Situation Analysis - Jelly Belly, Otis Sofware - Case Study Example

EXECUTIVE SUMMARY Jelly Belly is considering the re-investment options into Otis and had several proposals. This report is an insight into the strategic analysis carried out to arrive at decisions regarding various investment and strategy options available to Jelly Belly. The investment options to be considered are whether to continue investment (either by Jelly Belly itself or involving other investors) or to sell it off at a huge loss. The sale would be only at a price 16% of the total investment made in it ($ 800,000 being its pegged selling price and the investements made were $2.4 mn initially and 2.56 mn in the two years of its operation totalling the investment to $ 4.96 mn). This analysis shows that it is absolutely not feasible or viable to sell off this unit at such huge a loss. Therefore, continuing with the investment and searching avenues to boost up sales at Otis is a better option for Jelly Belly. Having decided upon continuing to invest, there is a need seen for Otis to expand as it has stagnant sales at this stage. The expansion could be seen as a strategy either into a new business market or its existing market by expanding salesforce. TABLE OF CONTENTS INTRODUCTION............................................................................................................. 3 ANALYSIS......................................................................................................................... 4 SUMMARY........................................................................................................................ 6 CONCLUSION.................................................................................................................. 7 RECOMMENDATIONS.................................................................................................. 9 REFERENCES.................................................................................................................. 10 INTRODUCTION: Marketing now seems imperative in all walks of life with all the big organizations engaging in marketing activities on a large scale. Marketing strategies to a large extent determine the success of a product. Marketing affects our everday life from clothes to food to entertainment; everything is related to marketing, advertising and publicity. Regis McKenna shows his view point in (1991) in an article “ marketing is everything” he says that the marketing is not only a responsibility of single person it’s a team work which deliver the best product to customers, so everyone from a worker to director is involve in it. The case discussed here is pretty much related to the marketing and sales requirement of an investment venture ‘Otis software. It belongs to Jelly Belly, a capital company with different business ventures and has seen a total investment of $2.4 million till now. The venture capital funding of Otis Software represents 6% of Jelly Belly’s investments. Although Otis is taking huge inputs in terms of capital investment, its sales growth is not as projected at the end of year 2 in alignment with its overall business strategy of selling it off for $100million after five years to a major US stakeholder like Microsoft, Sun or Google. In order to revamp sales and market standings, further investments into marketing and sales efforts and options of concentrating on Business markets have been in contemplation. There are several investment and strategy options which have been examined and analysed in this report further. ANALYSIS: Present situation faced by Jelly Belly and its venture company Otis Software is not very unique and uncommon. During last 18 months, global economic situation has got worse and companies are downsizing and restructuring their whole set ups. Jelly Belly may find it difficult but it has to make a choice of keeping the business of Otis Software under its platform or not. When it comes to investment options of: A. Quiting B. Continuing investment C. Involving other investors; Selling of Otis seems a very easy and quick solution. But, The investment options to be considered are whether to continue investment (either by Jelly Belly itself or involving other investors) or to sell it off at a huge loss. The sale would be only at a price 16% of the total investment made in it ($ 800,000 being its pegged selling price and the investements made were $2.4 mn initially and 2.56 mn in the two years of its operation totalling the investment to $ 4.96 mn). Moreover, contrary to quiting, business strategy of continuing to invest can be more productive if management sees the invisible flaws and removes these successfully. If any company refuses to surrender against the odds of business, Jelly Belly can be more profitable and may succeed its plan to sell Otis Software to an American IT icon at the desired price in few years to come. However, looking for other investors for Otis is not an option as Jelly Belly can sufficiently fund Otis on its own; moreover a game plan of selling it off after year 5 does not need the burden of involving other strategic partners which would make the deal more complex. The various strategies to be adopted needs to be looked into so as to estimate the potential growth by providing the standard product (Paulend toofar Group vice president of the platforms group). Since Jelly Belly should continue with the investment option, the analysis of the strategy options available is a must at this stage: 1. Direct resources to developing a new product directed to the business market (requires an additional 4 programmers) 2. Direct resources to the existing product (Report Card) and focus attention on ramping up marketing and sales (requires sales and marketing team and 1-2 programmers) As already factored in, growth in business market has huge potential for growth, as well as higher margins. If we continue the existing product, it has been evaluated already that the company cannot have positive cash by year 4 and consequently, a need for further expansion. 