950 Report Final-Jiaqi Pan

ENGG950
INNOVATION AND DESIGN
Smart-Cup
Lecturers : A/ Prof Brett Lemass
Project description : Report for Major Assignment
Due date : 4th June 2010 (Week 13)
Made by : Group
1. Per Morten Bjerkli (3734365)
2. Jiaqi Pan (3642896)

3. Jinyu Cui (3564058)
4. Lu Jiang (3347102)
5. Xuedan Pan (3684581)
6. Weichun Gong (3729813)

EXECUTIVE SUMMARY
The objective of this project is to develop an engineering design product from preliminary
concept design stage to final product detail design. Our group needs to narrow from three
initial concept design products to the only one final concept design product included the
assessment of selected design products, product market research, product costing estimation,
product risk assessment, team motivation assessment, business structure and design financial
management plan.
Through a weighted constraint matrix, we have decided that our final design product is
automatic temperature control cup named Smart-Cup which not only responds customers’
needs but also offers benefits to the investors. Moreover we decided to establish our own
manufacturing factory to manufacture to produce the product and focus on Australian
markets firstly, and then global markets as our future business goal.
Table of Content
CHAPTER ONE-INTRODUCTION..............................................................................6
1.1 Report Objective...........................................................................................6
1.2 Definition of the Major Assignment...............................................................7
CHAPTER TWO-DESIGN PRODUCT SELECTION.......................................................8
2.1 Three Problem Definition Statements...........................................................8
2.1.1 Problem definition statement of Life-Safe Flashlight..............................8
2.1.2 Problem definition statement of “Green Roof”.......................................9
2.1.3 Problem definition statement on Smart-Cup........................................10
2.2 Three Product Conceptualization Approaches............................................10

2.2.1 Product conceptualization approach on “Flashlight without Batteries” 10
2.2.2 Product conceptualization approach on “Green Roof”..........................12
2. 3 Weighted Constraint Matrix.......................................................................15
2.4 Associated Logic for Choosing a Single Product.........................................17
2.5 Product Concept Embodiment Sketches using Google Sketch Up.............17
CHAPTER THREE-DESIGN PRODUCT MARKET REASERCH.....................................19
3.1 Understanding the market and customer needs........................................19
3.2 Differentiation............................................................................................20
3.3 Positioning against tea consumption..........................................................20
3.5 Collection of data........................................................................................22

3.6 Six Market Research Questions..................................................................22
3.6.1 Market size...........................................................................................22
3.6.2 Market competition..............................................................................23
3.6.3 Market trends.......................................................................................25
3.6.4 Market price.........................................................................................27
3.6.5 Relative benefit product.......................................................................28
3.6.6 Market share goal.................................................................................29
3.7 SWOT Analysis.........................................................................................30
3.8 BCG Product Ratings...................................................................................31
3.9 Strategies for product promotion...............................................................32

Step 1: Identify the targeted marked............................................................32
Step 2: Determine communication objectives...............................................32
Step 3: Selecting a message.........................................................................33
3.10 Choosing Media........................................................................................33
3.10.1 Selecting the message source............................................................34
3.10.2 Collecting feedback............................................................................34
3.11 Design Product Brochure..........................................................................35
CHAPTER FOUR-DESIGN PRODUCT COSTING.......................................................36
4.1 Design Product Selling Price.......................................................................36
4.1.1 Prime Cost............................................................................................37

4.1.2 Expenses..............................................................................................40
4.2 Break-even volume.....................................................................................44
4.3 Cross Checking the Selling Price.................................................................46
CHAPTER-FIVE DESIGN PRODUCT RISK ASSESSMENT..........................................48
5.1 Risk Identification.......................................................................................48
5.1.1 Risks exist in the product design..........................................................48
5.1.2 Risks exist in the product manufacturing.............................................48
5.1.3 Risks exist in the marketing.................................................................49
5.2 Risk Quantification......................................................................................50
5.2.1 Quantification by probability and severity............................................50

5.2.2 Decision tree........................................................................................50
5.3 Risk protection and insurance....................................................................52
CHAPTER SIX-DESIGN TEAM MOTIVATION AND INTERNAL STRUCTURE...............54
6.1 Needs Assessment and Design Team Role...............................................................54
6.1.1 Needs assessment of group member...................................................58
6.1.2 Responsibility of group members.........................................................59
6.2 The Researched Comparative Benefits of Design Product Business Structure....................60
6.3 Logical Organization Charts of the 1st and 3rd Year of Business Operation........................62
CHAPTER SEVEN- DESIGN FINANCIAL MANAGEMENT PLAN.................................65
7.1 Researched Capital Investment and Initial Costs........................................65

7.1.1 Business Loan Index.............................................................................65
7.1.2 Interest and Principal Annual Repayment............................................66
7.2 Researched Monthly Operating Costs.........................................................67
7.3 Profit Realization Time................................................................................68
CHAPTER EIGHT-CONCLUSION AND RECOMMENDATION.....................................69
Reference............................................................................................................71
Bibliography.........................................................................................................74
Appendix-I Market Survey in ENGG 950 - Innovation and Design 2010...............75
Appendix-I Market Survey in ENGG 950 - Innovation and Design 2010

CHAPTER ONE-INTRODUCTION
Countless evidences show that innovation plays an important role in any industries which
from serve to manufacturing sectors in decades. Companies such as Apple and Toyota who
pay attention on product innovation result in creating core competency and achieve grand
success in their business.
The purpose of this report is to develop an engineering design product by utilizing the
innovation methodology. Firstly, three problems were identified by the group brainstorming.
According to weighted constraint matrix, the product of Smart cup which had the highest
scores was chosen as the final product. Then, methodologies such as survey, market trends
predict and SWOT analysis are utilized in the marketing research. After that, cost-plus
method was used in this report to define the selling price of Smart Cup. At the same time, to
make sure the success of Smart Cup’s development, risk management which includes
identification, quantification, and protection was implemented. Then financial management
was conducted for the business assessment. The Maslow’s theory was also applied in the
group assignment for planning and stimulating the efficiency and effectiveness of the group
members.
1.1 Report Objective
The main objective is to write a report about an engineering design product including the
product selection, market research, product costing, risk assessment and financial strategies.
The whole report started from preliminary conceptualization stage to the final product
embodiment; and also providing the corresponding information for the product such as cost
estimating, risk involvement in the design phase and motivation of the group members.
1.2 Definition of the Major Assignment
At beginning our group members had to come up with three concept design products by
brainstorming. After several evaluations and constrains analysis, these concepts were
narrowed to only one concept design product (this part is explained in design product
selection). Next, in order to explain and support further about our final concept design
product, the report applied some necessary evaluation, such as: design product market
research, design product costing evaluation, design product risk assessment, design team
motivation and business internal structure and design of financial management plan.
CHAPTER TWO-DESIGN PRODUCT SELECTION
2.1 Three Problem Definition Statements
In this preliminary stage of design product selection, our group has three problem definition
statements (shown below) after brainstorming; those are Life-Safe Flashlight, Green Roof
and Smart-Cup.
2.1.1 Problem definition statement of Life-Safe Flashlight
Most people have faced the situation that no battery when you want to use the flashlight. That
is something everyone has experienced in their life, and it is really annoying that it does not
work when it is needed. The flashlight is usually not something people use every day, but it is
used when they not have any other source of light. Often people suddenly need to use it, for
instance when the car suddenly strikes in the middle of the night, or the electricity in people’s
homes goes away for a while. How annoying is it then if the battery does not work, just
because nobody remembered to check it earlier. Many people love to camp and walk in the
nature. When the night comes they need to have some light too be able to see. People are
usually assured that they bring enough batteries for a trip, but in many cases this is not
enough and they run out of power. To run out of power in the flashlight when it is really
needed is a big safety issue, and can in the worst cases make the difference between life and
death.
Another problem is when people run out of electrical power in their cell phone, and they find
themselves in an emergency or they really need to make a call to say they are all right. That is
impossible to do if their cell phone is dead. What could then be better than a chargeable
flashlight that not only just give light, but also charge your cell phone with enough power to
make one or two calls? By having this opportunity people reduces the risk of not being able
to make important calls when it is really needed.
The solution to this issue is a flashlight that can be charged by using mechanical power to
generate electrical power. It can work without the need of any batteries in it; and will be able
to give light and charge cell phones. This could give enough light and power to save lives; if
a person is being searched for, he can use light to flash and easier be detected or charge his
phone to make important emergency calls.
2.1.2 Problem definition statement of “Green Roof”
As we known, many environmental issues such as loss of Arctic sea ice, global ocean
temperature and sea level increase caused by the world climate change. The main reason that
result in climate change is green gas emission which from automobile transportation,
industrial business, traditional energy consumption. Most of the energy used in commercial
and residential building is produced by non-renewable sources such as coal, gas, and
petroleum which emission green gas (CO2) heavily. To mitigate the stress of environment
protection, renewable energy resources should be utilized efficiently and broadly. It is
estimated that the built environment contributes around 25-40 percent of energy consumption
in developing countries. And the energy used in building’s ongoing operations contributes
80% of total energy consumption. Also with the consumption of traditional non-renewable
resources, the price for the electricity has been raised even higher than previous. So one type
of green roof which can combine the function of reducing thermal transmission, natural
ventilation, solar heating is quite necessary and urgency. As a result, the “Green Roof” can
reduce building’s life cycle energy consumption and protect our environment as to reducing
the negative impact on the environment caused by human beings. Also the cost for the user
on energy consumption is saved.

