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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)

business structure and design financial management plan. product risk assessment. Moreover we decided to establish our own .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 costing estimation. 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. team motivation assessment. product market research.

manufacturing factory to manufacture to produce the product and focus on Australian markets firstly. . and then global markets as our future business goal.

....6 1........10 .........1....8 2...................6 1........................................................8 2...................10 2...................................................7 CHAPTER TWO-DESIGN PRODUCT SELECTION...........1..................................................2 Problem definition statement of “Green Roof”...........2 Definition of the Major Assignment.................1 Three Problem Definition Statements.........................................................................................1 Report Objective..............8 2................3 Problem definition statement on Smart-Cup.....Table of Content CHAPTER ONE-INTRODUCTION...........................1...............................2 Three Product Conceptualization Approaches.............................................1 Problem definition statement of Life-Safe Flashlight...................9 2.....

.................2........................3 Positioning against tea consumption....................................................17 CHAPTER THREE-DESIGN PRODUCT MARKET REASERCH..............................................................................................................5 Collection of data.................................17 2...............12 2........19 3..2........22 ...2...............20 3............................2 Product conceptualization approach on “Green Roof”..5 Product Concept Embodiment Sketches using Google Sketch Up.................................................15 2............................................................... 3 Weighted Constraint Matrix.1 Understanding the market and customer needs.......................2 Differentiation.4 Associated Logic for Choosing a Single Product..1 Product conceptualization approach on “Flashlight without Batteries” 10 2.........19 3..........20 3...

...............................32 ...........9 Strategies for product promotion..6 Six Market Research Questions..............22 3...................................................25 3.............22 3......................4 Market price......................6...................................6...............28 3.............................................................30 3.....................8 BCG Product Ratings..............2 Market competition..................................23 3....................31 3..............................................................................................................................6..27 3................7 SWOT Analysis..................................................................................1 Market size..................29 3..................3 Market trends...............................................6...........................................6.............6 Market share goal......................5 Relative benefit product...6.........................3..................................

................................................1 Prime Cost..........................36 4.................11 Design Product Brochure......10 Choosing Media.....................................................................34 3....................................1....32 Step 3: Selecting a message................................37 .........................32 Step 2: Determine communication objectives..........................................................................................................................34 3.............10..1 Selecting the message source.....................35 CHAPTER FOUR-DESIGN PRODUCT COSTING...........................................36 4.......................10.Step 1: Identify the targeted marked................33 3................................................................................................2 Collecting feedback..............................................1 Design Product Selling Price..............33 3..............................................

...........................................1....................................................................2 Break-even volume.....................48 5..........................1 Risks exist in the product design.............................................................44 4...........1..............................40 4...........3 Cross Checking the Selling Price.................48 5.............................................4...1.....50 ...2 Expenses.....2...............................48 5.46 CHAPTER-FIVE DESIGN PRODUCT RISK ASSESSMENT...............................................................48 5......2 Risk Quantification......................................1.........1 Quantification by probability and severity.............................................................................................3 Risks exist in the marketing......................49 5..............................................1 Risk Identification.....................50 5...2 Risks exist in the product manufacturing....

.65 7...50 5...................2 Responsibility of group members...............2 Decision tree.......1 Needs Assessment and Design Team Role...54 6...........62 CHAPTER SEVEN..............................................1..........3 Logical Organization Charts of the 1st and 3rd Year of Business Operation...........................................................3 Risk protection and insurance...........52 CHAPTER SIX-DESIGN TEAM MOTIVATION AND INTERNAL STRUCTURE...............................2................65 ........2 The Researched Comparative Benefits of Design Product Business Structure.........................................5......54 6....DESIGN FINANCIAL MANAGEMENT PLAN................................59 6....1..................58 6...............1 Needs assessment of group member.......................................1 Researched Capital Investment and Initial Costs...........................60 6..............................................

..2 Researched Monthly Operating Costs..........68 CHAPTER EIGHT-CONCLUSION AND RECOMMENDATION.....................67 7......................3 Profit Realization Time....Innovation and Design 2010 ......................1......................................................7.....1 Business Loan Index..........69 Reference........................................................................................74 Appendix-I Market Survey in ENGG 950 ..........75 Appendix-I Market Survey in ENGG 950 ....65 7.......................Innovation and Design 2010........................66 7...............................................1............................................................................................................................................2 Interest and Principal Annual Repayment..................71 Bibliography............................

Firstly. the product of Smart cup which had the highest scores was chosen as the final product. cost-plus method was used in this report to define the selling price of Smart Cup. According to weighted constraint matrix. methodologies such as survey. to . At the same time. Companies such as Apple and Toyota who pay attention on product innovation result in creating core competency and achieve grand success in their business.CHAPTER ONE-INTRODUCTION Countless evidences show that innovation plays an important role in any industries which from serve to manufacturing sectors in decades. After that. three problems were identified by the group brainstorming. Then. The purpose of this report is to develop an engineering design product by utilizing the innovation methodology. market trends predict and SWOT analysis are utilized in the marketing research.

risk management which includes identification. and also providing the corresponding information for the product such as cost estimating. The Maslow’s theory was also applied in the group assignment for planning and stimulating the efficiency and effectiveness of the group members. product costing.make sure the success of Smart Cup’s development. market research. 1. Then financial management was conducted for the business assessment. risk assessment and financial strategies. and protection was implemented.1 Report Objective The main objective is to write a report about an engineering design product including the product selection. quantification. risk involvement in the design phase and motivation of the group members. The whole report started from preliminary conceptualization stage to the final product embodiment. .

the report applied some necessary evaluation. After several evaluations and constrains analysis. in order to explain and support further about our final concept design product. .1. design team motivation and business internal structure and design of financial management plan. Next. such as: design product market research. these concepts were narrowed to only one concept design product (this part is explained in design product selection). design product costing evaluation. design product risk assessment.2 Definition of the Major Assignment At beginning our group members had to come up with three concept design products by brainstorming.

The flashlight is usually not something people use every day.1. or the electricity in people’s . and it is really annoying that it does not work when it is needed. Often people suddenly need to use it. 2. That is something everyone has experienced in their life. Green Roof and Smart-Cup.1 Problem definition statement of Life-Safe Flashlight Most people have faced the situation that no battery when you want to use the flashlight.1 Three Problem Definition Statements In this preliminary stage of design product selection. our group has three problem definition statements (shown below) after brainstorming. for instance when the car suddenly strikes in the middle of the night. but it is used when they not have any other source of light.CHAPTER TWO-DESIGN PRODUCT SELECTION 2. those are Life-Safe Flashlight.

What could then be better than a chargeable flashlight that not only just give light. Another problem is when people run out of electrical power in their cell phone. Many people love to camp and walk in the nature. but also charge your cell phone with enough power to . and they find themselves in an emergency or they really need to make a call to say they are all right. People are usually assured that they bring enough batteries for a trip. How annoying is it then if the battery does not work.homes goes away for a while. To run out of power in the flashlight when it is really needed is a big safety issue. That is impossible to do if their cell phone is dead. just because nobody remembered to check it earlier. and can in the worst cases make the difference between life and death. When the night comes they need to have some light too be able to see. but in many cases this is not enough and they run out of power.

