Group 12, Section D

Compaq Computer: Intel Inside?

Background: Launch of Presario line of Notebooks in the consumer market increased the market
share of Compaq from 3% to 46%. To maintain its current market share Compaq needs to come up
with a new low-priced machine. This can be done by using a new processor with a better cost
instead of Intel, which charges premium for its existing brand value.

Compaq developed three version of low-cost notebook

Code Name Processor Cost

A Elvis Cyrix Media GX with MMX Least
B Road Warrior-II(a) AMD K6 with MMX +$150
C Road Warrior-II(b) Intel Premium with MMX +$300

Management Decision: Compaq needs to decide what product mix of these three alternatives to
launch in the consumer market and their pricing.

Market Research Problems:

To reach the decision regarding the product-mix, Compaq needs to know:

 Attitude of consumers towards non-Intel machines

 Price sensitivity of consumers towards various features such as:
- Configuration of the notebook
- Brand value of the PC makers

Research Design:

To know the attitude of the consumers towards non-Intel machines, Compaq should follow the same
methodology as it did earlier and conduct qualitative market research with focused group study on
three different groups.

And for measuring the price-sensitivity of consumers, it’s advisable to go for an experimental-
laboratory-market test, in which we can simulate the market like environment to gauge the
consumers’ perceptions of processors’ and PC makers’ brand value. The entire methodology can be
summarized as follows:

Methodology: Experiments -> Laboratory Test Market

Experiment Variables: Price and system configuration

 Group 12, Section D

Sample: The respondents should belong to the target market:

o Key decision makers for technology purchases for the home

o Have purchased a notebook PC within the past 12 months or intended to do so
within the next 6 months

Results and Conclusions: From the experiment, it is expected to know the change in consumer
perceptions with variation in the system prices and configuration.