2.1.3 Problem definition statement on Smart-Cup
People often need to reheat water, milk, or other drinks in their daily life. The traditional
heating methods are by using microwave or hotplate which is limited by environmental
conditions such as in workplace where may not have traditional heating equipment’s. Also
some appliances such as hotplate cannot control the temperature that the user desires.
Moreover, it is a waste of time and energy when people are waiting for the drinks to be cool
down due to the uncontrollable temperature of reheating is too high. Why there is no
temperature controller and indicator there to show the temperature.
The modern pace of life is just too fast and people are very busy all day. So people
(especially the career people) usually do not want to spend too much time on waiting for the
hot drink in queue. And as we know, most of electricity generated from the non-renewable
resources such as coal, gas, and other fossil resources which emit plenty of green gas which
raises environmental issues such as climate change (green house effect). To reduce the
consumption of non-renewable resources and protect our environment, a new type of Smart-
Cup which characters functions including auto-control temperature, visual colour changing
system to show the temperature and energy saving is desired.
2.2 Three Product Conceptualization Approaches
According to the three problem definition statements above, we had to generate three product
conceptualization approaches.
2.2.1 Product conceptualization approach on “Flashlight without
Batteries”
This idea is about having a flashlight that does not rely on whether the batteries inside it are
charged or not. It is about having an own little generating station inside the flashlight that by
human mechanical power can generate electricity so that the flashlight can work without any
batteries. This flashlight gives light whenever it is needed without any concerns; it also has
the extra feature too charge cell phones.
This concept is the same as the wind energy concept. There is a power that makes a stick to
move around and around. This stick is connected different sizes of wheel gears that then
move around, and these gears are finally connected to a generator that produces electrical
energy.
http://renaissanceronin.files.wordpress.com/2008/11/wind-turbine-dwg.jpg
Figure2-1
People these days are very concerned about safety in whatever they do. By having this
flashlight available on a camping tour reduces a lot of risk and makes the whole trip safer. An
opportunity to have reliable light at night, or charge a phone so people can do important calls
from the nature, can make the big difference between life and death.
Table 2-1 Morphological Chart for “Life-Safe Flashlight”
Number Method of Size Extra Features
of LED’s Generating Power
1 Shaking Small None
2 Mechanical handle Medium Charge phone
3 Mechanical string Big
4 Extra big
4*3*4*2 = 96 different combinations

2.2.2 Product conceptualization approach on “Green Roof”
According to brainstorming, a “Green Roof” consists of solar panel system, wind turbine
system and electricity storage system which can provide sufficient energy for occupants to
use. By the meaning of “Green Roof”, renewable energy is produced corresponding to green
gas emission which is reduced in the building as well.
2.2.2.1 Regulating indoor temperature and natural ventilation
The first function of “Green Roof” is regulating indoor temperature by air conditioning which
use electricity produced by solar panel and wind turbine. The power for the air condition is
supplied by the energy which is collected by the solar panel. Also the purpose of wind turbine
is to maintain the room temperature at a constant level that the people feel the most
comfortable.
2.2.2.2 Heating the water
The solar energy is not only for the air conditioning system, but also can be transferred to the
thermal energy to heat the water tank to provide the hot water. The benefit is to reduce the
requirement of the electricity came from the power supply company.
According to the table 2-2, there are 960 kinds of “Green Roof”. The concrete roof we choose
has the characters as follow: rectangle shape, a front location wind turbine, a 5KW solar
panel and white color.
Table 2-2 Morphological chart for Green Roof

Roof Shape Position of Material Paint The power
wind Colour of solar
turbine panel
Square Front Concrete Green 15KW
Circle Middle Aluminium Yellow 10KW
Triangle Left side Steel White 5KW
rectangle Right side Black 2KW
Back
Total amount of possible choice= 4*5*3*4*4=960
2.2.3 Product conceptualization approach on Smart-Cup
Compared to products which are already existed in the market, the Smart-Cup has several
advantages as following:
2.2.3.1 Auto-control temperature
A temperature sensor and monitor is designed with the Smart-Cup to control the drink
temperature, an effective heating device is set in the base of the heating-cup which can
transfer the electricity to thermal energy. According to the auto-controller, user can set the
desired temperature by the individual favour which leads to energy and time saving.
2.2.3.2 Change colour with temperature accordingly
Colour-changeable paper with chemicals inside is put in the Smart Cup’s double-layered
wall. The special paper can change colour according to drink’s temperature inside the Smart-
Cup. With the colour changeable it is much easier for users to directly view the drink
temperature changed. The measure’s range of the colour-changeable paper is from 0~30°C,
30~60°C, 60~100°C.
2.2.3.3 Convenience of carrying and using
The base of the Smart Cup has a heating device that can be altogether with the body of the
cup or can be separated. The capacity of the cup will be designed at 500ml for general
purpose. The Smart Cup is divided into inner and outer layers, inner layers is made up with
the plastic of polypropylene which can prevent burning the lips. The outer layer is made of
stainless steel.
2.2.3.4 The structure of the Smart-Cup
As conclusion, the basic structure of the Smart Cup includes a plastic inner liner, an outer
metal shell, and an insulation-filled space there between. There are two heating elements in
the cup. First heating element is located within the insulation filled space and is wrapped
around the lower portion of the plastic inner liner. The second heating element is located on
the bottom if the cup. Both heating elements are connectable to the power supply. The plastic
inner layer is curved over the upper edge of the outer metal shell to form a drinking rim that
is safe to the touch when the cup contains a hot beverage. The combination of the heating
element and plastic inner liner produces a diffuse slow heat that heats the liquid to a desired
temperature, but does not burn it, which typically occurs when using present electric liquid
containers with metal inner layer. The outer metal shell imparts strength and durability to the
cup, while the insulation-filled space prevents the metal shell from becoming warm to the
touch.
According to the table 2-3, there are 1800 kinds of smart cup. The 500ML volume, stainless
steel smart cup we choose has the characters as follow: circle cross section area, gray color,
and 240V power supplier.
Table 2-3 Morphological chart for Smart-Cup

Material Cross Section Volume colour of cup Type of power
Area supplier
P.E.T Square 500ML Red USB（22V）
Steel Rectangle 1L White Battery
Stainless steel Circle 350ML Yellow 240V supplier
Porcelain Ellipse 1.5L Black
P.P Triangle Green
Gray
Total amount of possible choice = 5*5*4*6*3=1800
2. 3 Weighted Constraint Matrix
Regarding to brainstorming and morphological chart, our group decides three possible
products: Life-Safe Flashlight, a Green Roof and Smart-Cup.

Those three products are the best design concepts results of our group brainstorming, thus it
is difficult to choose the best choice among them. There are a few things can affect the choice
of our final products, such as customers and investors. Therefore, it is necessary to provide
some constraints and targets of design product concepts that satisfying both investors and
consumers.
Next, certain product selection constraint weights are used to find precedence using 1-10
rating scale; in where buyer and investor are considered as the importance rating, because
each of them requires different preferences and requirements to the design products,
especially investors need product that can make the profit to them, while buyers need more
reliable and valuable product.

It can be seen from Table 2-4 that the “attractive to buy” might be the most important
constraint for both buyers and investors. Furthermore, consumers are focus on the visually
attractive, high reliability and life cycle, investor are concentrated on the risk rate for
investment, high reliability and proven market share. Table 2-5 is used to help creating a
group product selection using a weighted constraint model.
Constraint Importance Rating (1-10) Constraint Weight (%)

Customer Investor
Attractive to buy 9 10 19
Easy to produce 2 5 7
Low risk rate for investment 1 7 8
Easy to maintenance 6 4 10
Life Cycle 7 5 12
Upgradeable 6 4 10
Proven market share 3 6 9
Visually Attractive 8 2 10
High Reliability 8 7 15
Total 50 50 100
Table 2-4 Product Selection Constraint Weights
Group Design Product

Product Selection
Constraint and
Life-Safe Green Roof Smart Cup
Weight (%)
Flashlight
1-5 Concept Rating and Weighted Constraint Score
Point Score Point Score Point Score
Attractive to buy (19) 4 76 3 57 4 76
Easy to produce (7) 3 21 1 7 4 28
Low risk rate for 3 24 1 8 4 32
investment (8)
Easy to maintenance 1 10 2 20 3 30
(10)
Life Cycle (12) 1 12 4 48 1 12
Upgradeable (10) 1 10 3 30 1 10
Proven market share (9) 2 18 3 27 2 18
Visually Attractive (10) 2 20 1 10 4 40
High Reliability (10) 2 20 3 30 2 20
Total 19 211 21 237 25 266
Table 2-5 Group product selection using a weighted constraint model
2.4 Associated Logic for Choosing a Single Product
As a result, according to Table 2-5, the most preferable product for buyers and investors is
the Smart-Cup which has a total score of 266. Although the Smart-Cup is not a new invention
in the market, it has some innovative features in it and it has a wide range of application and
huge market requirement. Furthermore, there will be an innovation to combine the existing
function such as heating, temperature control and scale of temperature by colour in one cup.
Investors need fewer funds for investing on the Smart-Cup, compared to the Green Roof
which requires larger budget and capital investment because of quite a few new technologies
need to be invested. Furthermore the Green Roof has a high risk of the product failure. In
addition, although the Life-Safe Flashlight might spend the least investment among others,
compared with the market requirement and application, the figure of flashlight is quite lower
than the Smart-Cup. Moreover, the cup has a higher profit margin than the flashlight.
Combined all the reasons above, Smart-Cup is our final choice.
2.5 Product Concept Embodiment Sketches using Google
Sketch Up
2.5.1 Life-Save Flashlight

Figure 2-2
2.5.2 Green Roof

Figure 2-3
2.5.3 Smart-Cup
Figure 2-4
CHAPTER THREE-DESIGN PRODUCT
MARKET REASERCH
3.1 Understanding the market and customer needs
To create a successful new product the seller must understand its customers, competitors and
the markets, and develop a product that deliver a superior value to the customers. A market
research is important to understand what the market really need and want when it comes to
different products. It is really important that we know that the customer that buys our cup
does not really want just our cup; they want hot/boiled water. Our cup is just a tool for them
to make what they really want. The more research being done, the better understanding a
producer can get about these needs and the producer can more easily satisfy them. Every
organization or company that offers products or services needs to access knowledge about the
different markets, if not there is a big chance that the product will fail. A research study of
700 consumer and industrial firms shows that overall just about 65% of new product success.
[1]
Many products fail in the market due to incorrectly positioning, too high priced or poorly
advertised.
In this particular case we are producing a cup that can heat and boil drinks (water). When
people want boiled water in a cup that is what we want to give them; a tool for making
hot/boiled drinks. We will conduct our marketing activities by the “product concept”. The
product concept holds that consumers will prefer products that offer most quality,
performance and innovative features. We will give them good quality, performance and a
new innovative feature (boiling and heating with a smart in-built cord).
When looking at the different purchase behaviours in a market there is some things we have
to think about and try to answer in this report. These are things like:
 What is the customer need or want, and why is it wanted.
 What kind of information does the customer seek, how much information do they need,
what kind of information is needed, what kind of information channels should be used
and in what form should the information be given.
 How does the receiver interpret this information, do they understand what the seller tries
to sell and is the information relevant for the customer.
 What determines the customer conduct, appreciation and preferences? What is important
for them?
 How to the buyers decide to purchase the product, and what happen after they have
bought it.
3.2 Differentiation
Our product is a cup that can heat up drinks, due to an electronic heating element inbuilt in it.
Some products like this are already in the market. But the special feature about this product is
that is has a power cable that can roll in and out from the cup and be connected to the main
240 Voltage power grid. This is the main differentiation this product offer to its consumers
compared to competitors. Consumers only need a water source and a power source to boil up
the water. They do not need a kitchen or a place where boiled water can be accessed. This
makes the product very handy and user-friendly.

