Successes and Failures in Biotechnology Innovation Â Â Â Â Â When I first started this paper I would have to admit that I was pretty green in the field of Biotechnology, I had a brief understanding but nothing near an in depth understanding of the field. So when I first started looking for a success story, I tied my views on successful innovation in the areas that I am familiar with to the biotech field. The major theme that emerged was that successful innovation equals a product that produces quality profits for a company. After further research on the success of innovation, you do realize that profits may be the end goal of the company but success stems from a total company wide effort, that may start many years before a single cent of profit is ever realized. Â Â Â Â Â In my opinion, you have to look at three major areas to see if a company successfully manages their innovation; at the company level, customer level, and the impact the innovation had on society. From the company viewpoint, you have to look at how well management set the company up to be innovators in a given market. Did they choose an industry that would provide the company potential for continuous growth? How did they utilize their employee base and acquire a strong base of knowledge to continually come up with new ideas in the area of interest they are trying to enter? In addition once a product is developed did they manage their intellectual property in the in a manner which provided themselves maximum protection? Finally you have to look at the end results of the innovation. Did they introduce an innovation that allowed the company revenue to grow, were they able to achieve a strong segment of market share, did this innovation have a positive effect on the companies stock price, etc? Â Â Â Â Â From the prospective of the customer you have to look at if the innovation introduced by the company successfully met their needs. Would this product help them save time and money and improve their overall business? How did they manage the channels to which deliver their products to their customers? Your customer will ultimately impact your final sales figures, if they view the product as a benefit to them and if you can meet the needs that the customer has you can have your innovation viewed as a success. Â Â Â Â Â Finally from the standpoint of how the companies innovation had an impact on society. Was... ...sequence can be felt. With the world population soaring you will continue to see the emergence of genetically engineered crops to continue and you will be able to see who the winners and losers are within that industry based on how they handle the introduction of their products. Works Cited Current Status of Starlink Corn. 3 Jun. 2002. Starlinkcorn.com. 2 Feb. 2005. Â Â Â Â Â Estes, Lane. Economic Analysis of Roundup Ready Soybeans. Feb. 2002. 2 Feb. 2005. Geo-Pie Project. Am I eating Soy Beans. 16 Aug. 2004. Genetically Engineered Organisms. 2 Feb. 2005. Â Â Â Â Â Harl, Neil, Roger Ginder, Charles Hurburgh and Steve Moline. The Starlink Situation Â Â Â Â Â 25 Oct. 2000. AG Biotech Info Net. 2 Feb. 2005. Â Â Â Â Â Harris, Andrew. GE Corn Pollution Spawns 30 Lawsuits. 18 Sept. 2002. Organicconsumers.org. 2 Feb. 2005. Monsanto Inc. Simply the Most Profitable Way to grow Soy Beans. Jan. 2005. Monsanto Inc. 2 Feb. 2005. Ruen, Jim. Biotech R&D Isnâ€™t Just About Traits. Jan. 2005. Dealer and Applicator. 2 Feb. 2005. Starlink Corn. FSANZ. 2 Dec. 2004. Foodstandards.gov. 2 Feb, 2005. US 2000/01 Corn Exports Dented by Starlink. 10 Sept. 2001. Planetark.com. 2 Feb 2005.
Our main concern with Eastboro is their current dividend policy. With their current 40% dividend payout ratio, they will have to continue to borrow money to pay their dividend until the end of 2006. In 2007, they finally see an excess of cash after the dividend. With this current ratio, Eastboroâ€™s hope to expand more in the international market is very restrained. Since management does not like to take on debt, they theoretically wonâ€™t expand until 2007. However, with the recent restructuring of the company and recommendation of a name change, we feel that the dividend policy needs a make-over, as well. Management wants to focus their energy to moving the image of the company to more of a growth company as opposed to a high dividend paying mature company.
