WAC report on TerraCog Global Positioning system

Report submitted to Danesh Gojer

Submitted by:Riddhee.L.Gosar(60882)

Letter of Transmittal
TerraCog Global Positioning systems

To, The President, Richard Fiero, TerraCog. 15th January 2008.

Subject: Report on launch of Aerial (Satellite imagery GPS prototype) I am hereby enclosing the report on the decision regarding how to launch Aerial and at what price it should be launched. This report brings about a thorough analysis of various options available for launch of Aerial.

Regards, Emma Richardson (Vice President, Production)

Executive Summary
TerraCog Global positioning system has lost its market share to its competitor and is in dilemma regarding launch of Aerial to regain its market share and enhance cross departmental co-operation. The options available are: Launch Aerial in 3rd quarter of 2008 at a price of $475, Launch Aerial
in 3rd quarter of 2008 at a price of $425, Launch Aerial in 3rd quarter of 2008 at a price of $450, and Launch Aerial in 1st quarter of 2009 as a completely new and superior product

The options are evaluated on the basis of these criterias: Impact on profitability, impact on
market share, and impact on various departments of the company.

The recommended option is to launch Aerial in the 3 rd quarter of 2008 at $450. This is beneficial to the company as a whole.

(Words 134)

TABLE OF CONTENTS

Sr.No 1 2 3 4 5 6 7

CONTENTS SITUATION ANALYSIS THE PROBLEM STATEMENT THE OPTIONS AVAILABLE CRITERIA FOR EVALUATION EVALUATION OF OPTIONS RECOMMENDATION ACTION PLAN

PAGE NO. 5 6 6 6 6 7 8

SITUATION ANALYSIS
TerraCog is a private company specialized in high quality Global Positioning System (GPS) and Fishing Sonar equipment. Although, not first in the market but when the companys products are introduced they surpass those of the competitors in addressing customer needs. The company has developed strong relations with its key accounts. The companys products are known for their durability and value added features that are needed for the companys customer segment (i.e. serious outdoor enthusiasts) and the products are sold by word of mouth. The above reasons made TerraCog too confident to react when its competitor, Posthaste launched BirdsI a GPS prototype that displays satellite imagery that had certain visual appeal but lagged behind TerraCogs product s in both accuracy and speed. The company is in a growing industry which is technology based and there is high risk of products becoming obsolete. Thus, the industry requires quick adoption of new innovations and technological development. Since TerraCog failed to react to new technological development it has lead to losing its market share to Posthaste. BirdsI was launched at two of the major national outdoor retailers who are key accounts of TerraCog. If Aerial (.i.e. TerraCogs satellite imagery GPS prototype) is not launched, the relationship with key accounts will be hampered. The company has to launch Aerial to regain its market share and survive in the industry. All the departments of TerraCog are working towards their individual goals in regards to Aerial. Design and development department wants to get done with Aerial so they could concentrate on other innovative products. Production department are too conservative with regard to costing of Aerial. On the other hand Sales want the product to be priced as low as possible. Finance department do not want to squeeze their profit.

PROBLEM STATEMENT
TerraCog has to decide when it has to launch Aerial and at what price, which would also help in increasing cross departmental co-operation.

OPTIONS AVAILABLE
1. Launch Aerial in 3rd quarter of 2008 at a price of $475 2. Launch Aerial in 3rd quarter of 2008 at a price of $425 3. Launch Aerial in 3rd quarter of 2008 at a price of $450 4. Launch Aerial in 1st quarter of 2009 as a completely new and superior product.

CRITERIA FOR EVALUATION:

1. Impact on profitability 2. Impact on market share 3. Impact on various departments of the company

Evaluation of Options:
I. Launch Aerial in 3rd quarter of 2008 at a price of $475
1. Impact on profitability: If Aerial is sold at $475 this would not have impact on the margins of the company. 2. Impact on market share: The sales would find it difficult to sell the product at $475. Though customers are not price sensitive and play premium for the product. It would be difficult to regain its lost share at such high premium. 3. Impact on various departments of the company: Remuneration of the sales team along with their vice president Ed Pryor is based on sales targets. Pricing product at a high price of $475 would mean not reaching their sales target. This would eventually lead to low remuneration and discontent among the sales team. Selecting this decision would create stress between the sales, production and design and development departments.

II. Launch Aerial in 3rd quarter of 2008 at a price of $425

1. Impact on profitability: Selling Aerial at $425 would lead to reduce profit margin and increase in sales also would not help in enhancing companys overall profitability. 2. Impact on market share: This price would help regain the lost market share as TerraCogs customers are ready to pay premium for companys products compared to competitors products.

3. Impact on various departments of the company: At this price it would be easy for the sales department to reach their sales target. Production and design department would have to cut corners to an extent that it may hamper the quality and durability of the product. Even the finance department would not agree to sell at this price. Selecting this decision would increase stress between the sales, production and design and development departments.

III. Launch Aerial in 3rd quarter of 2008 at a price of $450

1. Impact on profitability: Selecting this option would lead to squeezing the profit margins by $25. But increase in sales would lead to overall increase in profits. 2. Impact on market share: The sales department can be push to increase sale at $450 and regain the companys market share. 3. Impact on various departments of the company: As Aerial is priced at $450 but put pressure on all the departments equally. All departments have to work equally leading to enhancing co-operation among various departments. Sales team have to make extra efforts to sell Aerial at $450. The production team has to be less conservative while preparing cost estimate for Aerial. The design team has to try to redesign Aerial in a way that would reduce production cost.

IV. Launch Aerial in 1st quarter of 2009 as a completely new and superior product
1. Impact on profitability: There would not be any impact on Margins of the company as the price and cost of the product would be as per companys margin norms. 2. Impact on market share: Till Aerial is launched TerraCog would continue to lose its market share. Once its launched TerraCog may regain its lost share. 3. Impact on various departments of the company: Selecting this option would lead to increase in cross departmental co-operation, as the departments would have time to synchronize individual goal of each department to the companys goal.

RECOMMENDATION
TerraCog is already two years behind Posthaste in launching satellite imagery GPS prototype further delay would endanger companys identity in the market. TerraCog products are known for their product quality, therefore a price has to be selected that covers all the cost along with certain margin required for sustaining in the market. The option selected should increase market share and also does not hamper cross departmental co-operation. Therefore the company should launch Aerial in the 3rd quarter of 2008 at $450. In future Aerial should be upgraded and modified as per needs of the targeted customer segment.

ACTION PLAN:
The decision should be communicated to all the departments. All department efforts should be directed towards achieving companys goal. After launching Aerial, company should supervise and control the implementation of the recommendation option. To check weather objective behind selecting this options are achieved. The company should be active and reactive towards innovation and technological advancements so that delays are avoided in future.

(Words 1098)