3.3 Positioning against tea consumption
So who need a cup that can boil water wherever there is a power- and water source, do people
really need to have boiling water at any time? This is a good question, and it is here the
position part comes in the picture. We want to position our product up against the tea
consumption that exists in the market. From Berry’s[2] article made in 2009 we got different
information about tea. Tea is the world’s second most consumed beverage after water. Tea
has a history of being refreshment driven, but over the last 5 years there has been a significant
repositioning from being refreshment driven beverage to be a beverage which is rich in health
and wellness. It is thought to prevent aging of cells and to benefit the immune system, and it
can emotionally be used to provide a natural energy boost and give persons more relaxation.
Consumers are becoming more aware of the specific antioxidants that are found in tea. We
want to use this in our marketing strategy so that people can see the benefits of drinking tea,
and that our product can help them to drink more tea easier, cheaper and more often.
3.4 Segmentation and target market
We have to identify which parts of the market we can serve best. The questions to ask are
who drinks tea, where they drink tea and if they are willing to make their own tea.
 Geographic segmentation
We want to start offering our product in Sydney in Australia. This is the second largest city,
and since we are located closest to Sydney we find it less risky to start there.
 Demographic targeting
We will mainly focus on students, but also people that are focused on health and wellness,
with an age between 13 – 60 years. We know that many Chinese people lives in Sydney and
that they have a strong tea-culture, so we will target them as well. Instead of buying a cup of
tea every day for a high price, they can easily and cheap make it by themselves whenever it
suits them.
We assume that children up to 10 years will not need this product, since it involves hot water
and often do their parents make them what they need to drink. We also think that older people
use much time at home and make their hot drink in other ways. People working at offices at
daytime usually have machines that make them hot drinks. People in a high social class will
probably not use this product either, but rather go to a restaurant/coffee shop and buy their
hot drink there. The household will not be considered in our targeting, because they will
probably make their hot drinks in the kitchen with their kettle (automatic or not).
3.5 Collection of data
We have one product that is targeted against tea and other hot drinks consumption. It is hard
to find useful and relevant secondary data about this. Secondary data is information that
already exists somewhere and has being collected for another purpose. There has not been
done much research about what kind of cups the market wants and how they want them,
especially not for this purpose. So in this case we also need to collect primary data, which
consists of information that are being collected for the specific purpose.
To gather primary data we have used a structured questionnaire survey that aims for students.
The questionnaire was produced after we found out what segments we want to target and
what the competitive substitutes to our product are. Our sample size is only 12 students,
which is a too small sample size for reliable results so we should be careful drawing
conclusions from these. But we will get some main ideas, and it will make it easier for us to
do a bigger survey later; where we can use data programs like JMP to calculate the outcomes.
We asked 6 females and 6 males, and the survey question and results can be found in the
appendix for this report. We printed out with wrong price, but changed it with a pen before
sending it out to the students.

3.6 Six Market Research Questions
3.6.1 Market size
To start with we will sell our product in Sydney, trying to reach people between 15-60 years,
mainly students in the first round. All of our statistics are found at ABS webpage.[3]
The population in Australia is increasing for every year. From 30 June 2008 till 30 June 2009
Australia recorded 301 000 births, which is the highest recording since 1977. The population
growth rate in total for 2009 was 2.1%, which is the highest growth rate in 40 years. Sydney
is the second largest city in Australia, with a population of 4 119 000. In 2007 there was
about 930 000 students that studied in Sydney, counted from the secondary school and up to
the highest education level. The distributions of these students are like this:
Student distribution Sydney Numbers In percent
Secondary school 270 000 29%
Technical or further education 100 000 11%
institutions
Universities 180 000 19%
Other not stated educational 380 000 41%
institutions
Total 930 000 100%
Table 3-1
There are also 145 000 people from China living in Sydney, and many of these are students.
From our market survey we can see that no students use to make their own hot drink at
school. This means that we have a large market to enter in the beginning. If the product
becomes a success among students and Chinese people we will increase our market
geographically to the bigger cities in Australia. And if this will succeed we will expand our
business to the global market.
3.6.2 Market competition
In this case we only have one product to produce and sell, which makes it difficult for us to
find the exact competitors in the market. A competitor will often produce and sell many
different products in different categories. This makes it very hard for us to find some useful
secondary data. But market competition does not only consist of other firms that are
competing with each other with the same products and services; it also consists of substitutes
that are available in the market. A substitute is a product or service that offers a similar
benefit to the consumers, but by a different process.

The substitutes that compete with our cup are listed in the table under.
Table 3-2
Substitutes: Thermos bottles Coffee/tea Coffee/tea Cup warmers 1
machines shops/bars
Advantages + - Larger volume - No need to - No need to make - Keeps drinks
make it yourself it yourself warm
- No need for
- Often found - Often found at - Can place any

power source
many places at a some places at a cup on it

- No need for school school
water source
- Quick delivery - Medium quick
delivery time,
- No need for
depends on queue
bringing a own
cup or flavours
- No need for
bringing own cup
or flavours
- More social
- Good assortment
Disadvantages - - Need to make it - Costly - Very costly - Cannot boil
before it is needed water

- Assortment is
limited
- Need to have a
- Gets colder after

shop/bar available
some hours
- Need to have a
machine
- Gets quickly
- Not fresh available

cold
- Cannot make - Smaller volume
new when it is of drinks
empty - Gets quickly
cold
1
E.g. USB Cup Warmer [4]
This is our products main competition. What do the customers prefer; price, performance,
convenience or a mix of these? From our survey we can find that 83 % of the people drink
hot drinks at school. Most of them drink coffee (80%) and half of the asked drinks it now and
then while other half drinks a couple of day. When it comes to price half of the asked persons
find it important while the other half find it less important. An interesting finding in this
survey is that 80% of the asked persons purchase hot drinks from a coffee or tea shop, 20%
from a machine and no one brings or makes their own drinks. It should be a large potential in
this targeted student segment for our product.
3.6.3 Market trends
People do always need to drink water, it is a physiological need that they need for survival.
To consume this water most people use a glass, but when consuming tea most people use a
cup. We cannot imagine that the trend to use a cup for consuming tea will change. Since we
want to position our product up against tea consumption, we have to have a closer look at the
tea consumption trend, so that we can use this information in our further marketing process.
People have changed some of their lifestyle the past years and that seems to continue. People
are these days more concerned about the environment and their own health and wellness.
Sharma[5] has done a lot of research about market trends in the food market (beverages
included). He writes that the three most identified trends and drivers for functional food
innovations are pleasure, convenience and health[6]. Tea does match these criteria at a perfect
level; it has a great taste, the packing are small and convenient, it is available in every
convenient shop’s (gas stations included), and its state of nutrition is very good. Tea and
coffee products sales grew in the US by 4% from 2002-2003.
In the article Back to Basics[7] it is written that the herbs that one can find in tea has been used
for ages when it comes to medicinal purposes. Herbs are good source for nutrition that
contains substances that play a role in health and cancer prevention. The article describes an
increasing trend in the consumer market that wants a tea with all-natural remedies for modern
consumer’s health needs. Consumers are these days looking for beverages that not only taste
great, but also offers them some sort of health and wellness benefits.
This is a positive trend that we can use in our advertisement for the product. They can drink
healthy tea more often to a cheaper price.
According to ABS’ website the trend of people attending educational institutions and
finishing their education is increasing. The main growth is happening in the largest cities in
Australia (like Sydney). From 1996 – 2006 there was an increase of people attending an
educational institution in the major cities of about 6% - 7% in the age group 15-19 years and
5 % between 20-24 years.
Graphs from ABS website

Figure3-1
Projections for year 2056 estimate that Sydney will be the largest city in Australia followed
by Melbourne. The population of Australia is expected to rise between 24 and 33 million by
2051. All these trends are good news for our Smart-Cup.
3.6.4 Market price
Our market survey shows that 50% of the people that did not want to buy our cup (for
$40.10) said that the cup was too expensive. We have to convince these people that in the
long-term run a cup like ours will save them a lot of money. Since 100 % of the people in the
survey that drink hot drinks at school purchases the drinks from a machine or bar, we need to
find these prices and show them that there is a lot of money saved by making it themselves
instead of buying it. In the first table we will present the prices for our main competitor
substitutes, the coffee/tea bars and coffee/tea machines. Prices that are used in the table under
are observed at University of Wollongong in May 2010.
Prices main substitutes Tea Coffee Hot chocolate
Campos Coffee (2 shops) $3 $3.10 $3.60
Rush Coffee N/A $3 $3
Picasso Espresso Bar N/A $2.60 $2.80
Panizzi Café $3 $2.60 $2.90
Vending Machine $2.60 $2.60 $2.80
Average price $2.80 $2.80 $3.10
Table3-3
These prices are for small cups. Our survey shows that about 50% of the people purchase a
couple of drinks each day. If we use the smallest price, which is $2.80, and assume that every
student go to school at least 3 days a week they have to pay $2.80 * 2 * 3 = $16.80 every
week. A semester at school consists of 12-13 weeks, which mean they will be ending up
paying over $200 each semester just for purchasing hot drinks at school. This is useful
information for us to use in our advertisement campaigns.
Prices on some of the other substitutes to our cup are shown in the table under.
Other substitutes Price Comments
Mr Gadget USB Cup Warmer $ 15.95 Was apperantly $29. Need to boil water another way.
Another USB Cup Warmer * $ 19.95 Cost $25 in retail shop. Need to boil water another
way.
Thermos travel cup * $ 12 Smaller cup

