 3.65 3.65 3.61 3.58 3.54 3.51

Variable Cost (Cartri.) 1.70 1.63 1.63 1.64 1.65 1.65 1.65 1.65

Total Cartridge Sales $774,113 $2,018,667 $6,876,945 $10,329,873 $12,751,050 $21,748,031 $29,695,351

Total Sales $0 $856,066 $2,232,583 $7,606,370 $11,382,244 $13,998,725 $23,791,889 $32,375,676

Variable Cost (Holder) 0 22,924 59,600 203,311 307,676 382,715 656,079 900,622

Variable Cost (Cartri.) 0 459,020 1,187,952 4,039,053 6,083,286 7,529,966 12,879,988 17,639,118

Fixed Mfg. Costs 86,005 162,782 168,056 173,501 179,122 184,926 190,917 197,103

Total COGS 86,005.00 644,726 1,415,608 4,415,865 6,570,084 8,097,607 13,726,984 18,736,843

Gross Profit 211,340 816,975 3,190,505 4,812,160 5,901,119 10,064,905 13,638,833

Start‐Up Costs 371,005

Fixed Admin. Costs 546,764 766,455 926,683 1,137,648 1,213,597 1,425,723 1,550,531

Marketing Costs 393,930 460,540 887,607 848,221 1,021,951 1,108,448 1,198,000

Depreciation 18,208 18,208 32,494 46,780 61,066 71,429 118,208

Earnings Before Tax (371,005) (747,562) (428,228) 1,343,722 2,779,511 3,604,505 7,459,305 10,772,094

Taxes 0.0 0.0 0.0 537,489 1,111,804 1,441,802 2,983,722 4,308,837

Net Income ($371,005) ($747,562) ($428,228) $806,233 $1,667,706 $2,162,703 $4,475,583 $6,463,256

Other Ratios

COGS % of Sales 75% 63% 58% 64% 64% 63% 63%

Gross Margin 25% 37% 42% 47% 46% 46% 46%

Profit Margin ‐87.3% ‐19.2% 10.6% 16.1% 17.0% 20.6% 21.8%

Finance Appendices 96 FE Appendix 3: Balance Sheet


Minimum Cash Balance 50,000 59,925 156,281 532,446 723,091 892,573 1,522,362 2,078,675

Accounts Receivable 0 93,815 244,667 833,575 1,132,041 1,397,375 2,383,346 3,254,285

Raw Materials Inventory 0 10,162 52,346 65,230 51,634 115,754 36,088 147,100

Finished Goods Inventory 0 1,997 5,163 17,442 25,979 31,802 53,794 72,851

Current Assets 50,000 165,899 458,457 1,448,692 1,932,745 2,437,504 3,995,590 5,552,911

Gross Fixed Assets 127,459 127,459 127,459 227,459 327,459 427,459 627,459 827,459

Depreciation 0 18,208 36,417 68,911 115,691 176,756 248,185 366,393

Net Fixed Assets 127,459 109,251 91,042 158,548 211,768 250,703 379,274 461,066

Total Assets $177,459 $275,150 $549,499 $1,607,240 $2,144,514 $2,688,207 $4,374,864 $6,013,976

Accounts Payable 0 61,363 135,268 422,949 629,502 775,960 1,315,746 1,796,126

Current Liabilities 0 61,363 135,268 422,949 629,502 775,960 1,315,746 1,796,126

Paid in Capital $542,784 $1,321,874 $1,945,591 $1,945,591 $1,945,591 $1,945,591 $1,945,591 $1,945,591

Retained Earnings (365,325) (1,108,087) (1,531,360) (722,057) 317,395 1,734,765 4,987,411 9,845,960

Dividends (Cumulative) 0 0 0 39,242 747,975 1,768,109 3,873,885 7,573,701

Total Equity 177,459 213,787 414,231 1,184,292 1,515,012 1,912,247 3,059,117 4,217,850

Total Liabilities and Equity $177,459 $275,150 $549,499 $1,607,240 $2,144,514 $2,688,207 $4,374,864 $6,013,976

Net Working Capital Balance 50,000 104,536 323,189 1,025,744 1,303,244 1,661,544 2,679,843 3,756,784

List of Sources Used “Allergic Reactions & Anaphylaxis Allergy." EpiPen. Merck & Co. 1 Apr. 2007

<http://www.epipen.com/>.