To obtain this image, the dividend payout ratio needs to be lowered drastically to a payout ratio of 10%. With this decrease in the payout, the new Eastboro Advanced Systems International (EASI) will convince shareholders of their change to a growth company. Switching to a 10% payout ratio allows Eastboro to see excess cash by 2004, rather than 2007 with the current ratio, giving them the ability to fund the international growth sooner. This will also attract new investors, which in the short-term will offset the expected loss of some current shareholders. We feel that this change will help increase the value of the company and the upside will, in the future, outweigh the downside.
The idea behind reducing the payout to 10% is that EASI will be able toÂ consistently reach this target. At the end of each year, after all projects have been funded, EASI will be able to issue a special dividend to shareholders. With this ability, Eastboro will not have a problem retaining the shareholders or obtaining new shareholders.
The recent attack on September 11, 2001 has caused the market to see some low results. Since the stock price has fallen from $30 to $22.15, this would be a good opportunity for EASI to repurchase some stock to help increase the value to the shareholders. Repurchasing some stock at this point will signal to shareholders that management feels strongly about the restructuring of the company. This, also, will give the shareholders the confidence to remain with the company.
We recommend that Eastboro change their name to Eastboro Advanced Systems International, Inc. to introduce the company as heading in the new direction of becoming a more technology advanced company. We also recommend reducing the dividend payout to 10%, as well as the repurchase of stock at the current price to help increase value. This will reduce the companyâ€™s dependency on borrowed funds, reducing the forecasted loss of the company and making them more profitable in shorter time period.
This will give them increased cash flows to reinvest in CAD/CAM research to keep the company on the leading edge of advancement of their Artificial Workforce and related products at home and abroad. Along with the change in company dividend payout policy, a statement should be issued to inform the stockholders of the companyâ€™s direction and the continued importance to improve the companyâ€™s CAD/CAM products. To maximize shareholder wealth, we will be sticking to a 10% dividend in the future with the possibility of special dividends. With these changes, Eastboro will be signaling their focus on becoming a high growth stock.
Overall group five did a very good job addressing the major issues in thisÂ case. They tackled the issues of the dividend policy, the proposed name change for Eastboro, and whether or not to buy back shares of stock.
We agree with much of their analysis and recommendations. By lowering the dividend policy to 15%, they are allowing a larger portion of funds to be used for future research and development, an idea we agree with. By cutting this percentage back from a current rate of 40%, there will obviously be a reaction by both current and prospective stockholders. By approving the name change to Eastboro Advanced Systems International, they are signaling to the street that they are committed to future growth, and will no longer be able to be relied upon for high dividend payouts. We also like the fact that they did a dividend valuation, showing that Eastboro is currently under-valued, and does have a strong future.
The only major issue we have with their analysis is a couple mistakes in the data they used. In reporting net income for 2001 in their forecasts for potential dividend payouts, they used 8. The correct number here, as given by the text, is 18. Also, they used the wrong depreciation data in several years in this forecast. These mistakes would have been realized if they had reviewed their brief adequately. These mistakes skew the numbers enough to mislead readers, showing the wrong timeframe for excess cash.
In conclusion, group five did a very good job on the major issues in this case. However, they should have taken more time reviewing some of their data to ensure accuracy.
There are several limitations in this case. One of the main issues is what kind of fallout will be produced by the cutting of the dividend payout from the current rate of 40% to a rate of 10%. We are assuming that those who are currently holding the stock for these large dividend payments will either stay with Eastboro, or will be replaced by new investors whose goals better represent Eastboroâ€™s vision.
We are also forecasting all numbers with an assumed growth rate of 15%, which obviously has the possibility, if not the probability of fluctuating below or above this number. Also, we are assuming the recent focus on the CAD/CAM technology will be profitable for Eastboro in the long-run, and that this new vision will create value for shareholders.
Lastly, we are assuming that the market as a whole will perceive this move for what it is, a change in focus for a solid company with high potential for future growth. An alternative would be that people would look at the cut in dividends for a company who had historically paid them as a signal of weakness for Eastboro. Weâ€™re going with the assumption that the name change, as well as proper marketing practices by Eastboro should adequately address this problem.
Write something about yourself. No need to be fancy, just an overview.