Large thermos 1* $ 75.91
Large thermos 2* $ 94.05
* See “Substitute prices” for direct reference links[8]
Table 3-4
By having a look at all these prices our cup should be strongly competitive in the market
when it comes to the price.
3.6.5 Relative benefit product
Our cup has some special features that make it more beneficial compared to other cups. The
main benefit is that is easily and fast can boil up water. This is being done by plugging a cord
from to cup into the power outlet in the wall. The power cord and its plug are in-built in the
cup. The cord goes in and out from the cup with the same mechanism as in the vacuum
cleaner. This makes it very easy in use for the customers, since they not need to concern
about bringing a loose to plug in their cup.
Our cup has a button that makes it available to adjust the preferred temperature the user wants
the drink to hold. Maybe do the users want to make hot chocolate with milk without boiling
the milk (milk should not be boiled). Our product will give them this opportunity. There is
also a color system feature in our product, which shows the user what the temperature is in
the cup at any time. This is useful for the user since nobody like to drink the hot drink
immediately after it has been boiled. So instead of drinking a sip of the cup to find out if they
can drink it or not, they can just have a look at the color system that shows them the
temperature.
3.6.6 Market share goal
Our market share goal is 2% of all the students in Sydney which is about 20 000 people
within the first year. This is an acceptable and feasible goal, about 9 000 product sales after
break-even is reached (break-even circa 10 000). We have to do a lot of advertisement,
especially in the first year. The more market-share a business or product want to gain, the
more advertisement there must be done. We find that 2% market share shot not be too hard to
obtain. But we have to try to increase our market share quickly if this product become a
success. This is because we not want other companies to start competing against our product
by making the same product as we got.
After the first year we want to continuously gain more and more market share in Sydney, but
we will probably not need to advertise as much as the first year. The word-of-the-mouth is a
very strong and powerful communication among consumers, and we believe that this will
help us gain more market share in the future. This means that we do not need to communicate
as much to them by advertisement.
If we succeed in Sydney the first year, we will expand to Melbourne and go for the same
tactic down there; trying to gain 2% market share of the targeted students within the first
year.
3.7 SWOT Analysis
This analysis will identify the main strength, weaknesses, opportunities and threats that our
product faces.
Table 3-5 S.W.O.T Analysis
SWOT – analysis
Strengths: Weaknesses:
➢ Large market compared for us ➢ Cost to produce
➢ Not many competitors in the targeted ➢ Big and heavy compared to a regular
market cup
➢ Should be competitive with the ➢ New product in market
threatening substitutes
➢ Cannot be used in the washing
➢ Easy and handy to use

machine
➢ Practical in use, does not need hot ➢ Easy to copy
water; just cold water and an

➢ Poor equity and liquidity
power outlet
➢ Covers a small geographical part of
➢ Good positioning strategy, clearly

total Australian market
defined
➢ People drink more tea due to
health and wellness benefits
Opportunities: Threats:
➢ Expand to other market segments ➢ Aggressive and stronger
competitors
➢ Expand to other cities
➢ To high market share goals
➢ Expand to the global market
➢ Substitutes
➢ Goodwill in market
➢ Expanding business when it should
➢ Reach the positioning strategy goal

not be expanded
➢ Complaints
➢ Wrong positioning
➢ Our surveys are totally opposite of
the market
➢ Bad, wrong or poorly

advertisement
➢ Product cost analysis is not reliable
- cost over-run.
3.8 BCG Product Ratings
Market share and market growth are the two critical variables that forms the BCG Matrix.
The matrix is used to show in which category out of four a business is in, based on the
business’ market share and the market growth rate. A star is a preferred position, while a dog
is not a preferred position to be in.
BCG Matrix
Image taken from: http://www.cleptestreview.com/supporting-images/BCG-matrix.gif
Fig3-2
It is hard to decide what high and low share or growth mean in this situation.
We think that since our product is positioning against tea and it is a smart product that can be
used almost everywhere, there should be a high market growth for our product. Our market
share is very low, due to just offering our product in Sydney. Therefore will we place our
product into the question mark category. This is a question mark and wonders if our product
will gain a high market share and become a star, or it will lose market share and become a
cash cow. To become a start involves a lot of heavy investment, which is a problem for our
company in the beginning. So it is more likely that our product ends up in the cash cow
category if we not grow and expand very fast. This is due to aggressive and much stronger
competitors that maybe will produce similar products as ours.
But we have to try our best to get into the star category. If the market growth fails in a way,
we have to assure that we gain much market share so we not end up like dogs. Business in the
dog category is recommended to divestment or close down.
3.9 Strategies for product promotion
It is not enough for us to develop a new innovative product that we price low and make
available to our targeted students. Marketing also involve communicating the products value
proposition to the potential and actual buyers. To develop an effective communications and
promotion program we need to: identify the targeted marked; determine the communication
objectives; design a message; choose media through which to send a message; select a
message source; and collect feedback.
We will use a push strategy for the product to reach its market. This involve that we push the
product through the marketing channels and to the final customer.
Step 1: Identify the targeted marked
We are mainly targeting people that go to secondary school and upwards.

Step 2: Determine communication objectives
In this step we need to know where the target audience stands when it comes to the product.
Are they aware of it; do they know anything about it; do they like it; do they prefer it; do they
need to be convicted to buy it or do they need to be reminded to purchase the product. A cup
is definitely not a new product in the market, and people are not aware of it either. Our cup is
just a little bit different to other cups, but not so much that the audience not knows what it is
all about. The problem is if we should go for the stage that is about if people like our cup, or
if we should go for the preference part, where target audience like the product but not prefer
it to others (our substitutes).
After thinking about it for a while we find it most important to make the objective about the
preference part. When looking at the surveys, 50% of the people answered that they would
not purchase the cup due to high price. We have to convince them that this product is cheaper
to use than to buy hot drinks from a bar or a machine.
Step 3: Selecting a message
In this step we need to develop an effective message. This message should ideally get
attention, hold interest, arouse desire and obtain action (AIDA model). This part will include
three different parts: message content (what to say), message structure (logically) and
message format (symbolically).
 Message content
We will give a message that shows people our products benefits, showing its quality,
economy, value and performance. We will also try to involve an emotional appeal that
involves some love, joy and humour into our message.
 Message structure
We want to give the audience two-side argument and draw a conclusion for them. This two-
sided argument is the negative things about buying hot drinks and the good thing about
making it on their own - with our product.
 Message format
We need to have a strong format for our message. Since our starting market is in Sydney we
will only use printed ads to begin with. We want to attract attention, so we will use an eye-
catching picture and headline with a good colour balance. The message size will be medium
large.
3.10 Choosing Media
There are two broad types of communication channels, personal or non-personal. We will use
both the channels in our promotion, but mainly the non-personal channel. In a personal
channel two or more people communicate directly with each other, while in the non-personal
a message is sent out without personal contact or feedback. We are going to use signs,
posters, ads on buses, and webpage as our non-personal media selection. In our personal
communication we will have stands at the largest universities and schools.
3.10.1 Selecting the message source
Our message out to the audience has to be trustful and liked. To success with this we want to
add some quotes in our advertisement from nutrition experts that can say something about the
importance of the positive health effects by drinking a lot of tea. We may also make some
experts to say something about the environment effects of using own cup instead of using
paper cups for one-time usage.
3.10.2 Collecting feedback
We have to know the effects of our message after it has been sent. In this stage we will go out
to our customers and ask them personally about whether they remember the message; if they
remember the main points from it and if they liked it or not. How many did actually buy the
product? This will give us answer if our message (advertisement campaign) were successful
or not.
3.11 Design Product Brochure
Figure 3-3
CHAPTER FOUR-DESIGN PRODUCT COSTING
4.1 Design Product Selling Price
It is important to determine the design product selling price for launching and selling
commercial products to the business market. Design product selling price includes prime
cost, overhead and profit. Prime cost consists of direct labour and material cost, while
overhead cost including manufacturing, marketing, and general expenses. The selling price
equals the sum of primary cost, overheat expenses and target profit.
Table 4-1 Cost-Plus Selling Price for a Manufactured Product (Lemass, B. 2010,)
The temperature control devices and heating elements are purchase from outsourcing. The
cost of these equipments is based on the purchasing price. In our business, we produce the
inner and outer layers for the cup, and we assemble all the units by assembly line.
The volume of the cups is 500ml, and from the manufacturing point of view we use the
plastic injection moulding machine for manufacturing the inner layer, and apply the stainless
steel casting technology for the outer layer. The time for the plastic injection moulding time
is only 0.4 min, which is suitable for mass production, the time for casting products will last
for 3 minutes because the cooling time is much longer than the casting time. We applied the
assembly line for assembling the products. The production rate will be determined by the
slowest station, there are 8 working stations including altogether, all the components will be
assembled automatically. The production rate will be 1 product/min. The table below shows
the information of manufacturing cups
Process Time
Injection Moulding Process 0.4 min
Casting Process 3 min
Assembling Process 1 min
Other Transport Time 2 min
Total 6.4 min
Table 4-2
4.1.1 Prime Cost
4.1.1.1 Direct Labour Cost
From the report of major labour cost in industry released by ABS[9], employee earnings
accounted for 86.6% of total labour costs. Superannuation was the next largest component at
7.6%. Payroll tax and Workers' compensation costs were 2.9% and 2.2% respectively, while
Fringe benefits tax was the smallest component at 0.8% of total labour costs.
According to Employee Earnings and Hours [10], it can be found that average weekly earnings
paid for full-time non-managerial adult employees on manufacturing are $1057.
Based in the information above, the total of labour cost per week have been list in table 4-3
which are $1222.