Annual Report. Abbott. Providence, RI, 2006. 12 Apr. 2007 <http://www.abbottinvestor.com/phoenix.zhtml?c=94004&p=irol‐irhome>.

“Barcode Scanners." BizRate. 04 Apr. 2007 <http://www.bizrate.com/barcodescanners/>.

Bellsouth." AT&T. 05 Apr. 2007 <http://smallbusiness.bellsouth.com/ld/compare_domesticpermin.asp>.

“Benadryl." Benadryl. Pfizer. 1 Apr. 2007 <http://www.pfizerch.com/brand.aspx?id=34>.

Best of Breed Vs. Integrated Systems. 2 April 2007 <http://olcsoft.com/select_0800.htm>.

Boys on a tree. LaSalle Council Boy Scouts of America. 2 April 2007. <http://www.lasallecouncilbsa.org/images>

“Calamine Lotion Information." Drugs.Com. 1 Nov. 2002. 1 Apr. 2007 <http://www.drugs.com/cdi/calamine‐lotion.html>.

“Clear Blue ‐‐ How Pregnancy Tests Work." Clearblue. <http://www.clearblue.info/uk/NewDigitalPregnancyTest.cfm>

“Consumer, Media, and Market Research." Mintel. 14 Apr. 2007 <http://www.mintel.com/frontpage/>.

Cookies for Santa. Microsoft clipart. 02 April 2007

“Distribution Channels." Encyclopedia of Small Business. The Gale Group, Inc, 2002. Answers.com 11 Apr. 2007. http://www.answers.com/topic/distribution‐channels

Dedicated Server Hosting from ASPwebhosting.com. 11 April 2007 <http://www.asp webhosting.com/dedicatedserverhosting.htm>.

Eastern Allergy Conference. American Academy of Allergy, Asthma & Immunology. 25 Mar 2007.<http://www.easternallergyconference.org>

“Emerging Ethnic Foods." Mintel Reports. Mintel, 2002. 1 Apr. 2007.

“Food allergy information.” Food Allergy Initiative, Food Allergy Initiative (FAI)., 1970. 11 Apr. 2007. http://www.foodallergyinitiative.org/section_home.cfm?section_id=3

“Food allergy." MedicineNet. MedicineNet Inc., 2001. Answers.com 11 Apr. 2007. Error! Hyperlink reference not valid.

“Food Allergy." Wikipedia. 6 Apr. 2007. 22 Mar. 2007 <http://en.wikipedia.org/wiki/Food_allergies>

FeedBurner Homepage. 4 April 2007 <http://www.feedburner.com/fb/a/home>.

Figures and Reports. Roche. Annual report, 2006. 10 Apr. 2007 <http://www.roche.com/home/inv_fin_link>.

FIME International Medical Exposition, Inc. 25 Mar 2007. <http://www.fimeshow.com/index.cfm>

GettyImages.2April2007. <http://creative.gettyimages.com/source/frontdoor/defaultfilm.aspx>

“Google Maps." Map. http://maps.google.com/maps?hl=en&tab=wl&q=. Google. 12 Apr. 2007 <http://maps.google.com/maps?hl=en&tab=wl&q=>.

Google Analytics Homepage. 23 March 2007 <http://www.google.com/analytics/>.

Google Search for "peanut allergy". 9 April 2007 <http://www.google.com/search?hl=en&q=peanut%20allergy>.

Google Technology. 25 March 2007 <http://www.google.com/technology/>.

Haskin, John. "Patients in waiting rooms throughout the United States".The Magazine Group. 9 April 2005 http://www.themagazinegroup.com/clients‐case‐studies‐webmd.asp

Homepage. California Business Solutions, California. Microsoft Dynamics. Microsoft. 14 Apr. 2007 <http://www.calbs.com/calbs/gp/index.htm>.

Homepage. Website, Long Island. Peanut Allergy. 15 Mar. 2007 <http://peanutallergy.com/>.

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