The solution to this issue is a flashlight that can be charged by using mechanical power to generate electrical power.2 Problem definition statement of “Green Roof” As we known. he can use light to flash and easier be detected or charge his phone to make important emergency calls. The main reason that result in climate change is green gas emission which from automobile transportation. global ocean temperature and sea level increase caused by the world climate change. and will be able to give light and charge cell phones. It can work without the need of any batteries in it. 2. This could give enough light and power to save lives.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. .1. if a person is being searched for. many environmental issues such as loss of Arctic sea ice.

. Also with the consumption of traditional non-renewable resources. It is estimated that the built environment contributes around 25-40 percent of energy consumption in developing countries. To mitigate the stress of environment protection. And the energy used in building’s ongoing operations contributes 80% of total energy consumption. solar heating is quite necessary and urgency. So one type of green roof which can combine the function of reducing thermal transmission. Also the cost for the user on energy consumption is saved. Most of the energy used in commercial and residential building is produced by non-renewable sources such as coal. As a result. gas. 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. renewable energy resources should be utilized efficiently and broadly.industrial business. natural ventilation. the price for the electricity has been raised even higher than previous. traditional energy consumption. and petroleum which emission green gas (CO2) heavily.

1. So people (especially the career people) usually do not want to spend too much time on waiting for the hot drink in queue. Also some appliances such as hotplate cannot control the temperature that the user desires. And as we know. 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. most of electricity generated from the non-renewable .3 Problem definition statement on Smart-Cup People often need to reheat water. 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. or other drinks in their daily life. The modern pace of life is just too fast and people are very busy all day.2. Why there is no temperature controller and indicator there to show the temperature. milk.

2 Three Product Conceptualization Approaches According to the three problem definition statements above. a new type of SmartCup which characters functions including auto-control temperature. It is about having an own little generating station inside the flashlight that by . gas. we had to generate three product conceptualization approaches.resources such as coal. and other fossil resources which emit plenty of green gas which raises environmental issues such as climate change (green house effect). 2.2. 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. visual colour changing system to show the temperature and energy saving is desired. To reduce the consumption of non-renewable resources and protect our environment.

There is a power that makes a stick to move around and around.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. 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. . This concept is the same as the wind energy concept. it also has the extra feature too charge cell phones.

can make the big difference between life and death.files.wordpress.com/2008/11/wind-turbine-dwg. or charge a phone so people can do important calls from the nature. 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.jpg Figure2-1 People these days are very concerned about safety in whatever they do.http://renaissanceronin. .

Table 2-1 Morphological Chart for “Life-Safe Flashlight” Number of LED’s 1 2 3 4 Method of Generating Power Shaking Mechanical handle Mechanical string Size Extra Features Small Medium Big Extra big None Charge phone 4*3*4*2 = 96 different combinations .

2. 2.2 Product conceptualization approach on “Green Roof” According to brainstorming.2. Also the purpose of wind turbine is to maintain the room temperature at a constant level that the people feel the most comfortable. The power for the air condition is supplied by the energy which is collected by the solar panel. By the meaning of “Green Roof”.2.2. renewable energy is produced corresponding to green gas emission which is reduced in the building as well. wind turbine system and electricity storage system which can provide sufficient energy for occupants to use.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. . a “Green Roof” consists of solar panel system.

a front location wind turbine. According to the table 2-2. a 5KW solar panel and white color. there are 960 kinds of “Green Roof”. The benefit is to reduce the requirement of the electricity came from the power supply company.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 concrete roof we choose has the characters as follow: rectangle shape. Table 2-2 Morphological chart for Green Roof .2.2.

3 Product conceptualization approach on Smart-Cup Compared to products which are already existed in the market.Roof Shape Position of wind turbine Material Paint Colour The power of solar panel Square Circle Triangle rectangle Front Middle Left side Right side Back Concrete Aluminium Steel Green Yellow White Black 15KW 10KW 5KW 2KW Total amount of possible choice= 4*5*3*4*4=960 2.2. the Smart-Cup has several advantages as following: .

2.3.2.1 Auto-control temperature A temperature sensor and monitor is designed with the Smart-Cup to control the drink temperature. 60~100°C. 2.2. 30~60°C. The special paper can change colour according to drink’s temperature inside the SmartCup.2 Change colour with temperature accordingly Colour-changeable paper with chemicals inside is put in the Smart Cup’s double-layered wall. an effective heating device is set in the base of the heating-cup which can transfer the electricity to thermal energy. . With the colour changeable it is much easier for users to directly view the drink temperature changed. user can set the desired temperature by the individual favour which leads to energy and time saving. According to the auto-controller.3. The measure’s range of the colour-changeable paper is from 0~30°C.

The outer layer is made of stainless steel. The Smart Cup is divided into inner and outer layers.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.4 The structure of the Smart-Cup As conclusion. inner layers is made up with the plastic of polypropylene which can prevent burning the lips.2.3. the basic structure of the Smart Cup includes a plastic inner liner. The capacity of the cup will be designed at 500ml for general purpose.2. an outer metal shell. Both heating elements are connectable to the power supply. There are two heating elements in the cup. and an insulation-filled space there between. The plastic . The second heating element is located on the bottom if the cup.3.2. 2. First heating element is located within the insulation filled space and is wrapped around the lower portion of the plastic inner liner.

there are 1800 kinds of smart cup.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 500ML volume. stainless steel smart cup we choose has the characters as follow: circle cross section area. According to the table 2-3. but does not burn it. which typically occurs when using present electric liquid containers with metal inner layer. Table 2-3 Morphological chart for Smart-Cup . gray color. while the insulation-filled space prevents the metal shell from becoming warm to the touch. The combination of the heating element and plastic inner liner produces a diffuse slow heat that heats the liquid to a desired temperature. The outer metal shell imparts strength and durability to the cup. and 240V power supplier.

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

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

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

Customer Attractive to buy Easy to produce Low risk rate for investment Easy to maintenance Life Cycle Upgradeable Proven market share Visually Attractive High Reliability Total 9 2 1 6 7 6 3 8 8 50 Investor 10 5 7 4 5 4 6 2 7 50 19 7 8 10 12 10 9 10 15 100 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) Easy to produce (7) Low risk rate for investment (8) Easy to maintenance (10) Life Cycle (12) Upgradeable (10) 4 3 3 76 21 24 3 1 1 57 7 8 4 4 4 76 28 32 1 10 2 20 3 30 1 1 12 10 4 3 48 30 1 1 12 10 .

according to Table 2-5. 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. the most preferable product for buyers and investors is the Smart-Cup which has a total score of 266. Furthermore.4 Associated Logic for Choosing a Single Product As a result. temperature control and scale of temperature by colour in one cup.Proven market share (9) Visually Attractive (10) High Reliability (10) 2 2 2 18 20 20 3 1 3 27 10 30 2 4 2 18 40 20 Total 19 211 21 237 25 266 Table 2-5 Group product selection using a weighted constraint model 2. there will be an innovation to combine the existing function such as heating. .

the figure of flashlight is quite lower than the Smart-Cup. 2. Furthermore the Green Roof has a high risk of the product failure.1 Life-Save Flashlight Google .5. Combined all the reasons above. Moreover. although the Life-Safe Flashlight might spend the least investment among others. the cup has a higher profit margin than the flashlight.5 Product Concept Embodiment Sketches using Sketch Up 2. In addition.Investors need fewer funds for investing on the Smart-Cup. compared with the market requirement and application. compared to the Green Roof which requires larger budget and capital investment because of quite a few new technologies need to be invested. Smart-Cup is our final choice.

