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Unformatted text preview: MS&E 352 Handout #14 Decision Analysis II February 12 th , 2009 ____________________________________________________________________________________________ ____________________________________________________________________________________________ page 1 of 15 Case #3: Daylight Alchemy Corp. Case Study #3 – Daylight Alchemy Corporation Due Thursday, February 26 th , 2009 Part I – The Decision Situation Background Daylight Alchemy Corporation (DA Corp.) is a start-up biotechnology firm, which specializes in the development and production of synthetic enzymes. DA Corp. was originally a research laboratory, and has recently started with production. However, they have very little experience in the marketing of synthetic enzymes. Researchers at DA Corp. developed a new enzyme that allows Riesling grapes to be highly susceptible to the attack of the botrytis mold. When almost ripe, Riesling grapes are attacked by the botrytis mold, and the skin of the grapes become porous, allowing water to evaporate while the sugar remains. This situation is very attractive to winemakers, because the wine resulting from the harvesting and processing of such grapes has extraordinary complexity. Winemakers in the United States could profit enormously from using this enzyme to enhance the quality of the Riesling wines, since botrytised Rieslings today are very rare and expensive. The Freemark Abbey winery has already contacted DA Corp. to express their interest in the Cyclone enzyme, since their last botrytised Riesling was from their 1973 vintage. The new enzyme is called Cyclone. While the final work is being completed in the lab, management is currently considering how best to proceed with production and marketing of Cyclone. In order to meet demand they are considering expanding their current production facility. DA Corp. has already decided to launch Cyclone and which markets to target. Cyclone will not be launched in any country besides the United States because of regulatory concerns. There are several decisions that need to be made but not during this analysis. For example, should DA Corp. produce Cyclone with the new NX-10 process? Should DA Corp. wait and "stack" the Cyclone enzyme with other enzymes in their development portfolio? Strategic Decisions DA Corp. could produce and market the Cyclone enzyme itself. However, its current production capabilities are limited to 2.5 million units of enzyme per year and this may not be enough if demand is high. On the other hand, the 6 million unit expansion currently under consideration would not be needed if demand is low. The expansion would bring total capacity to 8.5 million units per year. DA Corp. has considered strategic alliances with several larger chemical engineering firms, and has identified a potential candidate, EnzyTech. EnzyTech has enough capacity to meet any realistic demand, and has made the two following offers: • Joint Venture – EnzyTech will pay for the plant expansion in return for a 60% share of the net profits...
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This note was uploaded on 06/16/2010 for the course MS&E 352 taught by Professor Ronhoward during the Winter '09 term at Stanford.
- Winter '09