Item Amount (A.U. $)
Employee weekly earning $1057
Superannuation $93
Payroll Tax $35
Workers’ Compensation $27
Fringe Benefits Tax $10
Total $1222
Table 4-3
There are 52 weeks in a year, so the total annual cost is $63544.
Annual Hours are 38 hours per week[11] with 52 weeks
Total annual hours=52×38=1976 hours
Calculation of leaving time has been list below.[12]
 Annual leave is 4 weeks=4×38=152 hours

 Sick leave 2 weeks=2×38=76 hours
 Public holidays 9 days=9×385=68.4 hours
 Long service leave 6 days=6×385=45.6 hours
Total deduction=342 hours
Actual Annual Hours is 1634 hours
True directly labour cost per hour =635441634=$38.89/hour
Because the production rate is 6.4min/unit
Annual production rate is 15319 units
So one direct labour cost=$4.15/unit
Because there are two workers working at the same time, so the direct labour cost of our
product is $8.3
4.1.1.2 Direct Material Cost
The material we applied for inner layer is polypropylene (P.P) which is the ideal material for
injection moulding machine. The volume of the cup we designed is 500ml, so the dimensions
and cost of the inner layer have been shown below.
Diameter 80mm
Height 150mm
Thickness 1mm
Volume of P.P 42.73cm3
Density of P.P 0.946g/cm3
Selling Price of P.P[13] $1322/tonne
Cost of P.P $0.05
Table 4-4
Because the design of the cup is double layers for insulation purpose, so the dimension of the
outer layer will be larger than the inner layer.
So the detail design and cost of the cup outer layer has shown below.
Diameter 10 cm
Height 14 cm
Thickness 0.1 cm
Volume of stainless steel 51.84cm3
Density of stainless steel 8000kg/m3
Selling price of stainless steel[14] $4354.2/tonne
Cost of stainless steel $1.82
Table 4-5
Design for the Lid of stainless steel
Outer Diameter 8 cm
Height 3 cm
Thickness 0.3cm
Volume of stainless steel 101cm3
Cost of stainless steel $3.54
Table 4-6
Items Costs ($)
Heating Coil Element[15] 10.3
Temperature Senor[16] 0.6
Plastic Inner Layer(P.P) 0.05
Chemical Components 0.6
Stainless Steel Outer Layer 1.82
Middle Relay 1.3
Fuse[17] 1.86
Stainless Steel for Lid 3.54

Total 20.07
Table 4-7 Cost of raw material components per unit
Fig 4-1
4.1.2 Expenses
4.1.2.1 Manufacturing Expenses
(a) Indirect labour:
 Supervisor Cost
Supervisor (brief/quality control) = $34/hour[18]
We do the quality control for 5 samples from 500 products, the time spend for quality control
is 48 minutes, so the cost of supervisors =$0.05/unit

 Security labour
The annual wages for security guards is from AU$36,281 - AU$47,816[19]
The security cost per year is $42048
The security cost= $2.75/unit
 Administration labour
Administration = $20/ hour[20]
The average administration time we spend on one batch of 500 products is 2 hours for the
paper work, shipment, and order time etc., so the cost of administration is= $0.08/unit
 Research and development labour
R&D cost= $10,000 per year
The cost of R&D for each unit=$0.65/unit
Indirect Labour Cost (A.U. $)/unit

Supervisor Cost 0.05
Security Labour 2.75
Administration Labour 0.08
R & D Labour 0.65
Total 3.53
Table 4-8
(b) Indirect material
The equipments being used in the factory are plastic injection moulding machine, stainless
steel casting machine, and components assembly line. All the equipment will last for 5 years
Item Cost (A.U. $)
Plastic Injection Moulding Machine[21] $35,000
Stainless Steel Casting Machine[22] $30,000
Assembly Line $35,000
Office Facilities[23] $5,000

Total $105,000
Table 4-9
The cost over 5 years = $105,000/5yrs = $21,000/yr
The units/year=1634hrs/6.4mins per unit=.15,319 units/year
Therefore, cost per unit = ($21,000/yrs) / (15,319 units/yr) = $1.37/unit
(c) Utilities
The price of electricity is 17.3cents/kwh.[24]
The total consumption of the electricity is 81Mwh/year
The electricity utilities=$14013/year
There are 8 people involved in the whole company.

Electricity, water and telephone fees = [($15,000/yr) / 8 people] / (15,319units/yr)
=$0.11/unit
(d) Insurances
Insurances, which include professional indemnity, theft, public risk and property damage, are
about $18,000/yr[25], because the insurance can be considered as fix cost.
Thus, the cost per unit = ($18,000/yr) / (15,319unit/yr)/(8 workers)= $0.15/unit
Therefore, the total manufacturing expenses = $(3.53+1.37+0.11+0.15) = $5.16/unit
4.1.2.2 Marketing Expenses
(a) Training
The training cost of health and safety is $3720.[26]
The training cost per unit = ($3720/year)/(15319unit/year)=$0.24/unit

(b) Business advertising & promotion
There are two types of advertising we choose, the first one is the web advertising, which cost
$275 per week[27], so the total cost is $14300
The second one is the bus advertising, which cost $300 per week[28] the cost for the whole
year is $15,600.
The cost of advertising & promoting of company is $29,900 per year, the amount of products
manufactured in one year is 15319 units
Advertising and promotion cost per unit is $1.95/unit
The total marketing expenses=$1.95+$0.24=$2.19/unit

4.1.2.3 General Expenses
There is no relationship between the general expenses and number of staffs, so when we just
divided the general expenses by number of units produced each year to get the general
expenses per unit.
a) Leasing
The leasing fee for the factory is $550/week+G.S.T which is 10%, which contains 262 sqm of
floor area & 110 Mezanine , kitchen & toilet facilities, Auto rollar door & 5 car parking
spaces.[29] So the cost of leasing for one year is $31,460.
So the leasing cost=$41600/15319 units=$2.05/unit
b) Accounting Cost
Because we decide to hire a professional accounting firm to do the financial report for our
company, the cost will be $5000 per year
The financial cost is $0.33/unit
c) Publication fee
The publication fee for one year is $2000
The publication fee per unit is $0.13/unit
The total general expenses for one unit is=(2.05+0.33+0.13)=$2.51/unit
According to our group literature research as it can be seen in Table 4-10, we could predict
the cost for producing Smart Cup including its initial cost, product R&D, manufacture and
general cost.
Items Cost (A$)
Direct material/ per unit 20.07
Direct labor/ per unit 8.3
Prime cost/ per unit 28.37
Manufacture overhead/ per unit 5.16
Market Expense/ per unit 2.19
General Expense/per unit 2.51
Cost/ per product 38.23
Selling Price 46.1
Table 4-10 Cost for producing Smart Cup
To determine a suitable selling price of our product, we use target profit method by assuming
a 20% profit. So we figure out that the selling price of each product is $46.1.The figure 4-2
shows the percentage of each cost which consisted of total selling price.
Fig 4-2
4.2 Break-even volume
According to Table shown below, TVC, TFC and TP can be calculated as:
Total Fixed Cost (A.U. $)
R&D Cost 10,000
Investment Cost 21,000
Administration Cost 44,182
Utilities 15,000
Insurance 18,000
Marketing Expense 33,620
General Expense 48,600
Total 190,402
Table 4-11
Variable Cost (A.U.$) per unit
Direct Labour Cost 8.3
Direct Material Cost 20.07

Total 28.37
Table 4-12
Variable Cost per unit (Total Direct Labor + Material Cost+ Q.C.) =$28.37/unit
Total Fixed Cost (Total Fixed Overhead Cost) =$190,402/year
Selling Price =$46.1
TFC + TVC = V.x
where: TFC: total fixed cost
TVC: total variable cost
V : output volume
X : selling price
From the previous calculation which is shown in direct material cost section, the selling price
is $46.10, and to calculate the total variable cost, it is essential to multiply the prime cost by
the output volume (V) as shown below:
– Total variable cost (TVC) = Prime cost * V
= $28.16/unit * V
– Total fixed cost (TVC) = $190402
– V.x = TFC + TVC
Then, since profit is included:
TFC+TVC = Vx
190402+28.37×V=46.10×V
Break-even amount V=10738

Finally, based on the above calculation the break-even volume will be 10738 units.
Fig 4-3
However, this values are just set based on theory, thus further financial decision should be
established under the consideration of changes Breakeven

and interestPoint
rate which are going to be
discussed in Chapter 7.
4.3 Cross Checking the Selling Price
For checking our design product selling price, we do the comparison between our prices with
other competitors’ price. The purpose is to avoid to lose the market share by too high pricing
and to keep maintaining a fair price.

We check our price with the similar function of cup that already existed in the market; the
information has been list below. From the table we found that there are most three types of
catalogues in the market. The first type is the kettle, which can heat the water but hard to
maintain the temperature, and not convenient to carry. The price is quite close to our product.
The second type is the traditional mug without heating function; where the main function is
to try to maintain the high temperature as long as possible. But the selling price is quite
cheaper. The third type is the mug which is quite similar to our products, but the disadvantage
is that the temperature is not adjustable, which means the liquid in the mug will be heated
into a certain temperature, which is not efficient. Based on the research above, we can say
that the price of our product is acceptable for the customers with its multifunction.
Items Costs (A.U. $)
Brugo Mug without heating[30] 30
Farberware FCP280 Millenium Automatic 70.8
Coffee Percolator With Automatic
Temperature Control[31]
Electric Kettle with Automatic Temperature 80
Control and Indicator Light[32]
Smart Travel Mug With Temperature 38
Control[33]
Our products 46.1
Table 4-13 Cup, Mug, Kettle Prices

CHAPTER-FIVE DESIGN PRODUCT RISK ASSESSMENT
Risk management is a process that identifies loss exposures faced by an organization and
selects the most appropriate techniques for treating such exposures. New creation such as an
innovation engineering design that enters current business market will provide a riskier
situation than others because new creation generally is an unknown product. For efficient risk
management, there are four steps included: identify loss exposures, analyse the loss
exposures, risk control, and implement and monitor the risk management program will be
utilized in this report.

