Emerson Process Management: Accelerating on the Internet

If you were selling automation products for manufacturing plants, the 1970s were a wonderful time—sales were booming. By 2000, however, the market had changed. Sales had slowed and purchasers were beginning to think of automation products as commodities. So many buyers were using fewer suppliers.

That was the situation that the Fisher-Rosemount division of Emerson Electric faced. How could it attract the interest and attention of industrial purchasers for services that helped buyers optimize their plants and processes? Such decisions are made infrequently and can involve big money, ranging from $25,000 to $25,000,000. How could Fisher-Rosemount demonstrate in an engaging and dynamic way the benefits of reworking processes in customers' existing plants? How could the company show what its services could accomplish?

Fisher-Rosemount tackled this situation by first repositioning its services. By looking at the relevant purchase processes from the customer's point of view, it realized that customers were not looking for individual products that they had to assemble themselves, if they had the needed in-house expertise. Instead, they were looking for complete solutions. Competitors—especially software vendors—had already realized this. Seeking to capitalize on their own expertise, the competitors had assembled product portfolios that included everything from PC-based process control solutions to supply chain management solutions. However, although Fisher-Rosemount's repositioning strategy was similar to that of other industry suppliers, the company had the advantage of being part of a much larger organization.

Emerson Electric was founded in 1890 in St. Louis, Missouri, to manufacture reliable electric motors. By 1892, it was selling the first electric fans in the United States, still one of its major lines. Over the years, however, Emerson Electric has benefited from stable management and consistent growth in its product and service lines. Today, it has over 60 divisions selling a variety of products from fans to process solutions, from to refrigeration and air-conditioning technologies to tools for do-it-yourselfers and professionals, from plastics joining and cleaning compounds to world-class engineering and consulting services. In 2000, Emerson reported sales of $15.5 billion—a 9 percent increase from the previous year. The company also reported increased earnings for the forty-third year and increased dividends for the forty-fourth year in a row. To achieve such an enviable record, Emerson stresses increased growth—particularly in global markets—and innovation.

One way Emerson stays ahead of the competition is through heavy use of the Internet. It has over 115 e-business projects under way. In 2000, it transacted 10 percent of its sales (that's $1.55 billion) online and 70 percent of its 60-plus divisions had Web projects up and running.

The Internet provides a good channel for selling technical products. A survey of industrial users of the Internet indicated that much of the industry (85 percent) has access to the Internet, and that engineers are among early adopters and frequent users of the Net. They use the Internet primarily to gather information, but given the lack of relevant information found there, they spend only up to three hours a week on the Net. Therefore, it appears that supplier companies can best increase the value of the Internet in selling their services by providing more detailed information about products and services.

The folks at Fisher-Rosemount must have seen this report, because they chose to develop an information-packed site called ThePlantWeb (www.plantweb.com). The home page of this Web site provides visitors with information on ThePlantWeb. Right away, visitors learn how they can understand today's technologies better, access information more quickly, reduce costs, and increase revenues. They can do this by taking advantage of PlantWeb University, which provides short business courses on how to improve plant profitability, and engineering courses in which they can explore leading automation technologies. The page also provides short "testimonial-descriptions" of companies that have recently used ThePlantWeb to improve their operations. Visitors who want more information than that provided by the short testimonials can call up longer case studies for information. ThePlantWeb News provides recent examples of new users of ThePlantWeb services and gives a chronological listing for the last five years of successful applications of its services.

What is most interesting, engaging, and unusual about this Web site is a feature called TestDrivePlantWeb. In the test drive, visitors can see how much PlantWeb architecture can reduce capital expenditures compared to traditional DCS (Distributed Control Systems) architecture. What does that mean? Assume that you are a manager of a pulp and paper plant. Visit the Web site, go to the TestDrivePlantWeb page, and click on one of the industries listed on the left side of the page. Click on Pulp & Paper, then continue with the test drive, and you'll get a diagram showing all the processes in the pulp and paper industry, from waste treatment through papermaking, recovery, bleaching, and pulping. By using the various buttons, such as Customize Areas and Design Cost Assumptions, you can input data for your plant. All the while, the site provides an estimate of how much you can save using process management from Fisher-Rosemount. In addition to a summary of savings, you'll received information detailing how you would achieve those savings. Can't you just imagine engineers inputting various data to see how much they could save? In fact, the site has proven very effective in attracting new customers. No doubt that's why TestDrivePlantWeb has won several awards.

What is PlantWeb? According to the Web site, it's a revolutionary field-based architecture that changes the economics of process automation. TestDrivePlantWeb allows you to build your own virtual plant to evaluate the economics of process automation. It employs an easy-to-use, drag-and-drop interface that allows users to customize models by adding or deleting process areas, units, or devices or by adjusting variables such as labor rates and average wire run. The effects are shown immediately in the summary. Specific benefits of retrofitting your old plant with automation from Fisher-Rosemount include reduced process variability, increased plant availability, reduced capital and engineering costs, reduced operations and maintenance costs, and streamlined regulatory compliance.

