SafeBlend Tech
Safeblend
Technologies
PRESENTED BY: YUSUF AKTAN, WILLIAM CHEN, DAVID GU & KYRON RICHARD
Price Contracts & Competition
!
Goals for Safeblend:
!
Stay afloat until 2014, keep majority marketshare
Recommendation:
!
Competitive Pricing to eliminate Floatwise
Industry
Analysis
Competitive
Analysis
Financial
Analysis
Price
Proposal
Five Forces Analysis: Fracking
Customers:
Suppliers:
BNG (High)
AOG (Low)
NEGLIGIBLE
Rivalry:
GG (Med)
Bixon (Low)
Float (High)
Threat of
New
Entrants:
Industry
Analysis
LOW
Substitutes:
ALT. ENERGY
Fracking Fluid Suppliers Have Power
!
Barriers to entry are high and a lack of substitutes mean suppliers are powerful.
Competition and rivalry are intense.
Strategy: weed out competition for as long as possible.
Industry
Analysis
Industry
Analysis
Competitive
Analysis
Financial
Analysis
Price
Proposal
Main Industry Competitors
Floatwise
Safeblend
Privately held, $20 million revenue
Offering aggressive pricing to BNG
Privately held, $44 million revenue
60% of AOGs Fluid
GG Works
Bixon
Privately held, $25 million revenue
Providing 40% of AOGs Fluid
Publicly held oil and gas
$75 million revenue
Proprietary blend
Competitive
Analysis
Floatwise > Biggest Comp. in 2012
!
Bixon is proprietary & GG has lower profits without business
Floatwise is Biggest Competitor:
!
Advantages: Proven industry supplier and Floatwise is
unable to quickly mobilize.
Competitive
Analysis
Industry
Analysis
Competitive
Analysis
Financial
Analysis
Price
Proposal
How Low Can You Go?
!
Break-even point: When Profit = 0
Profit = Contribution Margin - Fixed Cost
Contribution margin = Fixed Cost
Financial
Analysis
Fixed Costs and AOG Revenues
!
SG&A as Fixed Costs
!
Estimate using 2012 FC using 2011 and
adjusting for 3% inflation
AOG Revenue
!
Estimate using 2012 Price Agreement; 60%
of 2560000 units at $ .4 / unit
$1,194,091 * 1.03
-= $1229913.73
2,560,000* .60 *$.40
Financial
Analysis
-=$614400
CM Needed from BNG?
!
CM needed from BNG depends on portion of the business
Break-even price is Unit CM in addition to Variable Costs
Unit CM = $615513 /(50% * 4640000)
Unit CM = $615513 /(75% * 4640000)
Unit CM = $615513 /(100% * 4640000)
Unit CM = $.13 +$.40
Unit CM = $.18 +$.40
Unit CM = $.27 +$.40
-$.53
$0.58
$0.67
Industry
Analysis
Competitive
Analysis
Financial
Analysis
Price
Proposal
Pricing Recommendation > Keep
BNG
!
Pricing strategy: delay Floatwises seizing portions of BNGs business
Most competitive pricing at 75%, discourage use of Floatwise as a supplier
2012
2013
2014
0.50
1392000
1560000
2088000
0.75
3132000
3510000
4698000
1.00
1392000
3120000
4176000
Price
Proposal
Future > Post-Recommendation
!
If Floatwise is kept from BNG, SB can obtain a higher marketshare in 2013
Kettle can be a client option in 2014
2012
2013
2014
AOG
614400
700000
880000
BNG
1392000
3510000
2436000
Kettle
1500000
TOTAL
2006400
4210000
4816000
Price
Proposal
Results of Alternate Price Strategies
2012
2013
2014
2012
2013
2014
AOG
614400
700000
880000
AOG
614400
700000
880000
BNG
3132000
1560000
522000
BNG
1044000
780000
522000
Kettle
1500000
Kettle
1500000
TOTAL
3746400
2260000
2902000
TOTAL
1658400
1480000
2902000
If they move to other competitors, it will hurt the business.
If you shoot low, the price will stay low.
Price
Proposal
Future Steps for Safeblend
!
Inorganic Growth through M&A
Partnership with Bixon
Long-term contracts with major clients
Offer complimentary products
Final Price Contracts & Competition
!
Recommendation:
!
Pricing is the strategy and were ready to sign!
Any Questions?
!
Goals?
Pricing Strategy?
Competition?
Industry Factors?