4 additional programmers would mean an additional expenditure of $ 304,000 per annum. In contrast, Otis is asking for an investment of $ 5 million in existing products by strengthening its maketing and sales front. Therefore, it seems a viable proposition to provide a partial investment for fortifying the marketing and sales workforce along with an investment into Business markets which would reap higher returns in future. Both these will seem to be generating higher sales volumes and putting Otis as a better selling proposition. SUMMARY: There are various reasons for providing both funds and direction to the Otis Sofware. Some of the main reasons are: a) With additional capital support of $5 million, Otis Software will become financially strong and their level of motivation will enhance with increased confidence on company’s status and improved financial worth. b) Otis Software will be in a position to draw more aggressive and appropriate market strategy for selling its newly innovated product ReportCard. c) With improved marketing efforts and guided support by Jelly Belly, team of Otis Software will be able to explore new horizons and markets that will support in selling the ReportCard to new customers. d) With improved and guided support from experts of Jelly Belly, Otis can search and find new customer segments that will be more convenient to sell instead of persistently calling the already targeted customers. e) Apart from the given product range and market segments, both companies can share expertise and develop new products with more and more options for their customers. f) In the light of cared and guided environment, programmers and marketing people of Otis Software can develop and sell new IT solutions to the competitive markets and can create new bench marks for the company that will help them to sell the venture for $100 million in next few years. g) Benefits of joint venture can be shared in the more practical way when experts from both companies try to find solutions for the unexpected sales. In a very specific direction, company can look for novel avenues to design, develop and sell new products. h) Research and development can further trigger the progress of development and marketing when both expert companies work togethers in terms of capital and software skills. i) The last important reason is the fact that after every recession, there is recovery and then another boom, Jelly Belly should invest this time in capital and direction and must develop new products to keep the pace of Otis Software high, so at the time of recovery or boom, they should capitalize these strengths and could sell the company may be at more than $100 million. CONCLUSION: This report has thus seen the analysis, evaluation and an examination of several investment options and the various strategic alternatives available. It has been well established that there is a need to adopt a strategic plan which makes the blueprint and roadmap of business development. There are certain critical success factors in terms of a strategic plan which are well known and well proven and it is worth giving each of them serious consideration. Financial success is completely dependent upon the marketing and promotional activity of any project. Finance, operations, accounting and other business projects will not work properly if you don’t have a demand for that project and you cannot make profit. Marketing is basically a tool to make right decisions to sell or promote your project. You just have to choose the right medium to market your project. It is vital that the exercise of the strategic plan is viewed as not only but urgent by the powers that are in the organization (Thompson, A and Strickland, 1997, 61). One of the reasons that time is devoted to strategic thinking only in times of crises is that it is only at such times that the subject is seen as urgent enough to take precedence over the immediate day-to-day problems. Senior Participation management’s participation in this situation is a pre-requisite for success, not only because of the perceptions such participation affords of importance and urgency, but also because decisions of this nature, taken in the absence of the most senior management, simply will not hold (Thompson, A and Strickland, 1997, 62). Secondly, preparation of supporting data is central to the whole exercise and significant effort should be devoted to it so that time is not wasted in discussion or delaying decisions because the facts are not known. It must not be neglected or the whole exercise will be severely compromised if related data is ignored or not analysed properly.Thirdly, Sound Leadership for the exercise of strategic plan is extremely important, and many organizations call on the services of an external consultant to facilitate the process. Such a consultant should carry out his exercise on previous occasions and will be familiar with the potential pitfalls; he should be free from any suspicion of promoting his own agenda; and he should leave management free to focus on the issues rather on the process. He should also advise on the preparation of supporting data so that the actual plenary session can proceed smoothly and without interruption. He should ensure that all participants are clear about the objectives of the session and have promoted reasonable expectations about what can be accomplished. RECOMMENDATIONS: 1. My recommendation for the Jelly Belly is to invest further into Otis software. Company should provide both funding and direction to Otis Software to keeps the spirit high and to achieve the goals in minimum possible time. If Jelly belly focuses on both financial and managerial developemtn of the Otis Software, there are many chances that company will achieve the goals in two to three years maximum. 2. Secondly, as a strategy option, it should move on to a dual pronged strategy of partially dividing the $ 5 million dollar into marketing and sales force expansion as well as an approximate minimum investment of $ 0.3 million per annum towards expansion into business markets for higher potential in sales volume and margins. REFERENCES: McKenna, Regis (Jan 1991). Marketing is everything. Harvard business review. Thompson, A and Strickland, (2006), Oxford University Press, 1997, 62 Paulend Toofar, Product Development Management Association and the Engineering Management Society, at DRM Associates, 2613 Via Oliver, and Palos Verdes, CA 90274; Read More