HYGEIA INTERNATIONAL

I. Title of the Case:

Hygeia International: Agricultural Poultry Expansion in Nigeria
II. Case Brief
III. Viewpoint:
Henry Livingstone, Vice President of the Africa Middle East Region of Hygeia
International
IV. Time Context:
1980
V. Problem Statement
How can Hygeia International further improve its results of operations?
VI. Statement of Objectives
1. To increase working capital by at least 11% every year
2. To reduce workforce by at least 2% every year
3. To increase customer satisfaction made through surveys by at least 15% a year VI. Areas
of consideration:
VII. Areas of Consideration
A. Internal Environment
B. Internal Environment

Background of the Company

HYGEIA International is pseudonym for one of the 10 leading pharmaceutical companies of the
world. Based in the United States, Hygeia also has laboratories and plants in many countries.
Over a third of its net income is earned outside the U.S., and because of growing federal
regulation, Hygeia looks abroad for a rising percentage of its future income.

Like other large pharmaceutical films, Hygeia has converted drugs designed for humans to use in
farm animals. This opens up a large market with relatively low R & D expense. In addition to
veterinary products for the control and treatment of disease, Hygeia produces a variety of feed
supplements. Currently, about 15 percent of Hygeia’s total sales of over a billion dollars come
from agricultural activities!

Hygeia’s agricultural business includes active participation in mass production of poultry.

Today, frying chickens are raised in 100,000-chick batches. Thanks to genetic selection.
Scientific feeding, and a strictly controlled environment, fries can be ready for market in 10
weeks. Egg production is similarly engineered. Significantly, these mass production methods
provide one of the most efficient conversions of cereal grains into protein known on earth.

Of course, two essential features of such operations are drugs for disease control and feed
supplements. Hygeia makes both (as do several competitors). More over, to keep contact with
the latest developments, Hygeia has a subsidiary focusing on development of new genetic strains
in chickens-for a faster growth, a larger proportion of white meat, more egg, resistance to
disease, or other desired characteristics, In the U.S., Hygeia itself does not produce chicken or
eggs commercially or sell chicks for the purpose, but it does have experts familiar with the entire
technology.

As part of its international expansion, Hygeia has helped promote modern poultry technology in
Europe. Latin America and now Nigeria.

Internal Forces
Marketing Hygeia International is already well
established in Nigeria. However, marketing
channels are poorly developed. Tv and radio
still have to be improved so the marketing
department of the company should implement
marketing activities to easily reach the target
market.
Structure
Processes and system/Operation Though Hygeia is not producing chickens or
eggs commercially, the company has experts
familiar with the technology and it also has a
subsidiary focusing on development of new
genetic strains in chicken (faster growth,
larger prod. of white meat, more eggs, disease
resistance, or other desired characteristics).
The company also has an expertise with the
entire technology of operations in drugs for
disease control and feed supplements for
chicks.
Resources The major bottleneck in this effort is the lack
of trained human resources. The number of
experts capable of dealing with local farmers
is very limited, and farmers with knowledge,
skill, and capital needed for modern
agriculture are scarce.
Financial Land Building & equipment Development
Expenses Total fixed investment Working
Capital Total investment Sales Direct
Expenses Administration, Sales, etc.
Operating profit Income taxes @ 50%Net
 Profit Government and Bank Financing
EquityTotal investment Return on equity
before Taxes/yr Return on equity after
Taxes/yr

Sales figures, but not expenses, reduce 20% to

allow for contingencies.
Actually, most Nigerian taxes will be rebated
during first four years.
Figures converted from naira to dollars at rate
of IN - $1.50.
Inflation will increase all estimates, but the
proportion should remain the same.

Estimates are for full-scale operations. It will

take two to three years to reach this level.
Estimates show both cash and net income
break even by end of first year and, with tax
rebate, full recovery of equity early in third
year.

External Forces
Legal and Regulatory Political risks such as revolution,
confiscation, controls on repatriation of
profits, arbitrary actions to promote
diplomatic ends is a threat for the company
for these may affect the operations of the
company especially when the work force the
company will hire are locals of Nigeria. The
most important thing that the government
should do is to unite three major tribal groups:
The Hausa-Fullani in the north, Ibo in the
east, and Yoruba in the west because there
was a serious civil war occurred from 1967-
1969 and also to promote peace and order in
the country. Good thing about the government
is that one facet of the national plan is to
increase agricultural output and to increase
substantially the supply of eggs and chicken
so this is a great opportunity for Hygeia
International to expand its business in poultry
production in the country.
Economic Nigeria is by far the leading black African
country economically. Its massive foreign
exchange from its crude oil exports ($15
billion in1980) provides a base for all sorts of