Figure 2-2 2.5.2 Green Roof .

Figure 2-3 2.3 Smart-Cup Figure 2-4 .5.

Our cup is just a tool for them to make what they really want.1 Understanding the market and customer needs To create a successful new product the seller must understand its customers. and develop a product that deliver a superior value to the customers. the better understanding a producer can get about these needs and the producer can more easily satisfy them. The more research being done.CHAPTER THREE-DESIGN PRODUCT MARKET REASERCH 3. they want hot/boiled water. It is really important that we know that the customer that buys our cup does not really want just our cup. Every organization or company that offers products or services needs to access knowledge about the different markets. A market research is important to understand what the market really need and want when it comes to different products. if not there is a big chance that the product will fail. A research study of . competitors and the markets.

. The product concept holds that consumers will prefer products that offer most quality. too high priced or poorly advertised.700 consumer and industrial firms shows that overall just about 65% of new product success. a tool for making hot/boiled drinks. performance and a new innovative feature (boiling and heating with a smart in-built cord). performance and innovative features. [1] Many products fail in the market due to incorrectly positioning. When people want boiled water in a cup that is what we want to give them. We will conduct our marketing activities by the “product concept”. In this particular case we are producing a cup that can heat and boil drinks (water). We will give them good quality.

and why is it wanted.  How does the receiver interpret this information. appreciation and preferences? What is important for them? .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. do they understand what the seller tries to sell and is the information relevant for the customer.  What determines the customer conduct. These are things like:  What is the customer need or want.  What kind of information does the customer seek. what kind of information is needed. how much information do they need. what kind of information channels should be used and in what form should the information be given.

This is the main differentiation this product offer to its consumers compared to competitors. . and what happen after they have bought it. They do not need a kitchen or a place where boiled water can be accessed. Consumers only need a water source and a power source to boil up the water.2 Differentiation Our product is a cup that can heat up drinks. due to an electronic heating element inbuilt in it. This makes the product very handy and user-friendly. How to the buyers decide to purchase the product. 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. 3.

cheaper and more often. Consumers are becoming more aware of the specific antioxidants that are found in tea. and it can emotionally be used to provide a natural energy boost and give persons more relaxation. . do people really need to have boiling water at any time? This is a good question.3. From Berry’s[2] article made in 2009 we got different information about tea. We want to position our product up against the tea consumption that exists in the market. and that our product can help them to drink more tea easier. It is thought to prevent aging of cells and to benefit the immune system. 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.and water source. Tea has a history of being refreshment driven. and it is here the position part comes in the picture. Tea is the world’s second most consumed beverage after water.3 Positioning against tea consumption So who need a cup that can boil water wherever there is a power. We want to use this in our marketing strategy so that people can see the benefits of drinking tea.

and since we are located closest to Sydney we find it less risky to start there. Demographic targeting  We will mainly focus on students. so we will target them as well. with an age between 13 – 60 years. 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. We know that many Chinese people lives in Sydney and that they have a strong tea-culture. they can easily and cheap make it by themselves whenever it suits them.4 Segmentation and target market We have to identify which parts of the market we can serve best.3. . Instead of buying a cup of tea every day for a high price. This is the second largest city. but also people that are focused on health and wellness. The questions to ask are who drinks tea.

We assume that children up to 10 years will not need this product.5 Collection of data We have one product that is targeted against tea and other hot drinks consumption. . We also think that older people use much time at home and make their hot drink in other ways. because they will probably make their hot drinks in the kitchen with their kettle (automatic or not). 3. but rather go to a restaurant/coffee shop and buy their hot drink there. It is hard to find useful and relevant secondary data about this. People working at offices at daytime usually have machines that make them hot drinks. since it involves hot water and often do their parents make them what they need to drink. People in a high social class will probably not use this product either. There has not been done much research about what kind of cups the market wants and how they want them. Secondary data is information that already exists somewhere and has being collected for another purpose. The household will not be considered in our targeting.

The questionnaire was produced after we found out what segments we want to target and what the competitive substitutes to our product are. where we can use data programs like JMP to calculate the outcomes. 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. which is a too small sample size for reliable results so we should be careful drawing conclusions from these. Our sample size is only 12 students.especially not for this purpose. and it will make it easier for us to do a bigger survey later. We asked 6 females and 6 males. To gather primary data we have used a structured questionnaire survey that aims for students. But we will get some main ideas. which consists of information that are being collected for the specific purpose. So in this case we also need to collect primary data. .

which is the highest recording since 1977.3.1 Market size To start with we will sell our product in Sydney.[3] The population in Australia is increasing for every year. which is the highest growth rate in 40 years.6. counted from the secondary school and up to the highest education level. From 30 June 2008 till 30 June 2009 Australia recorded 301 000 births.6 Six Market Research Questions 3. with a population of 4 119 000. mainly students in the first round. The population growth rate in total for 2009 was 2. All of our statistics are found at ABS webpage.1%. In 2007 there was about 930 000 students that studied in Sydney. The distributions of these students are like this: . Sydney is the second largest city in Australia. trying to reach people between 15-60 years.

Student distribution Sydney Numbers Secondary school 270 000 Technical or further education 100 000 institutions Universities Other not institutions Total 180 000 educational 380 000 930 000

In percent 29% 11% 19% 41% 100%

stated

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 power source many places at a some places at a cup on it - Often found at - Can place any

No need for depends on queue bringing a own cup or flavours ..No need for bringing own cup or flavours .No need for school school water source .Medium quick delivery time.Quick delivery . .

Not fresh available cold .More social .Gets colder after shop/bar available some hours ..Good assortment Disadvantages - .Assortment is water limited .Costly .Need to have a .Very costly .Cannot boil before it is needed .Gets quickly .Need to make it .Need to have a machine .

Cannot make . USB Cup Warmer [4] This is our products main competition.g. price.Gets quickly cold 1 E. An interesting finding in this survey is that 80% of the asked persons purchase hot drinks from a coffee or tea shop. 20% . convenience or a mix of these? From our survey we can find that 83 % of the people drink hot drinks at school. When it comes to price half of the asked persons find it important while the other half find it less important. Most of them drink coffee (80%) and half of the asked drinks it now and then while other half drinks a couple of day. What do the customers prefer. performance..Smaller volume new when it is of drinks empty .

