Aaron Troyer

1
UF
Food Resource Economics Dept.
Aaron Troyer Marisa Zansler 2001 AAEA Case
Study Competition
2
XS Inc.com Redefining Agricultural Input
Supply

• XS Ag.com
• Website designed to enable producers, dealers,
  and manufacturers to trade agricultural seed,
  chemicals, fertilizer, etc.
• Nterline
• Combines the traditional agricultural input
  distribution system with up to date technology
  that streamlines the supply chain

3
Problem Statement
?

• XS Inc.com must
• consider a marketing
• strategy designed to
• meet its challenges and
• allow profitable
• operation in the future

Marketing Plan
4
XS Inc.com Challenges

• Competition
• Supply Chain Inefficiencies
• Market Readiness

5
XS Inc. Internal Forces

• Core Strengths
• Lower Input Prices
• 24 hour availability
• Fills Supply Efficiency need
• Allows for better price transparency
• Customer data management

• Company Weaknesses
• Internet Only Access
• Service
• Return ability
• Delivery Time
• No Personal Relationships

6
XSInc. External Forces

• Opportunities
• Participates in large market
• Internet market is growing
• Access growers around US in one location
• Nterline is open platform

• Pressures
• Traditional markets turning e-friendly
• Strong service from traditionals
• Many online ag services
• Compete directly with manufacturers,
  distributors, and retailers.

7
Market Power

• Market Competition
• Traditional Companies
• UAP, Helena, Cargill
• John Deere
• Dow, Monsanto, Dupont
• Online Ag E-tailers
• DirectAg.com
• Rooster.com
• ASP software available
• Monsanto, Ariba

8
XS Ag.com Market Segmentation
Total U.S. Farms Inputs 188.5 Billion
Chemical Sales Application 8.48 Billion
Other Ag Inputs 166.88
Machine Parts Repairs 3.58 Billion
Animal Health 2.26 Billion
Seeds Plants 7.35 Billion
9
Percent of Farms and Land in Farms By Economic
Sales, U.S., 1998-2000 Farms Reporting Less Than
20K
Source Farms and Lands in Farms, Agricultural
Statistics Board, NASS, USDA February 2001
10
Percent of Farms and Land in Farms By Economic
Sales, U.S., 1998-2000 Farms Reporting Greater
Than 100K
Source Farms and Lands in Farms, Agricultural
Statistics Board, NASS, USDA February 2001
11
Alternatives

• Continue on current course
• Address issues of XSag.com and Nterline pricing
  and positioning
• Drop either two lines

12
XSag.com Implementation

• Redefine the target market
• Launch a phone service for producers
• Add enticing information to website
• Increase customer service availability

13
XSag.com The Target

• Focus the target to specific users
• Promote planning
• Advertise use for specific crops
• Target mid-revenue not acreage

14
Average Farm Size By Economic Sales, U.S.,
1998-2000
Source Farms and Lands in Farms, Agricultural
Statistics Board, NASS, USDA February 2001
15
Target By Region

• Mid revenue firm size by region

16
Add New Telephone Service

• Hire or contract new telephone customer service
• Allow for orders over the phone
• Can provide price information
• Access potential new clients
• Fits with the traditional method of communication

17
Expand Informational Services

• 65 of growers with access to the internet use it
  to find information
• Add news and weather
• Crop information
• New products available
• Commodity Prices and Outlooks

18
Launch Promotional Campaign

• Advertising _at_Agriculture online and in
  Successful Farming
• Promote Price
• New Telephone Order Service
• 800 number to access XS ag

19
Evaluation
PROS
CONS

• More capital risk
• Returns are somewhat unknown

• Establish Customer Loyalty
• Pinpoint Most Likely Users
• Addressing the needs expressed by the end-user

20
Revenues And Costs XSag.com

• Expected 2001 Revenues 1.44 million from XSag.com

• Base costs on Ag Services Powerfarm.com
• They lost .03/share or 164,000 dollars
• XS ag Costs then could range /- 20

21
XSag.com Anticipated 2002 Financial Data
Dollars are in millions
22
Nterline Evaluation

• Core competency
• Software that anticipates and analyzes demand for
  ag inputs
• Open system
• Coordinates different users along different
  points in the supply chain

• Challenges
• Competition from large traditionals
• Many large distributors already use some form of
  ASP
• Must be compatible with all users

23
ASP Market Size
Source Gartner Group May, 2001
24
Nterline Pricing

• Should be based on the level of service provided
• Three levels of service
• Customized
• Must be competitive with other available ASP
• Must save customers money

25
Three Levels of Service

• First Level provides transactional assistance
  throughout supply chain
• Second Level available provides the first plus
  customer data tools and regional anonymous data
• Third level includes both 1 and 2 plus and
  website integration.

26
Nterline Pricing

• Each level adds additional service, thus
  additional price
• First level 2,000 per quarter plus transactional
  fees
• Second level 3,000 per quarter plus
  transactional fees
• Third level 4,000 per quarter plus transactional
  fees plus website maintenance

27
Nterline Financials

• Cost associated with the development of Nterline
• 5.0 million .5M to promote and service
• Long term approach
• Target smaller to midsize firms and Co-Ops
• Set a goal of 125 customers in the first year
• Yields revenue of 1.5 million

28
Conclusion

• Chose to continue development of both Nterline
  and XSag.com
• Nterline
• profitable after 2 years
• Investment recovered after 6 years
• XS ag restructured
• Fits end-user needs
• Increases service and support