SafeBlend Fracturing - Garrett Carlson Marketing 510...

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Garrett Carlson Marketing 510 Professor Faircloth SafeBlend Fracturing Harvard Business School Case March 24, 2015 Define the Problem: With competitors entering the market, SafeBlend Fracturing’s CEO must figure out a price to sale their environmentally friendly fracturing fluid additive. Decision Alternatives: 1. Maintain the same selling price a. Assume competition isn’t relevant yet leaving SafeBlend Fracturing as the only major player b. Will be able to grow revenues drastically as the demand of the customers is increasing c. Keep the premium “gelling agent” 2. Drop the price slightly a. With competitors possibly having lower prices, BNG and other customers might go with a slightly discounted product from SafeBlend Fracturing because they know it works b. Revenues can still grow due to BNG’s increasing demand c. Implement cheaper “gelling agent” 3. Drop the price down to what the competitors might be asking a. Match the competitors price to keep BNG’s business b. Competitors likely can’t meet BNG’s demand so SafeBlend Fracturing will likely keep BNG’s business c. Become more efficient and lower costs by cutting jobs and utilizing the cheaper “gelling agent” Relevant Information: There will likely be federal regulations that would mandate fracturing companies to disclose all chemical and non-chemical components in fracturing fluids Shale gas production grew 48% annually from 2006 to 2010 U.S. natural gas production expected to grow consistently to at least 2035 o Shale was 16% of natural gas production in 2009, expected to be 47% in 2035 Sam Dudley described to have quality traits that make a good CEO – confident, decisive, driven, ambitious, quick to seize opportunity, persistent
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Revenues at SafeBlend fell from $46 million in 2005 to $27 million in 2008 BNG consistently choses the higher priced option despite similar results, wanted to be sure that no shortcuts were being taken BNG and AOG offered to pay for start-up costs, one million and 750k respectively AOG had SafeBlend use a cheaper “gelling agent” that was significantly cheaper than the current component being used, statistically, it was the same as SafeBlend’s premium “gelling agent” Price/Gallon for AOG is 1.40, BNG’s Price/Gallon was 2.80, with Gross margins .67 and 1.01 respectively Competitors looming: GGWorks, Bixon Enterprises, FloatWise Solutions all of which produce or will be producing environment friendly solutions
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  • Summer '13
  • bryan
  • BNG

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