. but when consuming tea most people use a cup. People have changed some of their lifestyle the past years and that seems to continue. It should be a large potential in this targeted student segment for our product. 3. Since we want to position our product up against tea consumption.from a machine and no one brings or makes their own drinks.6. To consume this water most people use a glass. so that we can use this information in our further marketing process. People are these days more concerned about the environment and their own health and wellness.3 Market trends People do always need to drink water. We cannot imagine that the trend to use a cup for consuming tea will change. we have to have a closer look at the tea consumption trend. it is a physiological need that they need for survival.

Tea and coffee products sales grew in the US by 4% from 2002-2003. but also offers them some sort of health and wellness benefits. The article describes an increasing trend in the consumer market that wants a tea with all-natural remedies for modern consumer’s health needs. Tea does match these criteria at a perfect level. convenience and health[6]. He writes that the three most identified trends and drivers for functional food innovations are pleasure. . it has a great taste. the packing are small and convenient. and its state of nutrition is very good. 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. it is available in every convenient shop’s (gas stations included). Herbs are good source for nutrition that contains substances that play a role in health and cancer prevention.Sharma[5] has done a lot of research about market trends in the food market (beverages included). Consumers are these days looking for beverages that not only taste great.

The main growth is happening in the largest cities in Australia (like Sydney).This is a positive trend that we can use in our advertisement for the product. From 1996 – 2006 there was an increase of people attending an educational institution in the major cities of about 6% . 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.7% in the age group 15-19 years and 5 % between 20-24 years. Graphs from ABS website .

In the first table we will present the prices for our main competitor . The population of Australia is expected to rise between 24 and 33 million by 2051.10) said that the cup was too expensive.4 Market price Our market survey shows that 50% of the people that did not want to buy our cup (for $40. 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.Figure3-1 Projections for year 2056 estimate that Sydney will be the largest city in Australia followed by Melbourne. 3. All these trends are good news for our Smart-Cup.6.

90 $2.80 * 2 * 3 = $16.10 $3 $2.80 $3. Our survey shows that about 50% of the people purchase a couple of drinks each day. Prices main substitutes Campos Coffee (2 shops) Rush Coffee Picasso Espresso Bar Panizzi Café Vending Machine Average price Tea $3 N/A N/A $3 $2.80 Coffee $3.60 $3 $2. which mean they will be ending up . Prices that are used in the table under are observed at University of Wollongong in May 2010.80 $2. A semester at school consists of 12-13 weeks.80.60 $2. and assume that every student go to school at least 3 days a week they have to pay $2.60 $2.80 Hot chocolate $3.60 $2.60 $2.substitutes. the coffee/tea bars and coffee/tea machines.80 every week. which is $2.10 Table3-3 These prices are for small cups. If we use the smallest price.

95 Comments Was apperantly $29.95 $ 19. Thermos travel cup * $ 12 Smaller cup . Cost $25 in retail shop. Prices on some of the other substitutes to our cup are shown in the table under. Need to boil water another way. Need to boil water another way. Other substitutes Mr Gadget USB Cup Warmer Another USB Cup Warmer * Price $ 15.paying over $200 each semester just for purchasing hot drinks at school. This is useful information for us to use in our advertisement campaigns.

The power cord and its plug are in-built in the cup.5 Relative benefit product Our cup has some special features that make it more beneficial compared to other cups. The cord goes in and out from the cup with the same mechanism as in the vacuum .6. The main benefit is that is easily and fast can boil up water. 3.91 $ 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.Large thermos 1* Large thermos 2* $ 75. This is being done by plugging a cord from to cup into the power outlet in the wall.

This is useful for the user since nobody like to drink the hot drink immediately after it has been boiled. . since they not need to concern about bringing a loose to plug in their cup. So instead of drinking a sip of the cup to find out if they can drink it or not. Maybe do the users want to make hot chocolate with milk without boiling the milk (milk should not be boiled).cleaner. This makes it very easy in use for the customers. which shows the user what the temperature is in the cup at any time. Our cup has a button that makes it available to adjust the preferred temperature the user wants the drink to hold. There is also a color system feature in our product. they can just have a look at the color system that shows them the temperature. Our product will give them this opportunity.

especially in the first year. The word-of-the-mouth is a very strong and powerful communication among consumers.6. and we believe that this will . The more market-share a business or product want to gain.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. but we will probably not need to advertise as much as the first year. But we have to try to increase our market share quickly if this product become a success. the more advertisement there must be done. After the first year we want to continuously gain more and more market share in Sydney.3. We find that 2% market share shot not be too hard to obtain. We have to do a lot of advertisement. about 9 000 product sales after break-even is reached (break-even circa 10 000). This is because we not want other companies to start competing against our product by making the same product as we got. This is an acceptable and feasible goal.

This means that we do not need to communicate as much to them by advertisement. . If we succeed in Sydney the first year. trying to gain 2% market share of the targeted students within the first year.help us gain more market share in the future. we will expand to Melbourne and go for the same tactic down there. .

T Analysis SWOT – analysis Strengths: Weaknesses: ➢ Large market compared for us ➢ Cost to produce ➢ Not many competitors in the targeted market ➢ Big and heavy compared to a regular cup .W. Table 3-5 S. weaknesses. opportunities and threats that our product faces.O.7 SWOT Analysis This analysis will identify the main strength.3.

➢ Should be competitive with the threatening substitutes ➢ New product in market ➢ Cannot be used in the washing ➢ Easy and handy to use machine ➢ Practical in use. 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: . does not need hot ➢ Easy to copy water.

wrong or poorly .➢ 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.

based on the business’ market share and the market growth rate. while a dog is not a preferred position to be in.advertisement ➢ Product cost analysis is not reliable .cost over-run. The matrix is used to show in which category out of four a business is in.8 BCG Product Ratings Market share and market growth are the two critical variables that forms the BCG Matrix. 3. BCG Matrix . A star is a preferred position.

there should be a high market growth for our product. due to just offering our product in Sydney.Image taken from: http://www. Therefore will we place our product into the question mark category. We think that since our product is positioning against tea and it is a smart product that can be used almost everywhere.com/supporting-images/BCG-matrix. Our market share is very low. This is a question mark and wonders if our product .cleptestreview.gif Fig3-2 It is hard to decide what high and low share or growth mean in this situation.

Business in the dog category is recommended to divestment or close down. or it will lose market share and become a cash cow. So it is more likely that our product ends up in the cash cow category if we not grow and expand very fast. But we have to try our best to get into the star category. This is due to aggressive and much stronger competitors that maybe will produce similar products as ours.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. If the market growth fails in a way.will gain a high market share and become a star. which is a problem for our company in the beginning. Marketing also involve communicating the products value . we have to assure that we gain much market share so we not end up like dogs. To become a start involves a lot of heavy investment. 3.

choose media through which to send a message. . To develop an effective communications and promotion program we need to: identify the targeted marked. This involve that we push the product through the marketing channels and to the final customer. design a message. select a message source.proposition to the potential and actual buyers. Step 1: Identify the targeted marked We are mainly targeting people that go to secondary school and upwards. We will use a push strategy for the product to reach its market. determine the communication objectives. and collect feedback.