5.1 Risk Identification
5.1.1 Risks exist in the product design
There are many technological problems should be solved in the innovation process. First of
all, the technology combine insulation with heating is a big challenge. Then, there are many
materials utilized in our design product. Materials choice is a key element to achieve
innovation success. All of the factors mentioned in the previous part maybe result the design
error which is a main risk resource in the innovation design. Furthermore, Intellectual
Property risk may involve investors for owing the novel invention of Smart Cup.
5.1.2 Risks exist in the product manufacturing
Health and safety risks should be considered in the manufacturing process. There are several
physical risks exist in the manufacturing process. Hazardous material may be harmful to the
workers’ health. Accidents such as explosion and fire may be happened during the
manufacturing process and not only injure the employee but also bring financial loss.
Furthermore, environment protection risk maybe exists due to the incorrect material
management. There are many different kinds of materials in the Smart Cup and the incorrect
mixture maybe result in pollution. If environment pollution happens, our company would not
only be punished by the government, but also damage the company’s reputation. Actually,
many companies ignore the responsibility of environment protection, as well as suffer huge
financial loss and damaged reputation.
At the same time, many evidences show that poor product quality result in increasing
manufacturing cost and customer dissatisfaction. Machine breakdown, workers’ mistake, and
poor quality of materials can cause the unqualified products. The other natural disaster such
as earthquake, flood, and hurricane should be considered, although the probability is very
low.
5.1.3 Risks exist in the marketing
Although marketing research was implemented before the product enters to the market, there
are still several risks exist. The future target market of our product is the whole global
market. As we know, customer habit and purchase power are different from one country to
another. At the same time, the government polices also heavily impact the marketing. The
risk of trade barriers due to the local government policies should be considered carefully.
Another risk exists in marketing due to the exchange rate. The exchange rate maybe
dramatically influence during a short period. However, the product price cannot be changed
frequently, and the dramatically change of exchange rate may result in poor performance of
marketing.
Finally, market is difficult to predict, although market trends had analyzed in the marketing
research. If the market trends become pessimistic, the product is hard to sell and it will bring
disaster to the company.
5.2 Risk Quantification
5.2.1 Quantification by probability and severity
Risk type Cause Severity Probability
Design error Lack of knowledge Medium Medium

Intellectual Cooperation with other company Low Low
property risk
Safety and health Hazardous materials, High High
Production safety accident
Environment Incorrect material management High Medium
pollution
Quality problem Machine breakdown, mistake of High High
worker, poor quality of materials
Natural disaster Earthquake, flood, hurricane High Low
Trade barriers Government policy High Medium
Exchange risk Influence of exchange rate Medium High
Market trends Demand decline High Low
Table 5-1
5.2.2 Decision tree
At the same time, in order to predict the outcomes of risk exist in the product of Smart cup,
the methodology of decision trees which provide useful information in representation of
possible decision taken and outcome results is implemented in this report.
In this report, we will take health and safety risk in the manufacturing process as an example
and use the decision tree to predict outcome.
As mentioned in the previous part of report, there are several causes to result in the health and
safety risk which will bring financial loss to company. And the following figure shows the
decision tree schematic on health and safety risks.

If do nothing, the probability of health and safety risk is 30%, and the loss is 50,000 dollars
per year
If more advanced equipment utilized in the manufacturing process, the cost is increased as
8,000 dollars and the probability of health and safety risk will decrease to 15% and the loss
declined to 40,000 dollars per year.
If enhance employee safety training, the cost is increased as 3,000 dollars and the probability
will decrease to 20% and loss declined to 45,000 dollars per year.
If more advanced equipment and employee training implement at the same time, the cost is
increased as 11,000 dollars and the probability will decline to 5% and loss declined to 15,000
dollars
If do nothing EMV=50,000*30%=15,000
If utilize advanced equipment EMV=8,000+40,000*15%=14,000
If enhance training EMV=3,000+45,000*20%=12,000
If utilize advanced equipment and enhance training EMV=11,000+15,000*5%=11750
Comparison those outcome, the more advanced equipment and enhance training method
should be taken to reduce the potential financial loss which from the health and safety risk in
the manufacturing process. The decision tree as follow:

Fig 5-1
a 1 means do nothing
a 2 means utilize advanced equipment
a 3 means enhance training
a 4 means utilize advanced equipment and enhance training
a 11 means risk happen
a 12 means risk not happen

5.3 Risk protection and insurance
There are three categories which include avoidance, mitigation, and acceptance in risk
protection. Avoidance means that specific threats are avoided by eliminating the cause of
risks. Mitigation means that threats are offset by reducing the EMV (Expected Monetary
Value) of a risk event by either lowering the probability of undesirable occurrence or
reducing the risk events. Next, acceptance means that specific threats are actively or passively
accepted.
As defined in the previous part of the report, to control risk effectively and efficiently, all the
risks can be divided to three parts. The detail information as follow:
Level Condition Categories
First High probability, high Quality risk, health and safety
severity risk, environment pollution,
Second Medium probability and/or Design error, exchange rate,
moderate severity
Third Low probability and Natural disaster, market trends
limited severity
Table 5-2
The first level of risk which has high probability and high severity should be handled at the
highest priority. Some risks such as environment risk can be avoided by using non-toxic
materials. Other risks such as health and safety risk can be mitigated by using advanced
equipment and enhance employee training.
At the same time, assurance can be used for risk sharing and risk transfer. The main function
of insurance is the creation of the counterpart of risk, which is security. It can reduce the
probability of financial loss connected with the event.

CHAPTER SIX-DESIGN TEAM
MOTIVATION AND INTERNAL
STRUCTURE
6.1 Needs Assessment and Design Team Role
Group members’ motivation is the most vital element for accomplishing team’s goal
successfully which is based on their basic ability of skills, knowledge and experience.
Motivation’s contribution to business success has been increasingly recognized by the
management authorities. In the fast-growing and intensive competitive environment the
motivation is undoubtedly becoming more and more significant for business management.
Table 1 shows the relationship between motivation, ability and performance. It is noticeably
apparent that high levels of motivation and ability will result in high levels of performance.
The area of High Performance is what is desired most by the management.

Table 6-1 Relationship between motivation, ability and performance (Brett Lemass)
Abraham Maslow, a USA famous psychologist, developed the Hierarchy of Needs model in
1940-50s. Maslow divides the human needs into five levels which are shown on the
following hierarchy pyramid. The bottom level is the most basic survival need that everyone
experiences then to the top of the most superior level. According to his theory, human
motivations are driven and end up with the satisfaction of their needs.
Figure 6-2
The needs in any single group only become an important motivation factor when the needs in
all groups below have reached an acceptable level of satisfaction. For example, a person will
have little motivation toward the need to social need if his basic security or physiological
needs are unsatisfied” (Brett Lemass)

Take the physiological need as an example which is the basic need for human to sustain life,
when a person is hungry, he starts to think about food firstly. If this need is not satisfied the
tension relative to hungry is raised until he finds food to satisfy his starving need. Once an
individual has moved up toward the above level, all of needs in lower levels have been
pleased. If needs under lower levels are not met, the individual would be trying to pay
attention on the unsatisfied lower and basic needs.
For the highest level of self-actualization, self-actualizers are mainly focused on self-
actualizing but are still motivated to eat and socialize. Similarly, homeless folk whose main
focus is feeding themselves and finding shelter for the night can also be, albeit to a lesser
extent, still concerned with social relationships of how their friends perceive them, and even
the meaning of life.[34]

Although Maslow’s theory created more than half an century ago, its explanations and
interpretations of the human condition remain fundamentally helpful and significant in
understanding and addressing all sorts of social and individual relevant behaviours
surrounding our modern world in terms of workplace management. In the Maslow’s self-
actualization, it sees problems in terms of challenges and situations requiring solutions, rather
than sees problems as personal complaints or excuses. Democratically, it prefers a fair and
non-discriminating that is embracing and enjoying all cultures, races and individual styles. It
advocates a combination of reliant on own experiences and judgment (independent) and also
reliant on culture and environment to form opinions and views. It encourages creative,
inventive and original ideas. It also encourages people excitement and interest in everything,
even ordinary things. It seeks comfortable with oneself despite any unconventional
tendencies. It is in favour of a few closer intimate friends rather than many surface
relationships.
Maslow’s concept has been used increasingly as an effective way to help people deal with
depression, low self-esteem, poor life circumstances, etc., help themselves to improve and
develop more effectively and profitably. The theory remains valid today for understanding
human motivation, management training, and personal development.
Maslow's work and ideas extend far beyond the Hierarchy of Needs. Maslow's concept of
self-actualization relates directly to the present day challenges and opportunities for
employers and organizations that are to provide real meaning, purpose and true personal
development for their employees, for life - not just for work. Maslow saw the fact that
employees have a basic human need and a right to strive for self-actualization, just as much
as the corporate directors and owners do fifty years ago. Increasingly, the successful
organizations and employers will be those who genuinely care about, understand, encourage
and enable their people's personal growth towards self-actualization the way beyond
traditional work-related training and development, and of course way beyond old-style
management autocracy which still forms the basis of much organized employment today. The
best modern employers and organizations are beginning to learn at last: that sustainable
success is built on a serious and compassionate commitment to helping people identify,
pursue and reach their own personal unique potential self-actualization. In fact virtually all
personal growth, whether in a hobby, a special talent or interest, or a new experience,
produces new skills, attributes, behaviours and wisdom that is directly transferable to any sort
of job role. The best modern employers recognize this and as such offer development support
to their staff in any direction whatsoever that the person seeks to grow and become more
fulfilled. Maslow is obviously most famous for his Hierarchy of Needs theory, rightly so,
because it is a wonderfully simple and elegant model for understanding so many aspects of
human motivation, especially in the workplace.
It is apparent that the group motivation is driven by how well the team is organized and how
suitable its environment is set to meet the needs of its members. Although the needs vary
from one member to another some may have achieved certain personal objectives and are
searching for social need, some may seek for the self-actualization need through the
leadership in their job. Therefore an organization should pay positive attention to focus on its
employees and create the atmosphere to gain a win-win result of fulfilling the individual
needs and company’s goal throughout the business practice.
To encourage cohesion between team members, a “Needs Assessment” for group members
should be studied before the project starts in terms to build the basis for achieving the ideal
performance during the project process and to manage the human resources effectively and
efficiently. Based on individual member’s characteristics the needs assessment for group
members on physiological, security, social, esteem and self-actualization consideration are
listed in the below chart.