In 2001, as part of its corporate repositioning strategy, Emerson Electric renamed the Fisher-Rosemount division, calling it the Emerson Process Management division. The goal was to enhance the overall corporate brand and to provide insight into the division's services. The repositioning also involved the integration of Fisher-Rosemount with other services in Emerson Electric, such as Emerson Performance Solutions, in order to provide complete solutions to purchasers.

Emerson Process Management does not rely only on the Internet to sell its services. To promote ThePlantWeb, it hired 50 sales reps (dubbed "PlantWeb Champs") and trained them on Internet technology. To support their efforts, it used print advertising and direct marketing to reach prospects that it calls "technical evangelists." The print ads used brilliant colors and images that contrasted old and new technology—for example, a weather vane and a weather satellite. These ads stood out amid the wordy competitor ads surrounding them. Emerson also used the TestDrivePlantWeb site to collect names of prospects and their affiliations. It then sent direct mail to higher-level executives in each organization. The idea was to intrigue the "technical evangelist's" supervisor, who was more likely to be involved in the purchase decision. Perhaps they would meet in the hallway, and the technical evangelist, who was excited from taking a "test drive" on ThePlantWeb, would exchange information with the supervisor who had questions about costs.

Such simple hallway conversations can be the beginning of a process that takes months to complete. During that time, Emerson sends prospects promotional materials and invitations to seminars to keep their interest from flagging. If all of those marketing efforts are not enough, PlantWeb has a guarantee that the purchaser will reduce total installed cost using PlantWeb automation solutions as compared to traditional DCS architectures.

Does this work? You decide. In the first 18 months that TestDrivePlantWeb was up, Emerson identified 65,000 unique visitors to the site, and that translated into 850 installations of ThePlantWeb product.

Questions for Discussion

1. What type of purchase decision is involved in buying solutions to a company's process systems from Emerson Process Management (Fisher-Rosemount)?

2. Who might participate in the buying process? How can ThePlantWeb and the associated marketing campaign impact each of the buying-decision participants?

3. How can ThePlantWeb and the associated marketing campaign affect each stage in the business buying process?

4. What purpose do the testimonials, case studies, and PlantWeb Guarantee serve?

5. Is promotion and selling on the Internet a wise decision for Emerson Process Management? Why or why not? What are the advantages of using the Internet compared with using only personal selling and advertising? The disadvantages?

6. In your opinion, is Emerson wise to reposition itself by branding all of its divisions with the Emerson name? Why would this be beneficial in selling to business markets? How might it be a disadvantage?

You have three genes on the same chromosome - A, B and C. Each gene has two alleles in a dominant/recessive relationship. For these genes the homozygous recessive has the mutant phenotype for that trait, the dominant phenotype = wild type for that trait.

• allele A is dominant to a; phenotype a = mutant for trait a; phenotype A = wild type for trait A
• allele B is dominant to b; phenotype b = mutant for trait b; phenotype B = wild type for trait B
• allele C is dominant to c; phenotype c = mutant for trait c; phenotype C = wild type for trait C

Note: phenotypes can be represented by single letters. For example phenotype A = genotypes Aa or AA; phenotype a = genotype aa. Assume that phenotype ab = mutant phenotype for traits a and b, and wild type phenotype for trait C.

You cross an individual heterozygote for all three genes, with an individual who is homozygote recessive for all three. Out of 10,000 offspring you get the following phenotypes and amounts:

• phenotype a - 98
• phenotype b - 150
• phenotype c - 4751
• phenotype ab - 4749
• phenotype ac - 147
• phenotype bc - 99
• phenotype abc - 3
• wild type - 3

Use this information to answer the following questions.

You cross an individual heterozygote for genes A, B and C, with an individual who is homozygote recessive for all three. Assuming independent assortment for all three genes what do you expect to see out of 10,000 offspring?

Remember:

• for all three traits wild type phenotype is dominant to mutant phenotype
• allele A is dominant to a; phenotype a = mutant for trait a; phenotype A = wild type for trait A
• allele B is dominant to b; phenotype b = mutant for trait b; phenotype B = wild type for trait B
• allele C is dominant to c; phenotype c = mutant for trait c; phenotype C = wild type for trait C

Select one:

a. Three different phenotypes among the offspring; approximately 3333 offspring of each phenotype.

b. Approximately 156 offspring will have the recessive phenotype for all three traits.

c. Approximately 2963 offspring will be wild type (dominant phenotype for all three traits).

d. Eight different phenotypes among the offspring; approximately 1250 offspring of each phenotype.

Flesch Corporation produces and sells two products. In the most recent month, Product C90B had sales of $19,950 and variable expenses of $5,985. Product Y45E had sales of $26,190 and variable expenses of $10,476. The fixed expenses of the entire company were $17,000. If the sales mix were to shift toward Product C90B with total dollar sales remaining constant, the overall break-even point for the entire company:

Multiple Choice

• would increase.

• would decrease.

• could increase or decrease.