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 twosided 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 eyecatching 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

and webpage as our non-personal media selection. 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. 3.10.1 Selecting the message source Our message out to the audience has to be trustful and liked.a message is sent out without personal contact or feedback. 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.10. if they . ads on buses. We are going to use signs. In this stage we will go out to our customers and ask them personally about whether they remember the message. posters.2 Collecting feedback We have to know the effects of our message after it has been sent. In our personal communication we will have stands at the largest universities and schools. 3.

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 .

. The selling price equals the sum of primary cost.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. Prime cost consists of direct labour and material cost. overheat expenses and target profit. overhead and profit. while overhead cost including manufacturing. Design product selling price includes prime cost. marketing.CHAPTER FOUR-DESIGN PRODUCT COSTING 4. and general expenses.

and apply the stainless steel casting technology for the outer layer. and we assemble all the units by assembly line. In our business. we produce the inner and outer layers for the cup.4 min. the time for casting products will last for 3 minutes because the cooling time is much longer than the casting time. The cost of these equipments is based on the purchasing price. 2010.Table 4-1 Cost-Plus Selling Price for a Manufactured Product (Lemass. which is suitable for mass production. The time for the plastic injection moulding time is only 0. B. We applied the . and from the manufacturing point of view we use the plastic injection moulding machine for manufacturing the inner layer.) The temperature control devices and heating elements are purchase from outsourcing. The volume of the cups is 500ml.

The production rate will be 1 product/min. there are 8 working stations including altogether. all the components will be assembled automatically.4 min 3 min 1 min 2 min 6. The production rate will be determined by the slowest station.assembly line for assembling the products.4 min Table 4-2 . The table below shows the information of manufacturing cups Process Injection Moulding Process Casting Process Assembling Process Other Transport Time Total Time 0.

employee earnings accounted for 86. it can be found that average weekly earnings paid for full-time non-managerial adult employees on manufacturing are $1057. Payroll tax and Workers' compensation costs were 2.1.6%.6% of total labour costs.2% respectively.1 Direct Labour Cost From the report of major labour cost in industry released by ABS[9].1. According to Employee Earnings and Hours [10]. . Based in the information above. the total of labour cost per week have been list in table 4-3 which are $1222. while Fringe benefits tax was the smallest component at 0. Superannuation was the next largest component at 7.9% and 2.4.1 Prime Cost 4.8% of total labour costs.1.

Item Employee weekly earning Superannuation Payroll Tax Workers’ Compensation Fringe Benefits Tax Total Amount (A.[12]  Annual leave is 4 weeks=4×38=152 hours . 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.U. $) $1057 $93 $35 $27 $10 $1222 Table 4-3 There are 52 weeks in a year.

so the direct labour cost of our product is $8.   Sick leave 2 weeks=2×38=76 hours Public holidays 9 days=9×385=68.15/unit Because there are two workers working at the same time.6 hours Total deduction=342 hours Actual Annual Hours is 1634 hours True directly labour cost per hour =635441634=$38.3 .4 hours Long service leave 6 days=6×385=45.4min/unit Annual production rate is 15319 units So one direct labour cost=$4.89/hour Because the production rate is 6.

P) which is the ideal material for injection moulding machine. so the dimensions and cost of the inner layer have been shown below.1.P 80mm 150mm 1mm 42.05 Table 4-4 .73cm3 0.946g/cm3 $1322/tonne $0.1. The volume of the cup we designed is 500ml.P Selling Price of P.4. Diameter Height Thickness Volume of P.P Density of P.P[13] Cost of P.2 Direct Material Cost The material we applied for inner layer is polypropylene (P.

82 Table 4-5 Design for the Lid of stainless steel Outer Diameter 8 cm .2/tonne $1. so the dimension of the outer layer will be larger than the inner layer. Diameter Height Thickness Volume of stainless steel Density of stainless steel Selling price of stainless steel[14] Cost of stainless steel 10 cm 14 cm 0. So the detail design and cost of the cup outer layer has shown below.Because the design of the cup is double layers for insulation purpose.84cm3 8000kg/m3 $4354.1 cm 51.

54 .Height Thickness Volume of stainless steel Cost of stainless steel 3 cm 0.82 1.P) Chemical Components Stainless Steel Outer Layer Middle Relay Fuse[17] Stainless Steel for Lid Costs ($) 10.3 1.3cm 101cm3 $3.3 0.86 3.54 Table 4-6 Items Heating Coil Element[15] Temperature Senor[16] Plastic Inner Layer(P.6 1.6 0.05 0.

07 Table 4-7 Cost of raw material components per unit Fig 4-1 4.1 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.1.2 Expenses 4.1. so the cost of supervisors =$0.Total 20.05/unit . the time spend for quality control is 48 minutes.2.

 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 Security Labour Administration Labour R & D Labour Total

0.05 2.75 0.08 0.65 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 Plastic Injection Moulding Machine[21] Stainless Steel Casting Machine[22] Assembly Line Office Facilities[23]

Cost (A.U. $) $35,000 $30,000 $35,000 $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.

theft.[26] The training cost per unit = ($3720/year)/(15319unit/year)=$0. water and telephone fees = [($15. the cost per unit = ($18.000/yr[25].24/unit . which include professional indemnity.2 Marketing Expenses (a) Training The training cost of health and safety is $3720.37+0. public risk and property damage.11/unit (d) Insurances Insurances.15) = $5.16/unit 4. because the insurance can be considered as fix cost.53+1. the total manufacturing expenses = $(3. Thus.1.319unit/yr)/(8 workers)= $0.2.Electricity.319units/yr) =$0.000/yr) / (15.11+0.000/yr) / 8 people] / (15. are about $18.15/unit Therefore.

900 per year.19/unit . which cost $300 per week[28] the cost for the whole year is $15.95/unit The total marketing expenses=$1.(b) Business advertising & promotion There are two types of advertising we choose.600.95+$0. the first one is the web advertising. which cost $275 per week[27].24=$2. so the total cost is $14300 The second one is the bus advertising. The cost of advertising & promoting of company is $29. the amount of products manufactured in one year is 15319 units Advertising and promotion cost per unit is $1.

Auto rollar door & 5 car parking spaces.3 General Expenses There is no relationship between the general expenses and number of staffs. which contains 262 sqm of floor area & 110 Mezanine .1.[29] So the cost of leasing for one year is $31. So the leasing cost=$41600/15319 units=$2.05/unit b) Accounting Cost . a) Leasing The leasing fee for the factory is $550/week+G.S. so when we just divided the general expenses by number of units produced each year to get the general expenses per unit.460.T which is 10%.2. kitchen & toilet facilities.4.

33+0. the cost will be $5000 per year The financial cost is $0.13)=$2.33/unit c) Publication fee The publication fee for one year is $2000 The publication fee per unit is $0. we could predict the cost for producing Smart Cup including its initial cost.05+0. product R&D.13/unit The total general expenses for one unit is=(2. .Because we decide to hire a professional accounting firm to do the financial report for our company. manufacture and general cost.51/unit According to our group literature research as it can be seen in Table 4-10.