6.1.1 Needs assessment of group member
Physiological ➢ Suitable working environment
➢ Appropriate length of working
➢ Fitting infrastructure and equipment
➢ Flexible working time which could fit
for personal agenda
➢ Physical demands in the work
Security ➢ Protection of working environment
➢ Security of employment
➢ Regular pay
➢ Superannuation
➢ Sick leave and other working related
service leaves
Social ➢ Friendly working environment
➢ Pleasant social interaction &
recreation with colleagues and friends
➢ Proud of being part of the team and
the business.
Esteem ➢ Confidence on completing their job
➢ Authority and responsibility for job

➢ Recognition from business and
Colleagues
➢ Enjoy the obligation and right
➢ Collective goals and shares of
knowledge and joys
➢ Rewards, admiration and benefits from
their job
Self-actualization ➢ Chance on improving ability to
decision-making
➢ Joyful satisfaction from job fulfillment

➢ Great chance for promotion and
challenging working condition
Table 6-2
In order to fulfil the job successfully, the tasks have been divided into six part, every group
member undertakes about one part according to the individual’s characteristics and personal
needs description for team members. If the needs of each member are satisfied then the
motivation will be encouraged to accomplish the job productively. Below is the chart about
the responsibility of each group members.
6.1.2 Responsibility of group members
Group member Responsibility
Xuedan Pan In charge of product selection, including integrating all of the resources,
making decision when group confront problem, making timetable and
dividing tasks for each member.
Responsible in group motivation and internal structures. Including
collecting motivation data from existing industry, creating needs
assessment of group members, analyzing the researched comparative
benefit of our design product business structure and providing logical
organization charts for the 1st and 3rd year of business operation.
Per Morten In charge of conception of flashlight, sketch-ups, design product market
Bjerkli research, including market research with six market question, collecting
data form market, analyzing the current marketing situation and SWOT
analysis, BCG product ratings, promoting strategies for design product. He
makes the brooches and presentation in week 13.

Jiaqi Pan In charge of design product costing, including collecting cost data,
benchmarking the similar product price such as labour cost, material cost,
as well as deciding price of our product using either cost-plus or
breakeven or target profit methods.
Weichun Gong In charge of design product risk assessment, including collecting risk
assessment in similar industry, benchmarking the risk between comparable
company, identifying and assessing the risk in product statement, making
risk quantification and risk insurance for our final product.
Lu Jiang Responsible in conceptualization approaches for products, lighting our
product technological advancement, creating weighted constraint matrix,
finishing the product concept embodiment sketches by using Sketch up
and making design product brochure.

Jinyu Cui Responsible in design product financial management plan, including
researching capital investment and initial cost in comparable company,
analyzing the monthly operating costs, making and providing the profit
realization time and appropriate financial strategy of our final product.
Table 6-3
6.2 The Researched Comparative Benefits of Design Product Business
Structure
When deciding what structure to choose for business such factors as taxation, type and size of
business, compliance requirements, insurance cover, finance requirements and establishment
costs should be considered which will influence the decision on the business structure.
According to the Industry & Investment NSW regulation[35], the most common business
structures are sole trader, partnership, proprietary limited company, association and co-
operative. The main features and major legal requirements for each type of business are listed
in table 6-4. Additionally, as the businesses grow up the business structure could be changed
accordingly. Each business structure has different characteristics. The income tax for
company is 30% in Australia except the Sole Trader whose tax is paid at personal tax rates
which means the owner of the business might pay tax less than or more than 30% depending
on his total income.[36] Detailed tax regulation can be found from the Industry & Investment
NSW and ATO website.

Business Features and main legal requirements
Structure
A sole trade is a person carrying on his or her own business as an
individual. The business can have employees like any other kind of
business. This is the simplest and least expensive business structure to set
Sole trader
up. No requirement to disclose any financial details to the public, which
means that the business has privacy.
A partnership is defined by the Partnership Act 1892 (NSW) as the
relationship which exists between persons carrying on a business in

Partnership
common with a view to profit. It is often called as a firm. The business
can have employees. The firm may have a maximum of twenty members.
It involves an agreement between two or more parties to enter into a

legally binding relationship and is essentially contractual in nature.
It is a privately-owned company as distinct from a publicly-owned one,
limited by shares and with issued share capital. Its name ends in the words
“Pty Ltd” regulated under The Corporation Act and Law 2001.
Proprietary
A private company is a more complex business structure formed by one or

limited
more people who wish to have a business that is a separate legal entity to
company
themselves. It runs by directors and owned by shareholders.
A minimum of one director, a minimum of one shareholder and maximum
of 50 non-employees shareholders. A public officer appointed for income
tax purposes.
An association is an alternative to forming a company for small non-profit

Association groups. It has similar advantages as a company but is not as expensive to
set up or legally maintain. An association can trade but this cannot be its
main objective. Any profit from the trading should be put back into the
association and not given to its members.
A co-operative is a form of business organization which is member-
owned. It must consist of five or more people. Co-operatives are
distinctive for fostering a democratic style of work, pooling resources to
Cooperative
be more competitive, and sharing skills. Co-operatives supply goods and
services to their members or to the general public in areas as diverse as
retailing, manufacturing, labor hire, printing and agriculture.
Table 6-4
Compared the features of each business structure, we have the results: at the beginning stage
of the business, the partnership business structure will be chosen because its comparative
benefits and suitability to our new business to set up. Here the advantages and disadvantages
comparison for the first three structures are shown in the following table.
Advantages Disadvantages
The simplest and cheapest ownership Have unlimited liability for the debts.
Sole trader structure to establish and operate under.
Exclusively owns and controls the Afford all the strains. May no
business, makes decision by himself. holidays.
Any profit belongs to the trader personally. Any loss is the owner’s liability
personally.
Partnership Can arise more capital to run the business. Share the profits of it.
Each as a principal can make decision and Sometimes it is hard to make a
run it together. decision.
Share each as an agent for the other, have Each is bound by the other’s contract.
more relax time.
Share the strains and risk together.
Can have a holiday in turn.
Proprietary Can arise more capital to run the business Cannot raise funds by inviting the
Company and make more profit. public to invest in it.
Can make decision and run it together. Share the profits of it.
Share the strains and risk together. Sometimes it is hard to make a

decision.
Can keep personal assets separate from the Risk is higher.
business.
Can have a holiday. Each is bound by the company’s
contract.
Table 6-5
6.3 Logical Organization Charts of the 1st and 3rd Year of Business
Operation
At the beginning operation of our company, the business will include four main departments
which are design, marketing, human resource, manufacturing department. Design department
is in charge of the product design and innovation together with the manufacturing
department. Marketing department will research the market to integrate the customer needs of
market which is one of the critical elements for further operation. Human resource
department is responsible for management of employees. Manufacturing department is in
charge of the whole in-house and outsourcing and assembly business related to products. The
company’s structure of first year is shown below. We will focus on the market around such as
Wollongong and Sydney then if we succeed in Sydney the first year, we would expand to
Melbourne and go for the same tactic down there.
Organization chart of the 1st year
Fig 6-3
At the third year, the business would be consolidated and progressed so the business structure
has to be changed accordingly. The new departments and added functions to the existing
departments are shown below. Marketing department will be of China, USA and New
Zealand due to the globalization of the business. Financial department will provide support
on detailed financial plan data and objectives, assess the costs and profit of new product and
company, as well as provide specific effective financial management strategies to run
business. The QC (Quality control), procurement, in-house and outsourcing and assembly
branches are added to the manufacturing department. After-sales service department would
be set to improve the service quality and get feedback from clients. The company’s structure
of third year is shown below.

Organization chart of the 3rd year
Fig 6-4
CHAPTER SEVEN- DESIGN FINANCIAL
MANAGEMENT PLAN
7.1 Researched Capital Investment and Initial Costs
In this chapter, we did the basic research of the capital investment, initial costs and monthly
operation costs which would support our financial management plan. Because of the structure
of our business is quite small, so the capital investment and initial cost is limited. In order to
achieve the success of our product, we decided to get the financial support by bank loan. The
benefits are quite obvious that we have enough funds to purchase the flexible machine,
advertise our product into the new market and provide good quality of customer services.
Based on the information provided by NAB, the detail business loan and interest and
principal annual repayment has been calculated and list on the table.[37]
7.1.1 Business Loan Index
Item Value
Loan Amount $200,000
Loan Term 60months
Payment Frequency Monthly
Interest Rate (APR) 10.23%
Monthly Service Fee $100.00
Application Fee $1875
Monthly Payment $4372
Table 7-1
The information of bank loan is got from NAB Business Center, Wollongong.[38]
7.1.2 Interest and Principal Annual Repayment
Year Beginning Interest Principal Annual Ending
Balance Charged Payment Payment Balance
1 200,000 21,440 32,294 53,734 167,706
2 167,706 17,978 35,756 53,734 131,950
3 131,950 14,145 39,589 53,734 92,361
4 92,361 9,901 43,833 53,734 48,528
5 48,528 5,202 48,532 53,734 0

Table 7-2
Our capital cost includes the purchase of machine, training, office equipment and so on,
which will be list below.
Capital Cost Costs (A$)
Legal & licenses Fee $1,000
Training $3,720
Electricity and telephone $500
installation
Office equipment $5,000
Vehicles $30,000
Purchase of machine $100,000
Security system $1,500
Business structure $10,000
Application fee $1,875
Bank Loan Deposit $15,000
Building Cost $10,000

