What are the advantages of starting a business versus acquiring a company and running it yourself?

Table of Contents I. Executive Summary II. Project Background III. Market Opportunities IV. Company Strategy V. Marketing VI. Production Management VII. Investment Analysis VIII. Financial Analysis IX. Management System X. Opportunities and Risks XI. Exit of Venture Capital Appendix 1. Market Volume Estimation Sheet 2. Market Survey and Qualitative Analysis Sheet 3. Financial Schedules 1. Executive Summary 1.1. The Company Chitosan Material Research &. Ltd. is a proposed company, which owns the patented technology of chitin fiber preparation, advocates the new concept of green life based on science and technology, and provides human beings with the best natural biological products. The annual market demand for medical sutures in China is about 1.5 billion RMB, of which about 750 million is for absorbable sutures. The company was initially established to produce medical chitosan absorbable sutures to meet the needs of the rapidly developing absorbable suture market, and used the investment in factory solutions to solve the problem of the majority of PGA (Polyglycolic Acid) absorbable sutures relying on imports, which is expensive and affects the improvement of people's standard of medical care. The company focuses on the combination of short-term goals and long-term strategy, the medium and long term goal will gradually broaden the product field, involved in chitin medical antibacterial materials, drug slow-release materials, artificial organs, cosmetics, health food, health care clothing fabrics, new environmentally friendly packaging materials, fast-food appliances, etc., the formation of a diversified group of companies with chitin materials as the core of the business. 1.2. Market The medical suture market is a group market, and the purchasing process is a group purchasing behavior. At present, China's large number of medical sutures are mainly silk thread, sheep intestinal thread and PGA-type absorbable thread. Sheep intestinal thread material itself has defects, PGA suture production costs remain high, the scope of use are affected. Medical chitin sutures will enter the market on this entry point. Medical chitosan sutures use competitive pricing strategy to enter the market. The production cost of the product is about 2.1 yuan / piece, one-tenth of the PGA sutures; average pricing of 30 yuan / piece (according to the survey, the market can accept the price of 30-40 yuan / piece), about 1/2 of the average market price of PGA sutures, and there is more room for price reduction. The company will set up seven regional distribution centers across the country to establish a sound marketing network with agents and dealers. Products into the market process will be a large number of complimentary products for doctors to try as a promotional tool and means to increase market share, the first year to give away 900,000, the second year to give away 1.6 million, the third year after the annual gift of 800,000. The international leading chitin fiber preparation patent technology is the key to prepare medical chitin sutures. The company will establish ISO9000 quality management system and strive to obtain international ISO9000 quality management certification. 1.3 Investment and Finance The company is located in Wuxi, and enjoys the preferential tax policy of "three exemptions and three halves". At the initial stage of the company's establishment, the company needs capital of 11 million dollars. Among them, venture capital is 7 million, Donghua University invests 1 million, and short-term borrowing is 3 million. Which is used for fixed asset investment of 6.02 million, working capital of 4.98 million. In addition, Tianpure Biomaterials Co., Ltd. equipment shares 1 million. The size and structure of the share capital is tentatively set as follows: the company's registered capital of 12 million. Foreign venture capital invested 7 million (58.33%); xxxxx patented technology invested 3 million (25%), capital invested 1 million (8.33%); xxxxx company equipment invested 1 million (8.33%). The second year is estimated to make a profit of 10 million RMB, and then the annual sales profit margin is about 45%, the return on assets in the second year is 75.39%, and the payback period is two years and one month. Venture capital should preferably be withdrawn in the 3rd-5th year, and the use of acquisition is more suitable for the Company. 1.4 Organization and human resources The nature of the company is a limited liability company, and the initial organizational structure adopts the linear system. The company's ownership and operation rights are separated, and the general manager is responsible for the system. Under the general manager, there are vice general manager of marketing, vice general manager of technology and vice general manager of finance. The patent of chitin fiber preparation technology belongs to Donghua University, and Professor Tan Zhiqing and other teachers are the inventors of the patented technology. Professor Tan Zhiqing has many years of experience in the industrialization of scientific and technological achievements, and will be the chairman of the board of directors of the company and the vice general manager of technology; members of the entrepreneurial team will be involved in the company's marketing and financial management; the company also hired Professor Gu Qingliang of the Department of Marketing of the University of East China as a marketing consultant. 2. project background 2.1. industrial background In recent years, China's medical device industry has been developing rapidly. 