Items Direct material/ per unit Direct labor/ per unit Prime cost/ per unit Manufacture overhead/ per unit Market Expense/ per unit General Expense/per unit Cost/ per product Selling Price Cost (A$) 20.16 2.3 28.19 2.23 46.1 .37 5.51 38.07 8.

TFC and TP can be calculated as: . So we figure out that the selling price of each product is $46.2 Break-even volume According to Table shown below.Table 4-10 Cost for producing Smart Cup To determine a suitable selling price of our product. TVC.The figure 4-2 shows the percentage of each cost which consisted of total selling price.1. we use target profit method by assuming a 20% profit. Fig 4-2 4.

$) per unit Direct Labour Cost Direct Material Cost 8.620 48.07 .U.3 20.U.000 21.000 44.Total Fixed Cost (A. $) R&D Cost Investment Cost Administration Cost Utilities Insurance Marketing Expense General Expense Total 10.182 15.000 33.402 Table 4-11 Variable Cost (A.600 190.000 18.

37 Table 4-12 Variable Cost per unit (Total Direct Labor + Material Cost+ Q.1 TFC + TVC = V.Total 28.) =$28.402/year Selling Price =$46.37/unit Total Fixed Cost (Total Fixed Overhead Cost) =$190.C.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. since profit is included: TFC+TVC = Vx 190402+28. it is essential to multiply the prime cost by the output volume (V) as shown below: – Total variable cost (TVC) = Prime cost * V = $28. and to calculate the total variable cost.x = TFC + TVC Then.16/unit * V – Total fixed cost (TVC) = $190402 – V.10. the selling price is $46.37×V=46.10×V Break-even amount V=10738 .

based on the above calculation the break-even volume will be 10738 units. thus further financial decision should be established under the consideration of changes Breakeven Point which are going to be and interest rate discussed in Chapter 7. .Finally. 4. this values are just set based on theory. we do the comparison between our prices with other competitors’ price.3 Cross Checking the Selling Price For checking our design product selling price. The purpose is to avoid to lose the market share by too high pricing and to keep maintaining a fair price. Fig 4-3 However.

which is not efficient. . The second type is the traditional mug without heating function. and not convenient to carry. But the selling price is quite cheaper.We check our price with the similar function of cup that already existed in the market. The third type is the mug which is quite similar to our products. Based on the research above. The price is quite close to our product. which means the liquid in the mug will be heated into a certain temperature. the information has been list below. but the disadvantage is that the temperature is not adjustable. where the main function is to try to maintain the high temperature as long as possible. The first type is the kettle. we can say that the price of our product is acceptable for the customers with its multifunction. which can heat the water but hard to maintain the temperature. From the table we found that there are most three types of catalogues in the market.

Kettle Prices .Items Brugo Mug without heating[30] Farberware FCP280 Millenium Automatic Coffee Percolator With Automatic Temperature Control[31] Electric Kettle with Automatic Temperature Control and Indicator Light[32] Smart Travel Mug With Temperature Control[33] Our products Costs (A.8 80 38 46. $) 30 70. Mug.U.1 Table 4-13 Cup.

.

risk control. and implement and monitor the risk management program will be utilized in this report. 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. . there are four steps included: identify loss exposures.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. For efficient risk management. analyse the loss exposures.

1 Risk Identification 5. Materials choice is a key element to achieve innovation success.5. Intellectual Property risk may involve investors for owing the novel invention of Smart Cup. the technology combine insulation with heating is a big challenge. 5. Hazardous material may be harmful to the . there are many materials utilized in our design product.1.1 Risks exist in the product design There are many technological problems should be solved in the innovation process. First of all. Furthermore. There are several physical risks exist in the manufacturing process. Then.1.2 Risks exist in the product manufacturing Health and safety risks should be considered in the manufacturing process. All of the factors mentioned in the previous part maybe result the design error which is a main risk resource in the innovation design.

Machine breakdown. many companies ignore the responsibility of environment protection. many evidences show that poor product quality result in increasing manufacturing cost and customer dissatisfaction. but also damage the company’s reputation. workers’ mistake. The other natural disaster such . environment protection risk maybe exists due to the incorrect material management. At the same time. There are many different kinds of materials in the Smart Cup and the incorrect mixture maybe result in pollution. as well as suffer huge financial loss and damaged reputation.workers’ health. Actually. our company would not only be punished by the government. Accidents such as explosion and fire may be happened during the manufacturing process and not only injure the employee but also bring financial loss. If environment pollution happens. Furthermore. and poor quality of materials can cause the unqualified products.

there are still several risks exist. The exchange rate maybe dramatically influence during a short period. customer habit and purchase power are different from one country to another.3 Risks exist in the marketing Although marketing research was implemented before the product enters to the market. 5. flood. The risk of trade barriers due to the local government policies should be considered carefully. However. As we know. the government polices also heavily impact the marketing.1. At the same time. and hurricane should be considered. The future target market of our product is the whole global market.as earthquake. the product price cannot be changed . Another risk exists in marketing due to the exchange rate. although the probability is very low.

market is difficult to predict. 5. although market trends had analyzed in the marketing research. and the dramatically change of exchange rate may result in poor performance of marketing. If the market trends become pessimistic.1 Quantification by probability and severity Risk type Design error Cause Lack of knowledge Severity Medium Probability Medium .frequently. Finally.2 Risk Quantification 5.2. the product is hard to sell and it will bring disaster to the company.

hurricane Government policy Influence of exchange rate Demand decline High High Medium High Low Medium High Low High High Incorrect material management High Medium Table 5-1 . poor quality of materials Natural disaster Trade barriers Exchange risk Market trends Earthquake. flood. High High Production safety accident Environment pollution Quality problem Machine breakdown. mistake of worker.Intellectual property risk Safety and health Cooperation with other company Low Low Hazardous materials.

the methodology of decision trees which provide useful information in representation of possible decision taken and outcome results is implemented in this report. As mentioned in the previous part of report.2. . in order to predict the outcomes of risk exist in the product of Smart cup. there are several causes to result in the health and safety risk which will bring financial loss to company.5. And the following figure shows the decision tree schematic on health and safety risks. 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.2 Decision tree At the same time.

000 dollars and the probability will decrease to 20% and loss declined to 45. the cost is increased as 3.000 dollars per year. and the loss is 50.000 dollars .000 dollars and the probability of health and safety risk will decrease to 15% and the loss declined to 40. the cost is increased as 8. the probability of health and safety risk is 30%. the cost is increased as 11. If enhance employee safety training.000 dollars and the probability will decline to 5% and loss declined to 15. If more advanced equipment and employee training implement at the same time.000 dollars per year If more advanced equipment utilized in the manufacturing process.If do nothing.000 dollars per year.