• would not change.

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Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

The total contribution margin for the month under variable costing is:

Multiple Choice

• $43,120

• $45,620

• $109,820

• $125,970

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WV Construction has two divisions: Remodeling and New Home Construction. Each division has an on-site supervisor who is paid a salary of $86,000 annually and one salaried estimator who is paid $48,000 annually. The corporate office has two office administrative assistants who are paid salaries of $52,000 and $38,000 annually. The president's salary is $156,000. How much of these salaries are common fixed expenses?

Multiple Choice

• $246,000

• $156,000

• $90,000

• $318,000

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Younie Corporation has two divisions: the South Division and the West Division. The corporation's net operating income is $89,000. The South Division's divisional segment margin is $39,500 and the West Division's divisional segment margin is $171,900. What is the amount of the common fixed expense not traceable to the individual divisions?

Multiple Choice

• $122,400

• $128,500

• $260,900

• $211,400

Garcia Company has employed a bookkeeper who is inexperienced. On December 30, after reviewing the records for the year, you discover the following error. On August 1, Garcia Company received $600 on account (from a customer for services previously performed and billed on July 15). The bookkeeper recorded this by debiting Cash and crediting Service Revenue. Required: Prepare a correcting entry on December 30. Make sure to enter the day for each separate transaction.

You need to order US $100,000 worth of reams of paper from China to complete an order from an important commercial customer in 30 days. The current rate of exchange is USD/CNY = 6.5766.

• Ignoring other transaction expenses associated with the order, how many Yuan would you need to pay the Chinese supplier?
• Define the meaning of foreign exchange. Assuming that you have the choice to pay immediately or in 30 days, define, describe, and provide examples of how you may use each of the following to complete the transaction:
  • Definition and use of foreign currency derivatives
  • Spot, forward, and futures currency contracts
  • Bid/ask spreads
  • Definition and use of currency options

Purchase of Health Insurance

1) As one looks at historical data in the US from 1950 forward, describe the medical services that have been most commonly covered by health insurance (for the most people, and earliest in history), and those that have been covered less commonly (for fewer people, and later in history).

2) Discuss two economic aspects of the demand for these various services that will help understand the historic trends you described in part 1).

3) Related to question 1) and 2), would you expect more people to purchase insurance against losses associated with dental care or with hospital care? Why?

Trefor, a US firm, has a sterling (£) receivable of £300,000 from a UK customer due one year from now. Trefor has no use for sterling currency and will exchange the receipt into US dollars ($). The spot exchange rate now is £1=$1.34 and the one- year forward exchange rate is £1=$1.31. Assume the forecasted spot rate in one year’s time is £1=$1.28 or £1=$1.38, with equal probability. The discount rate is zero.

0. (a) What is the expected dollar value of Trefor’s receivable if it chooses:

   1. (i) not to hedge the receipt?

   2. (ii) to use a forward hedge?

1. (b) One year sterling put options and sterling call options are available at a cost of

   $0.03 per £ with an exercise price of £1.32.

   1. (i) How could Trefor make use of an option hedge for its sterling receivable?

   2. (ii) What will be the expected value in dollars of the outcome of the option hedge?

2. (c) If Trefor is concerned only about downside risk, is it better to choose the forward hedge or the option hedge? Explain. (60 words)

3. (d) An alternative hedging strategy for Trefor is to use futures contracts. Are there any advantages to using futures instead of a forward exchange extract? Explain. (60 words)

4. (e) Briefly discuss the implications of the Capital Asset Pricing Model for the relationship between the current spot price of an asset and the discount offered by the seller of a futures contract.

I'll give good rating please help.

what are the market growth rates for the Retail pharmaceutical industry from 2015-2019 in the US? Please describe whether they are positive or negative.

3. Trefor, a US firm, has a sterling (£) receivable of £300,000 from a UK customer due one year from now. Trefor has no use for sterling currency and will exchange the receipt into US dollars ($). The spot exchange rate now is £1=$1.34 and the oneyear forward exchange rate is £1=$1.31. Assume the forecasted spot rate in one UL20/0419 Page 5 of 8 year’s time is £1=$1.28 or £1=$1.38, with equal probability. The discount rate is zero. (a) What is the expected dollar value of Trefor’s receivable if it chooses: (i) not to hedge the receipt? (ii) to use a forward hedge? (b) One year sterling put options and sterling call options are available at a cost of $0.03 per £ with an exercise price of £1.32. (i) How could Trefor make use of an option hedge for its sterling receivable? (ii) What will be the expected value in dollars of the outcome of the option hedge? (c) If Trefor is concerned only about downside risk, is it better to choose the forward hedge or the option hedge? Explain. (60 words) (d) An alternative hedging strategy for Trefor is to use futures contracts. Are there any advantages to using futures instead of a forward exchange extract? Explain. (60 words) (e) Briefly discuss the implications of the Capital Asset Pricing Model for the relationship between the current spot price of an asset and the discount offered by the seller of a futures contract. (100 words)