1978, the total output value of the medical device industry was 7.7%. In 1978, the total output value of China's medical device industry was 730 million yuan. By 1995, according to the statistics of the State Administration of Medicine, it was 8 billion yuan, while the survey shows that the actual total output value of the national medical device industry reached 16-18 billion yuan, which is equivalent to 22-25 times of 1978, and accounted for about 2% of the world's total sales. China's medical device industry development lags behind the chemical drug industry, the ratio of medical equipment and drug sales in developed countries is close to 1:1, while China is only 1:10, so there is great room for expansion. According to the survey, the value-added of high-performance medical textiles can reach 1:50 or so. At present, a large number of medical sutures used in our country have three kinds: silk thread, sheep intestine thread and PGA class absorbable thread. Sheep intestinal thread and PGA class sutures are absorbable sutures. Sheep intestinal thread has a backward production process, pollutes the environment, has poor absorbability, and is prone to allergies and antibody reactions. At present, it exists only due to the price advantage.PGA type absorbable suture relies heavily on imports, which not only costs a large amount of foreign exchange and increases the economic burden of the country and surgical patients, but also has a certain impact on the improvement of China's surgical level. According to the report of Taiwan's Industrial Technology Research Institute, the global market value of medical sutures was estimated to be 1.5 billion U.S. dollars in 1994, with an annual growth rate of about 4%. According to the information of Taiwan Chemical Industry Institute, there are only three factories in the world to produce PGA raw materials, it is extremely difficult to obtain, the price remains high. In addition, the high water content of PGA will lead to hydrolytic deterioration of the material, decrease in mechanical strength, and the quality of the suture will be seriously affected. As a pure biological product, the absorbable suture made of chitin can be completely absorbed by the human body without toxic side effects, and can meet all the indexes of absorbable suture, which is in line with the theme of green and environmental protection, and is an alternative to PGA-based absorbable suture. On the basis of absorbing the advantages of imported absorbable sutures, the research and development of chitosan absorbable sutures with superior performance and appropriate price is in line with social and market requirements. The production of medical chitin absorbable suture is ahead of its time in the world, and has long-term economic and social benefits in promoting the development of China's medical device industry, improving people's medical standard, and reducing the burden of the country's foreign exchange. 2.2. Product Overview (Omitted) 2.3. Advantages of Chitin Absorbable Suture It has been proved by clinical experiments that compared with the existing sutures, the medical chitin absorbable suture possesses the main advantages as an absorbable surgical suture: ． Pure biological products, good compatibility with human body, small wound scar; ． The raw material is widely found in marine organisms, and the cost is one-tenth of PGA-based products; ． ．The environment around the thread body inhibits the growth of bacteria, which is favorable for wound healing; ． Non-toxic, non-irritant, no antibody reaction, can be completely absorbed by the body; ． Sufficient tensile strength and flexibility, fully meet the requirements for the preparation of absorbable sutures; ． Easy to be stored and hardly decompose in air; ． Able to withstand sterilization and disinfection treatment, and can be dyed and antiseptic treatment, etc.; ． Senior professors, experts and researchers are in charge of scientific research, with strong R&D strength and internationally leading patented technology. 2.4. Prospect of chitin application Chitin is a kind of natural polymer, a new type of environmentally friendly material, which has a wide range of uses in the fields of medicine, agriculture, light industry and so on. In medicine, it can be used to make artificial skin, drug slow-release materials, hemostatic agents and wound healing agents, artificial organs (such as artificial kidneys, artificial blood vessels), etc. In agriculture, it can be used to produce chitosan, chitin-coated pesticides, degradation of mulch film, etc. In light industry, it can be used to make cosmetic products, health care products, functional clothing, and environmentally friendly packaging materials, etc. 3. Market Opportunities 3.1 Market Characteristics 3.1.1. Overview The actual consumers of medical sutures are patients, the users and purchasing decision makers are surgeons and head nurses, and the actual purchasers are purchasing departments. The market is characterized by the specificity of the separation of users, purchasing decision makers and purchasers. The medical suture market is a group market, the purchasing process is a group purchasing behavior, and sales promotion is the most effective sales method. Doctors first choose the type and specification of suture according to the type of surgery and requirements, and at the same time will be affected by the use of habits, brand preference, geographical differences and other factors. Sutures belong to the category of medical devices, and the macro policies and regulations formulated by medical and health management organizations, such as the State Administration of Medicine and Health Bureau, will have a significant impact on their development. The sale of medical devices should be complete with three certificates, which are "Medical Device Manufacturing License", "Medical Device Sales License", "Product Conformity Certificate", and in some places, "Permission to Sell" issued by the local health authority is also required. 