000 If utilize advanced equipment and enhance training EMV=11.000+15.000*15%=14.000*30%=15.000*5%=11750 Comparison those outcome.000+45. The decision tree as follow: .000+40.000 If enhance training EMV=3.000*20%=12.000 If utilize advanced equipment EMV=8. 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.If do nothing EMV=50.

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 .

3 Risk protection and insurance There are three categories which include avoidance. Next. 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. mitigation. and acceptance in risk protection.a 21 means risk happen a 22 means risk not happen a 31 means risk happen a 32 means risk not happen a 41 means risk happen a 42 means risk not happen 5. . acceptance means that specific threats are actively or passively accepted.

to control risk effectively and efficiently. Design error. environment pollution. The detail information as follow: Level First Condition High probability.As defined in the previous part of the report. market trends Table 5-2 The first level of risk which has high probability and high severity should be handled at the highest priority. exchange rate. Some risks such as environment risk can be avoided by using non-toxic . high severity Categories Quality risk. health and safety risk. Second Medium probability and/or moderate severity Third Low probability and limited severity Natural disaster. all the risks can be divided to three parts.

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. It can reduce the probability of financial loss connected with the event. Other risks such as health and safety risk can be mitigated by using advanced equipment and enhance employee training. which is security. .materials.

In the fast-growing and intensive competitive environment the motivation is undoubtedly becoming more and more significant for business management. It is noticeably apparent that high levels of motivation and ability will result in high levels of performance. knowledge and experience.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. Motivation’s contribution to business success has been increasingly recognized by the management authorities. . ability and performance.CHAPTER MOTIVATION STRUCTURE SIX-DESIGN AND TEAM INTERNAL 6. The area of High Performance is what is desired most by the management. Table 1 shows the relationship between motivation.

. Maslow divides the human needs into five levels which are shown on the following hierarchy pyramid.Table 6-1 Relationship between motivation. According to his theory. developed the Hierarchy of Needs model in 1940-50s. The bottom level is the most basic survival need that everyone experiences then to the top of the most superior level. human motivations are driven and end up with the satisfaction of their needs. ability and performance (Brett Lemass) Abraham Maslow. a USA famous psychologist.

For example.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. a person will have little motivation toward the need to social need if his basic security or physiological needs are unsatisfied” (Brett Lemass) .

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

it prefers a fair and non-discriminating that is embracing and enjoying all cultures. In the Maslow’s selfactualization. Democratically. inventive and original ideas. It also encourages people excitement and interest in everything. 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. It is in favour of a few closer intimate friends rather than many surface relationships. It encourages creative. even ordinary things. .Although Maslow’s theory created more than half an century ago. races and individual styles. It seeks comfortable with oneself despite any unconventional tendencies. rather than sees problems as personal complaints or excuses. 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 sees problems in terms of challenges and situations requiring solutions.

for life . Maslow saw the fact that employees have a basic human need and a right to strive for self-actualization. management training. Increasingly.not just for work. and personal development. encourage and enable their people's personal growth towards self-actualization the way beyond traditional work-related training and development. low self-esteem. help themselves to improve and develop more effectively and profitably. Maslow's work and ideas extend far beyond the Hierarchy of Needs. purpose and true personal development for their employees. just as much as the corporate directors and owners do fifty years ago. understand. etc. The theory remains valid today for understanding human motivation. and of course way beyond old-style .Maslow’s concept has been used increasingly as an effective way to help people deal with depression. poor life circumstances. the successful organizations and employers will be those who genuinely care about. 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..

or a new experience. Maslow is obviously most famous for his Hierarchy of Needs theory. attributes. whether in a hobby. produces new skills. behaviours and wisdom that is directly transferable to any sort of job role. Although the needs vary .management autocracy which still forms the basis of much organized employment today. In fact virtually all personal growth. rightly so. pursue and reach their own personal unique potential self-actualization. a special talent or interest. 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. especially in the workplace. because it is a wonderfully simple and elegant model for understanding so many aspects of human motivation. 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. 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.

from one member to another some may have achieved certain personal objectives and are searching for social need. esteem and self-actualization consideration are listed in the below chart. security. some may seek for the self-actualization need through the leadership in their job. social. . To encourage cohesion between team members. Based on individual member’s characteristics the needs assessment for group members on physiological. 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. 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.

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 .6.1.

➢ 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 .

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

1.➢ Great chance for promotion and challenging working condition Table 6-2 In order to fulfil the job successfully. 6. Below is the chart about the responsibility of each group members. .2 Responsibility of group members Group member Responsibility Xuedan Pan In charge of product selection. 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. including integrating all of the resources. the tasks have been divided into six part.

making decision when group confront problem. collecting data form market. analyzing the current marketing situation and SWOT analysis. including market research with six market question. He makes the brooches and presentation in week 13. making timetable and dividing tasks for each member. sketch-ups. BCG product ratings. Per Morten Bjerkli In charge of conception of flashlight. 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. design product market research. promoting strategies for design product. Including collecting motivation data from existing industry. . Responsible in group motivation and internal structures. creating needs assessment of group members.

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

2 The Researched Comparative Benefits of Design Product Business Structure When deciding what structure to choose for business such factors as taxation. insurance cover. partnership. making and providing the profit realization time and appropriate financial strategy of our final product. proprietary limited company. finance requirements and establishment costs should be considered which will influence the decision on the business structure. analyzing the monthly operating costs.Jinyu Cui Responsible in design product financial management plan. association and co- . According to the Industry & Investment NSW regulation[35]. type and size of business. including researching capital investment and initial cost in comparable company. compliance requirements. Table 6-3 6. the most common business structures are sole trader.

operative. 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. as the businesses grow up the business structure could be changed accordingly.[36] Detailed tax regulation can be found from the Industry & Investment NSW and ATO website. Additionally. . The main features and major legal requirements for each type of business are listed in table 6-4. Each business structure has different characteristics.

The business can have employees. which means that the business has privacy. It is often called as a firm.Business Structure Features and main legal requirements 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. The firm may have a maximum of twenty members. 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. This is the simplest and least expensive business structure to set Sole trader up. No requirement to disclose any financial details to the public. It involves an agreement between two or more parties to enter into a .

An association is an alternative to forming a company for small non-profit . It is a privately-owned company as distinct from a publicly-owned one. A minimum of one director.legally binding relationship and is essentially contractual in nature. 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. limited by shares and with issued share capital. Its name ends in the words “Pty Ltd” regulated under The Corporation Act and Law 2001. It runs by directors and owned by shareholders. a minimum of one shareholder and maximum of 50 non-employees shareholders. A public officer appointed for income tax purposes.

Any profit from the trading should be put back into the association and not given to its members. An association can trade but this cannot be its main objective. printing and agriculture. labor hire. It has similar advantages as a company but is not as expensive to set up or legally maintain. manufacturing. Co-operatives supply goods and services to their members or to the general public in areas as diverse as retailing. pooling resources to Cooperative be more competitive. Table 6-4 . It must consist of five or more people. and sharing skills. A co-operative is a form of business organization which is memberowned. Co-operatives are distinctive for fostering a democratic style of work.Association groups.

