DermaCare Case Questions Harvard Case Solution & Analysis

DermaCare Case Questions Case Solution

Question One:  Would DermaCare likely be a successful angel investment?  Please use the Angel Oregon Company Evaluation Matrix.  Please limit your answer to one page, starting with a “Yes” or “No”.
Answer to Question One:

No, DermaCare would not be a successful angel investment because the funds that will be available through the angel investments would not sufficient to meet the business expenses. In addition to the investment potential of the company, whether the investment in DermaCare is feasible or not, the following evaluation matrix is formed:

DermaCare has high market potential as it has come up with the innovative and new treatment for the acne problem. Since it is a new method, therefore there is probability that the customers will try it for sure. Thus, there will be high demand for the product and the company will capture high market share. The business strategy is also favorable where the marketing strategy is highly competitive since it will bring the product to every end user; eliminate the need of distributor and retailer. Thus, all profits will be of the company. The company has been facing delay in its planned start up and this implies more startup cost. Moreover, the competitor has emerged from nowhere, which has placed the risk on the projection and business of the company. The competitor’s product will enter the market early and thus, it would affect the market share and profitability of the company. Therefore, the risk should be assessed due to competition. The overall evaluation shows that the business is feasible for investors.

Question Two:  Is the use of Direct Response Television (DRTV) a good go-to-market strategy DermaCare?  Please limit your answer to 1/4^th page, starting with a “Yes” or “No”.  If
No”, what would you recommend?
Answer to Question Two:

Yes, the Direct Response Television (DRTV) is an effective marketing and sales strategy. The television broadcasting is being used by almost every household. Thus, the awareness of the product will be created to the masses that might not be achieved by different other alternative marketing and sales strategy. There were majority of people who suffered from acne and these peopledid nothing about their problem, mostly because of their failed attempts. Even most of them never visit dermatologists. The DRTV solution will capture more customers. It will reach the targeted customers and will create demand for the product. Moreover, the customers will find convenience in placing the order which will increase the sales. The customers will be presented with all the required information they need about the product through DRTV, which will increase their confidence and compel them to order and at least give it a go.

Question Three:  How much money does DermaCare need before it can reach cash flow breakeven?  I recommend you break your estimate into three categories of cash need:
(a) Pre-Launch Monthly Cash Burn;
(b) Inventory build, and;
(c) Losses after launch but before cash flow breakeven is achieved.
Answer to Question Three:

DermaCare will need about $2.45 million before it can achieve break-even. The cash burn till break-even is $0.84 million and the total operating loss is $0.12 million. Inventory built was assumed to be equal to the break even units per month and thus, it is calculated as $0.38 million.

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