3.1.2. Purchase decision-making process In purchase decision-making, doctors and head nurses of operating rooms play a very important role, and some of them are even designated or purchased by the head nurses (especially in hospitals below the second level), and very few hospitals are purchased by the decision-making of the administrative department. The decision-making pattern is mainly shown in the following figure: Figure 1. omitted 3.2. Market segmentation According to the degree of market development, the domestic market for medical sutures is mainly divided into two categories: 3.2.1. Developed absorbable suture market This refers to the market that uses sheep's intestinal threads and PGA-type absorbable sutures. The The market for PGA-based absorbable sutures is a market that uses a large number of PGA-based absorbable sutures. The distribution of this type of market is mainly in the hospitals of large cities with a higher level of economic development and a higher level of medical care, such as Beijing, Shanghai, and Guangzhou. Market characteristics are: manufacturers for the use of PGA absorbable sutures for the preliminary publicity has been basically completed, the degree of acceptance of doctors is high, doctors have a high degree of brand loyalty; absorbable sutures are widely used, the application of a long time; price sensitivity is relatively low; consumer behavior is more mature. The Markets that use a large number of absorbable sutures The distribution of this type of market is mainly in hospitals in large and medium-sized cities with a relatively low level of economic development, such as Xi'an. The market characteristics are as follows: absorbable medical sutures mainly use sheep's intestines, not yet large-scale use of PGA-type absorbable sutures; doctors' acceptance of absorbable sutures is relatively high; they are more price-sensitive; and brand loyalty is not high. 3.2.2. untapped absorbable suture market This refers to the market that should or could use absorbable sutures but still uses silk sutures. This kind of market is mainly distributed in small and medium-sized urban hospitals or small hospitals in big cities with a low level of economic development and a limited level of medical care. The characteristics of the market are as follows: doctors have less contact with or use PGA absorbable sutures; silk sutures are commonly used in surgery; price sensitivity is very high; PGA absorbable sutures have not yet entered this market, and competition is slow. 3.3. Sales Channel Analysis According to the survey, the main sales channels of medical sutures are. Manufacturers' direct sales/local agents' sales PGA type absorbable sutures manufacturers mainly use this way. Through local agents can reduce barriers to entry and enter new markets smoothly. Manufacturers' direct sales are suitable for markets with small barriers to entry. Hospitals generally trust local agents, which can handle problems in a timely manner and have a guaranteed reputation. The sales process is mainly like this: Figure 2. strategy. Sales through medical device wholesalers Mainly domestic manufacturers of silk thread and sheep intestines, who have established a huge sales network through medical device companies and distributors at all levels, with smooth sales channels and strong business relationships with major Chinese hospitals across the country, which are relatively less affected by human factors. Figure 3. Strategy 3.4. Competitive Analysis 3.4.1. Competitive Products and Competitors ． Silk thread: Cheap, still using a lot of ordinary silk thread in surgery. Shanghai Pudong Jinhuan Medical Supplies Co., Ltd. occupies most of the market share in the national silk thread market, followed by Johnson & Johnson's "Mousse Thread", which is also commonly used in large hospitals in China, and there are also domestic manufacturers in Tianjin, Hangzhou, Wuxi, and Nantong. The Sheep intestines: cheap, more often used in obstetrics and gynecology surgery, inconvenient to use, easy to cause inflammation, in the stage of being gradually replaced. Manufacturers are mainly located in Shanghai, Tianjin, Hangzhou and other places. The PGA class absorbable sutures: mostly imported, domestic Nantong also have production, higher prices, manufacturers to the United States Johnson and Cyanamid (Kendall) for the most. The main use of door-to-door sales and a large number of products to give away the trial way to capture the market. According to the survey, Johnson & Johnson and Cyanamid have more than 80% of the market share of absorbable sutures in Shanghai; followed by Nantong "Huarikang" also has a certain percentage. The price of "Huarikang" is about 60% of that of Johnson & Johnson and Cyanamid, but the price advantage is basically offset by its imperfect after-sales service and quality problems. 3.4.2 Analysis of Competitive Influential Forces (Omitted) 3.4.3 Competitive Advantages The superior performance of crustacean suture itself; monopoly of proprietary technology and talents; cost advantage; strong availability of resources; high and new technology in line with the direction of development of the government's policy. 3.5. Market Capacity 3.5.1. Market Capacity According to estimation: the domestic medical suture market capacity in 1999 was about **1.5 billion RMB. According to the survey and secondary information, the use of absorbable sutures only accounts for about 5% (including sheep's intestines and PGA-type sutures), but the amount accounts for about 50% of the total amount, which is about **750 million. (Note: **See Appendix 1, P29 for the estimation process). 3.5.2. Trend Analysis and Forecast According to a report by Taiwan's Industrial Technology Research Institute (ITRI), the global medical suture market is growing at an annual rate of 4%. According to the survey, PGA-type suture products have only developed about 10% of the absorbable suture market, and the market potential is huge. At present, medical absorbable sutures are mainly used in large-scale surgeries (e.g., open thoracic, abdominal, etc.), and PGA-type absorbable sutures are mainly dependent on imports, which are subject to strict national restrictions. Considering the market growth, the annual sales of crustacean sutures are estimated to reach about 100 million in five years. (See Appendix 1, P30) 3.6. Impact of policy guidelines and WTO (omitted)