CAPSTONE CASE: ECO-PRODUCTS, INC.ASSIGNMENT:ANSWER ONLY QUESTIONS = H, I, J, K.H.Eco-Products’ management developed a Confidential Private PlacementMemorandum (PPM) dated October 16, 2007 in an attempt to raise $3,500,000.Appendix A contains excerpts from the PPM.1.What is meant by a Regulation D offering? What is an accredited investor and how many investors can participate in the PPM? [You may wish to review materials from Chapter 8 and its appendices when answering these PPM-related questions.]2.Considering the planned use of proceeds, discuss the pros and cons of trying to raise $3,500,000 in increments as small as $50,000 each.3.Summarize the risk factors listed by management in the Private Placement Memorandum. Which factors do you believe are the most crucial in determining the future success of Eco-Products?I.Identify and discuss the factors and developments that led to thepreviously unexpected revenue growth during the first-half of 2008 by Eco-Products. Is such growth likely to be sustainable in the near future? Whatpossible developments might interrupt or change this rapid rate of sales growth?J.Explain Eco-Products’ supply chain model that existed in early 2008.Describe the strengths and weaknesses of such a model from an operationsviewpoint. What are the implications of this supply chain model on Eco-Products working capital financing needs and its cash conversion cycle?
CAPSTONE CASE 1: ECO-PRODUCTS, INC. End-of-Case Assignments: Suggested Discussions and Analyses A. Describe Eco-Products’ early history (1990 through 2003). Would you view the firm during that period as being a life-style business, an entrepreneurial venture, or? Why? Steve Savage and his father founded the company in 1990 with the intent to provide eco-friendly paper and janitorial supplies. They chose to locate the business in Boulder, Colorado, a community known for its support of environmental initiatives and natural products. However, consumers were slow to adopt eco-friendly products. Margins were low and salaries were small. Friends and family supplied funds for business operations. This early history was suggestive of a life-style business. B. Discuss Eco-Products’ revenue growth-based “business model” that evolved over the 2004 through early 2008 period in terms of (a) production versus distribution, (b) product line development, (c) branding, etc. The company remained a local marketer of green janitorial paper and building supplies until 2004 when the company was set on a new course with both business supply and building supply divisions. The management team was expanded and sales in the business supply division grew rapidly as a result of a focus on brand and Internet strategies. a) In 2004-05 Eco-Products remained primarily a distributor of eco-friendly products such as biodegradable disposable drinking cups, etc. that were purchased from a variety of manufacturers. As the business focus shifted from retail sales to wholesale distribution, pressure increased to produce their own brand of eco-friendly products. Product suppliers were selected in China and Taiwan. b) Steve Savage emphasized the development of a signature Eco-Products line from a Polylactide (PLA) resin from renewable resources such as corn and sugarcane. This allowed the firm to offer a full, uniquely designed line of environmentally friendly products. However, lead times were long since orders from the Asian original equipment manufacturers took from 7 to 12 weeks to be filed. c) As wholesale distribution grew, existing product manufacturers restricted Eco-Products’ ability to sell many products in the wholesale marketplace. After identifying Asian manufacturers, the “Eco-Products” branded line of compostable cups and food containers hit the market in March, 2007. C. What is the size of the domestic and global markets for foodservice disposable packaging? Who are the major competitors producing/selling environmentally-friendly food service products. What intellectual property or competitive advantages does Eco-Products, Inc. possess? 1