Written Analysis and Communication-I

TerraCog Global Positioning Systems: Conflict and Communication on Project Aerial

Assignment-II
Submitted to

By On 11/25/2011

INDIAN INSTITUTE OF MANAGEMENT UDAIPUR

To, Allen Roth, Director, Design and Development Ed Pryor, Vice President, Sales Harold Whistler, Vice President, Design and Development Tony Barren, Director, Production

From, Emma Richardson, Executive Vice President

03/20/2008 Subject: Launch of Aerial Dear all, This report is an analysis of options available regarding Project Aerial and strategy regarding dealing with emerging competition in the market.

Executive Summary
The redesigned version of Aerial which includes features like satellite imagery is planned to be launched in the coming holiday season. TerraCog is losing its market share to BirdsI, a similar product already present in the market and is eager to hit the market with Aerial. But the cost of redesigned Aerial is high and it is not profitable to price Aerial below $475, which is $100 higher than BirdsI. Also at current set price of $475, company cannot expect sufficient sales due to price sensitive nature of the product. Thus company should delay the launch by six months and should come up with better technology at a lesser price. [110 Words]

Content
Executive Summary-----------------------------------------------------------2 Situation Analysis-------------------------------------------------------------4 Objective-----------------------------------------------------------------------4 Options-------------------------------------------------------------------------4 Criteria for Evaluation-------------------------------------------------------4 Evaluation of Options--------------------------------------------------------5 Recommendations------------------------------------------------------------6 Action Plan--------------------------------------------------------------------6 Exhibit I-----------------------------------------------------------------------7

Situation Analysis
TerraCog has been a trusted brand for its hand held GPS products, especially with customers who are serious sports enthusiasts. It had planned to launch its new product Aerial with additional features like altimeter and barometer. But it is facing a tough competition by BirdsI, a product launched by its competitor Posthaste. BirdsI has satellite imagery features and has got a positive response in the market. As a result, TerraCog has started losing its market share. Thus the design team has come up with a new design for Aerial having the additional feature of satellite imagery. But this has led to an increase in cost. After all possible considerations, Aerial cannot be priced below $475 without adversely affecting the margins. Also its launch is delayed by two years and BirdsI has strengthened its market position in this category. At a price of $475, the premium of $100 over BirdsI is difficult to justify as the new technology has led to a lesser processing speed. Under these circumstances company primarily needs a go-no go decision. If company decides to go ahead with the launch, it must decide clearly the pricing and positioning strategy. If it decides otherwise, it must have a plan to regarding further improvement in Aerial so as to launch it after six months.

Objective
To decide the best possible strategy to counter the competition posed by BirdsI and to recapture the lost market share.

Options
1. Launch Aerial at a price of $475
2. Compromising on margins, launch Aerial at a competitive price of $375

3. Delay the launch by six months and come up with a new and advanced product

Criteria for Evaluation

1. Responding to customers needs 2. Regaining Market share
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3. Sustainability

Evaluation of options
1. Launch Aerial at a price of $475

This price is $100 higher than that of BirdsI. The premium thus charged has to be justified by the value proposition of the product. Customers involvement in the purchase decision process is high in this category. Since the new feature of satellite imagery has significantly reduced the speed, this may not go well with the customers. Assuming that customer may trade off speed for this feature, it will be just a matter of time that a new technology with improved speed hits the market and the very selling proposition of Aerial is wiped off. Thus the current design is not a proper response to customers needs. Currently the company is in a Product Development stage (Exhibit I) where it is introducing a new product in an existing market. High price will not help in gaining the market share due to the very price sensitivity of the product. Sales force of the company will also face difficulty to pull it through. Thus this option does not give a scope for sustainability as it will not be able to generate sufficient revenue.

2. Compromising on margins, launch Aerial at a competitive price of $375

Challenges pertaining to customer needs in this option are same as that of option 1. If it is priced competitively at $375, it will help in gaining the market share. But this will lead to accumulation of losses and is difficult to sustain them for a longer period of time. It will be feasible only when the company puts in resources for development of high quality product to be launched in six months and is able to charge a premium
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on it. This will make up for the losses due to current product. Also transition in the product development cycle will be smooth and thereby augmenting the brand equity. However, unpredictability of the market makes this option risky and thus is not preferred.

3. Delay the launch by six months and come up with a new and advanced product

The kind of market the product caters to calls for quality product and the product development team has assured that it can come up with such product at a lesser cost in six months. Thus the customer requirement is addressed to a large extent in this case. Also brand loyalty for this category of product solely depends on features and quality offered. If the customer perceives new Aerial to be better than BirdsI, it can easily switch over, thereby enabling the company to regain its market share. Thus it compensates for opportunity lost in six months and also regaining the brand value. This strategy will also put the company in the drivers seat rather than being a mere follower in the market. There is no compromise on margins and thus this option has positive impact on both top line and the bottom line .Overall this strategy is sustainable in market where technology is changing rapidly.

Recommendation

Company should cancel the launch of current version of Aerial and should focus on improvement to the product design so that it can launch it in six months at a competitive price with better quality.

Action Plan
1. Carry out a market survey to gauge customers expectation and thus giving ideas for the development of new product
2. Put in extra resource in R&D to ensure the high quality of the new design at a

cheaper cost.
3. Launch promotional schemes to increase sales of TerraCogs existing product so

as to make up for the loss of market share.

4. Make the sales team a part of this strategy whereby they may continue with efforts

of pushing the current product and also creating the right environment for the launch of new Aerial by way of maintaining relations with the retailers and gearing up the distribution channels. [933 Words]

Exhibit- I

Fig1. Currently the company is in 2nd quadrant where it is trying to launch a new product in an existing market and thus should follow a Product Development strategy.

Fig2. By not launching the current version of Aerial but launching it after 6 months with improved features company assures high quality and high price thus gets an ability to charge a premium.