Social/ Customers
SWOT Analysis
STRENGHTS
 Nigeria is growing dramatically and by
far the leading black African country
economically and has a favorable foreign
exchange position.
 Hygeia International may start their
operation on having the parent colonies in
Nigeria.
 Expert on modern process technology
WEAKNESSES
 Hygeia International is not presently the
large-scale producer of eggs and chicken
to be sold for meat.
 Heavy traffic due to over population.
 Marketing channel are poorly develop
expansion and is very favorable for the
company. However, pricing poses a dilemma.
High prices, which will stimulate farm output,
also lead to high prices for the city dweller
that is already caught in inflation.
Like other large pharmaceutical firms, Hygeia
has converted drugs designed for humans to
use in farm animals. These competitors also
have the two essential features which are
drugs for disease control and feed
supplements. The village society is unsuited
to large scale agricultural technology. This is
also an opportunity for Hygeia to start a large
scale operation in poultry industry in Nigeria.
3. Customers
There is a high potential demand for protein
foods especially eggs and the urban
population of 15 million people alone would
be an opportunity for the company.
OPPORTUNITIES
 Nigeria’s estimated return is well over the
30% hurdle-rate used for domestic
investment. If eggs become a stable part
of urban dwellers’ diets, the increased
demand for veterinary and feed products
will continue.
 Government support is available.
 Higher demand for protein meat
THREATS
 In the U.S. parent colonies are usually
operated by separate companies loosely
linked to genetic development.
 Political risks – revolution, confiscation,
controls on repatriation of profits,
arbitrary actions to promote diplomatic
ends, etc.
 During inflation, there is some risk that
price controls on eggs might squeeze the
profit margins.
 VIII. Alternative Courses of Action:

1. Retain current business position

Even without the expansion of the company, Hygeia is already doing well in its current business position
and product portfolio. It is one of the leading pharmaceutical companies in the world. The company
already has good business both in pharmaceutical and agricultural area. The political risks such as
revolution, confiscation, controls on repatriation of profits, arbitrary actions to promote diplomatic ends
would also be minimized if Hygeia stays in its current business position. The disadvantage of this is that
the company will not be able to maximize its potential since it already has the technology needed for the
said expansion. The company would also be missing the projected growth of 30 percent as well.

2. Expand business by venturing into poultry production in Nigeria

The Second alternative course of action is the expansion of Hygeia by venturing into poultry production
in Nigeria. Since the company is already well established in the country, has good relationship with the
government, it would be feasible for it to expand its business here. The company, aside from being one of
the largest pharmaceutical companies in the world, also has an expertise in the technology even though it
does not produce poultry because its operation focuses in drugs for disease control and feed supplements
of chicks. There is a projection of return of investment by 30 percent hurdle-rate used for domestic
investment. Moreover, there’s a high potential demand for protein foods, especially eggs, which are less
perishable than fresh meat. There is also potential market urban population of Nigeria 15M people, only
about 36 eggs per person per year compared with 335 in the US and it’s included in the national plan of
government to have a significant increase in agricultural output. The danger of exchange rate losses is not
high because of its favorable foreign exchange position. The disadvantage of this is mainly focused on
political aspect and lack of trained human resource.

3. Focus on Hygeia’s core competency, which is pharmaceutical products for

human consumption, and try to grow their business in Nigeria in that manner.

No distraction from company’s current core activity * Proven track record in human
pharmaceutical products | * Lost opportunity in the growing Nigerian agricultural market |

XI. CONCLUSION

DECISION MATRIX (scale of 1-5, 5 being the highest)

CRITERIA ACA 1 ACA 2 ACA 3

Timeliness 5 5 3
Acceptability 3 5 2
 Effectiveness 5 4 2
Ease of 3 4 4
Implementation
TOTAL 16 18 11

Timeliness. May satisfy urgency of the solution.

Acceptability. Will be met with less opposition from both head office and the Nigerian
branch/company.
Effectiveness. Tested in other related locations/situations.
Ease of Implementation. Can be implemented with little or no difficulty

RECOMMENDATION:

Conclusion: Based on the foregoing analysis, ACA No. 2 is chosen.

XII. Plan of Action

ACTIVITIES PERSON RESPONSIBLE TIMEFRAME

Give instructions to Nigeria Henry Livingston 1 day
office to prepare marketing
plan
Draw up logistics/mechanics Marketing Department of 1 month
of promotional campaign Nigeria office
Secure approval from Hygeia EP Murtala 1 day
Head Office
Prepare Agricultural Poultry Operator
Production 2 months
Begin implementation EP Murtala 2 months
Monitor implementation EP Murtala continous