Total cost $178,595
Table 7-3 Researched capital costs investment
The calculation of initial cost of our company is based on the period of one year. The
information of initial cost is provided by the table below.
Initial Cost Costs (A$)
Wages $54,964
Initial promotion $14,300
Lease $31,460
Loan Establishment $15,000
Electricity, gas & telephone $500
Stationary and office supplies $5,000
Computer software $5,000
Statutory charges $1,000
Association member fee $1,000
Insurance $18,000
Printing and artwork $5,000
Total Cost $151,224
Table 7-4 Researched initial costs investment
7.2 Researched Monthly Operating Costs
Next, Table 7.3 illustrates a researched monthly operation cost of manufacturing and
marketing the Smart cup product for the first three months.
Item Month 1 Month 2 Month 3
Leasing 2420 2420 2420
Outgoings 500 500 500
Wages 33842 33842 33842
Staff amenities 50 50 50
Advertising 2300 2300 2300
Wrapping 500 500 500
Maintenance & Repair 1000 1000 1000
Electric & Gas 1250 1250 1250
Waste disposal 300 300 300
Workcover 200 200 200
Monthly Service by NAB 100 100 100
Payroll tax 140 140 140
Capital repayment 4478 4478 4478
Motor vehicle expenses 100 100 100
Accounting fee 417 417 417
Travel & 300 300 300
Accommodation
Subscription 200 200 200

Legal fee 200 200 200
Total 48297 48297 48297
Table 7-5 Researched monthly operating costs (in A.U $)
7.3 Profit Realization Time
Due to the huge requirements of the Smart cup and its new concept design, we anticipated the
sales volume of our cups would be 20,000 each year, so the revenue of our company would
be $922000. So the cash flow statement of our company has been list below, the
corresponding net present value of our company has been calculated as well. The annual
discount rate we applied is 12% which equal to the sum of rate of inflation (5.4%) and bank
interest rate (6.5%)
Item　 Year 0 Year 1 Year 2 Year 3 Year 4 Year 5

Revenue 　 922000 922000 922000 922000 922000
Cost 　 579564 579564 579564 579564 579564
Net Cash 　 342436 342436 342436 342436 342436
Flow
Initial cost -151224 　　　　　
Capital cost -178595 　　　　　
Borrowed -200,000 　　　　　
Fund
NPV of each -529819 285363 237803 198169 165141 137617
year
Table 7-6 Annual Income Statement
Finally, a payback period could be predicted at the end of third year in where the net present
value changes from negative to positive. After year 3, it could be a good time for us to
expand our market share and the size of our company; we can promote our product into the
global market.
CHAPTER EIGHT-CONCLUSION AND
RECOMMENDATION
In summary, through the preceding analysis on product conceptualization by utilizing a series
methodology from product concept design to financial management, we have strong
confidence that the Smart Cup product is viable and will have a great potential success in the
future. One major reason is that consumers are these days looking for beverages that not only
taste great, but also offers them some sort of health and wellness benefits. Moreover they can
drink healthy tea more often to a cheaper price. We need to convince the students that in the
long-term run a cup like ours will save them a lot of money.
Although we define that the Smart Cup has an increasing market, due to ever-changing
environment such as the varying economic environment and increasing technology

innovation, the actual market trend would still keep dynamic and uncertain. Logically, in our
assessment, most of materials are bought overseas so situations such as influence of exchange
rate and material prices variation were ignored. All of those will impact on the business
success of the Smart Cup. We should bear in mind of those limitations so adjusting our
business strategies dynamically.
So for recommendation, as our business expansion, many unpredictable conditions maybe
have negative effects on the business success. In order to create and maintain core
competences, continual innovation for our product, dynamic quality management and risk
management should be implemented. Furthermore, methodologies such as PESTEL and Five
force analyses would be used in company’s strategic management to help us continuously
keep up with the vibrant and growing market.

Our group are satisfied with the work in this report. We have reached our goal in developing
an engineering design product from preliminary concept to a final product detail design. We
think that our Smart-Cup will be a great success in our targeted markets, with a smart
position strategy up against the tea market. We believe that we can gain a high market share
in the global market in the future with this product.

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38. Predl, N 2010, email, 25 May 2010, npredl@nab.com.au.
Bibliography
 Lemass, B., 2010, Lecture Note, University of Wollongong.
 Kotler, A, Denize, A 2009, Principles of Marketing, 4th edition, Pearson Education
Limited, Australia.
Appendix-I Market Survey in ENGG 950 -
Innovation and Design 2010
This survey is for students only.
Gender: Female Male
Age: 17-20 years 21-25 years Over 25 years
Do you drink any hot drinks at school?
Yes No
If No, jump to last question.
What do you usually drink?
Tea Coffee Hot chocolate
How often do you drink this?
Couple of drinks each day Circa one each day Sometimes now and then
Where do purchase these drinks?

Coffee/tea bar Bring or make my own Hot drinks machine
0 – 1 – 2 – 3
How important is the price when buying from a bar or machine?
(3 is most important and 0 is not important at all)
LAST QUESTION:
If a product came to the market where you could boil your own water in a cup by easily
plugging it into the power outlet, would you be interested in using that product at a cost of
$25?
YES NO
If NO why not:
THANK YOU VERY MUCH FOR ANSWERING THE QUESTIONS
Results from the market survey
Gender Number Percent
Females 6 50 %
Males 6 50 %
Sum 12 100 %
Age Number Percent
17 – 20 years 7 58 %
21 – 25 years 4 33 %
Over 25 years 1 9%
Sum 12 100 %
Do you drink hot drinks at school? Number Percent

Yes 10 83 %
No 2 17 %
Sum 12 100 %
What do you usually drink? Number Percent
Tea 1 10 %
Coffee 8 80 %
Hot chocolate 1 10 %
Sum 10 100%
How often do you drink this? Number Percent
Couple each day 5 50 %
Circa one per day 1 10 %
Sometimes now and then 4 40 %
Sum 10 100 %
Where do you purchase these drinks? Number Percent
Coffee/tea bar 8 80 %
Bring or make my own 0 0%
Hot drinks machine 2 20%
Sum 10 100 %
How important is the price when Number Percent
purchasing from a bar or machine?
0 0%
1 4,5 45 %
2 5 50 %
3 0.5 5%
Sum 10 100 %
LAST QUESTION: Would you buy a Number Percent
cup like our or not?
YES 6 50 %
NO 6 50 %
Sum 12 100 %
Reasons for not being interested in the cup:
- Too expensive (3 persons)

- If there is a power outlet she may as well have a kettle (1 person)
- No power outlet where this person usually are (1 person)
- Open drink are not allowed (1 person)
- Laziness, would rather throw the cups away rather than washing them
One person says NO, but is maybe interested on these criteria:
- Depends on the design of the cup
- Depends on the cord connected to the cup. Don’t want a cord dangling off it.
Persons answering YES say that:

- As long as it is very small and portable (1 person)
- It has to be easy to use (1 person)

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ENGG950

INNOVATION AND DESIGN

Project description : Report for Major Assignment

Due date : 4th June 2010 (Week 13)

1. Per Morten Bjerkli (3734365)

2. Jiaqi Pan (3642896)

5. Xuedan Pan (3684581)

6. Weichun Gong (3729813)

1.1 Report Objective...........................................................................................6

1.2 Definition of the Major Assignment...............................................................7

CHAPTER TWO-DESIGN PRODUCT SELECTION.......................................................8

2.1 Three Problem Definition Statements...........................................................8

2.1.1 Problem definition statement of Life-Safe Flashlight..............................8

2.1.2 Problem definition statement of “Green Roof”.......................................9

2.1.3 Problem definition statement on Smart-Cup........................................10

2.2 Three Product Conceptualization Approaches............................................10

2.2.2 Product conceptualization approach on “Green Roof”..........................12

2. 3 Weighted Constraint Matrix.......................................................................15

2.4 Associated Logic for Choosing a Single Product.........................................17

2.5 Product Concept Embodiment Sketches using Google Sketch Up.............17

CHAPTER THREE-DESIGN PRODUCT MARKET REASERCH.....................................19

3.1 Understanding the market and customer needs........................................19

3.3 Positioning against tea consumption..........................................................20

3.5 Collection of data........................................................................................22

3.6.1 Market size...........................................................................................22

3.6.2 Market competition..............................................................................23

3.6.3 Market trends.......................................................................................25

3.6.4 Market price.........................................................................................27

3.6.5 Relative benefit product.......................................................................28

3.6.6 Market share goal.................................................................................29

3.7 SWOT Analysis.........................................................................................30

3.8 BCG Product Ratings...................................................................................31

3.9 Strategies for product promotion...............................................................32

Step 2: Determine communication objectives...............................................32

Step 3: Selecting a message.........................................................................33

3.10 Choosing Media........................................................................................33

3.10.1 Selecting the message source............................................................34

3.10.2 Collecting feedback............................................................................34

3.11 Design Product Brochure..........................................................................35

CHAPTER FOUR-DESIGN PRODUCT COSTING.......................................................36

4.1 Design Product Selling Price.......................................................................36

4.1.1 Prime Cost............................................................................................37

4.2 Break-even volume.....................................................................................44

4.3 Cross Checking the Selling Price.................................................................46

CHAPTER-FIVE DESIGN PRODUCT RISK ASSESSMENT..........................................48

5.1 Risk Identification.......................................................................................48

5.1.1 Risks exist in the product design..........................................................48

5.1.2 Risks exist in the product manufacturing.............................................48

5.1.3 Risks exist in the marketing.................................................................49

5.2 Risk Quantification......................................................................................50

5.2.1 Quantification by probability and severity............................................50

5.3 Risk protection and insurance....................................................................52

CHAPTER SIX-DESIGN TEAM MOTIVATION AND INTERNAL STRUCTURE...............54

6.1 Needs Assessment and Design Team Role...............................................................54

6.1.1 Needs assessment of group member...................................................58

6.1.2 Responsibility of group members.........................................................59

6.2 The Researched Comparative Benefits of Design Product Business Structure....................60

CHAPTER SEVEN- DESIGN FINANCIAL MANAGEMENT PLAN.................................65

7.1 Researched Capital Investment and Initial Costs........................................65

7.1.2 Interest and Principal Annual Repayment............................................66

7.2 Researched Monthly Operating Costs.........................................................67

7.3 Profit Realization Time................................................................................68

434*2 = 96 different combinations

Total amount of possible choice= 45344=960

Total amount of possible choice = 55463=1800