. Here the advantages and disadvantages comparison for the first three structures are shown in the following table.Compared the features of each business structure. makes decision by himself. Exclusively owns and controls the business. Afford all the strains. Have unlimited liability for the debts. Advantages Disadvantages The simplest and cheapest ownership Sole trader structure to establish and operate under. Any profit belongs to the trader personally. the partnership business structure will be chosen because its comparative benefits and suitability to our new business to set up. May no holidays. we have the results: at the beginning stage of the business. Any loss is the owner’s liability personally.

Sometimes it is hard to make a decision. have more relax time. Can make decision and run it together. Share the profits of it. Sometimes it is hard to make a .Partnership Can arise more capital to run the business. Proprietary Company Can arise more capital to run the business and make more profit. Cannot raise funds by inviting the public to invest in it. Share the profits of it. Share the strains and risk together. Share each as an agent for the other. Each as a principal can make decision and run it together. Share the strains and risk together. Each is bound by the other’s contract. Can have a holiday in turn.

marketing.3 Logical Organization Charts of the 1st and 3rd Year of Business Operation At the beginning operation of our company. Each is bound by the company’s contract. human resource. the business will include four main departments which are design. Can keep personal assets separate from the business. Design department is in charge of the product design and innovation together with the manufacturing department. Can have a holiday.decision. manufacturing department. Risk is higher. Table 6-5 6. Marketing department will research the market to integrate the customer needs of .

We will focus on the market around such as Wollongong and Sydney then if we succeed in Sydney the first year. The company’s structure of first year is shown below. USA and New . the business would be consolidated and progressed so the business structure has to be changed accordingly. Organization chart of the 1st year Fig 6-3 At the third year. Marketing department will be of China. Manufacturing department is in charge of the whole in-house and outsourcing and assembly business related to products. The new departments and added functions to the existing departments are shown below. Human resource department is responsible for management of employees.market which is one of the critical elements for further operation. we would expand to Melbourne and go for the same tactic down there.

as well as provide specific effective financial management strategies to run business. in-house and outsourcing and assembly branches are added to the manufacturing department. procurement. After-sales service department would be set to improve the service quality and get feedback from clients.Zealand due to the globalization of the business. . assess the costs and profit of new product and company. The company’s structure of third year is shown below. The QC (Quality control). Financial department will provide support on detailed financial plan data and objectives.

Organization chart of the 3rd year Fig 6-4 .

[37] . advertise our product into the new market and provide good quality of customer services.CHAPTER SEVEN. we did the basic research of the capital investment. initial costs and monthly operation costs which would support our financial management plan. The benefits are quite obvious that we have enough funds to purchase the flexible machine. the detail business loan and interest and principal annual repayment has been calculated and list on the table. In order to achieve the success of our product.DESIGN FINANCIAL MANAGEMENT PLAN 7. Because of the structure of our business is quite small.1 Researched Capital Investment and Initial Costs In this chapter. we decided to get the financial support by bank loan. so the capital investment and initial cost is limited. Based on the information provided by NAB.

23% Monthly Service Fee $100.1.7.000 Loan Term 60months Payment Frequency Monthly Interest Rate (APR) 10.00 Application Fee $1875 Monthly Payment $4372 Table 7-1 .1 Business Loan Index Item Value Loan Amount $200.

532 Annual Payment 53.1.528 .950 92.440 17.294 35.145 9.978 14.706 131. Wollongong.706 131.361 48.734 53.[38] 7.589 43.The information of bank loan is got from NAB Business Center.756 39.950 92.734 Ending Balance 167.901 5.734 53.734 53.361 48.833 48.000 167.2 Interest and Principal Annual Repayment Year Beginning Balance Interest Charged 21.202 Principal Payment 32.528 0 1 2 3 4 5 200.734 53.

720 Costs (A$) Electricity and telephone $500 installation Office equipment Vehicles Purchase of machine Security system Business structure Application fee Bank Loan Deposit Building Cost $5.000 $3. Capital Cost Legal & licenses Fee Training $1.Table 7-2 Our capital cost includes the purchase of machine.000 $1. which will be list below.000 $1.875 $15.000 $10. training.000 $100.500 $10.000 $30.000 . office equipment and so on.

Total cost $178.595 Table 7-3 Researched capital costs investment The calculation of initial cost of our company is based on the period of one year. The information of initial cost is provided by the table below. Initial Cost Wages Costs (A$) $54.964 .

000 $1.000 $5.300 $31. Table 7.000 $151. gas & telephone Stationary and office supplies Computer software Statutory charges Association member fee Insurance Printing and artwork Total Cost $14.224 Table 7-4 Researched initial costs investment 7. .000 $500 $5.000 $18.Initial promotion Lease Loan Establishment Electricity.2 Researched Monthly Operating Costs Next.3 illustrates a researched monthly operation cost of manufacturing and marketing the Smart cup product for the first three months.000 $5.460 $15.000 $1.

Item Leasing Outgoings Wages Staff amenities Advertising Wrapping Maintenance & Repair Electric & Gas Waste disposal Workcover Monthly Service by NAB Payroll tax Capital repayment Motor vehicle expenses Accounting fee Travel & Accommodation Subscription Month 1 2420 500 33842 50 2300 500 1000 1250 300 200 100 140 4478 100 417 300 Month 2 2420 500 33842 50 2300 500 1000 1250 300 200 100 140 4478 100 417 300 Month 3 2420 500 33842 50 2300 500 1000 1250 300 200 100 140 4478 100 417 300 200 200 200 .

3 Profit Realization Time Due to the huge requirements of the Smart cup and its new concept design.4%) and bank interest rate (6.U $) 7.Legal fee Total 200 48297 200 48297 200 48297 Table 7-5 Researched monthly operating costs (in A. we anticipated the sales volume of our cups would be 20. so the revenue of our company would be $922000. The annual discount rate we applied is 12% which equal to the sum of rate of inflation (5. the corresponding net present value of our company has been calculated as well. So the cash flow statement of our company has been list below.000 each year.5%) Item  Year 0 Year 1 Year 2 Year 3 Year 4 Year 5 .

we can promote our product into the global market. a payback period could be predicted at the end of third year in where the net present value changes from negative to positive.000                               NPV of each -529819 year 285363 237803 198169 165141 137617 Table 7-6 Annual Income Statement Finally. it could be a good time for us to expand our market share and the size of our company. .Revenue Cost Net Flow Initial cost Capital cost Borrowed Fund Cash       922000 579564 342436 922000 579564 342436 922000 579564 342436 922000 579564 342436 922000 579564 342436 -151224 -178595 -200. After year 3.

Moreover they can drink healthy tea more often to a cheaper price. One major reason is that consumers are these days looking for beverages that not only taste great.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. but also offers them some sort of health and wellness benefits. Although we define that the Smart Cup has an increasing market. We need to convince the students that in the long-term run a cup like ours will save them a lot of money. due to ever-changing environment such as the varying economic environment and increasing technology .

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

We have reached our goal in developing an engineering design product from preliminary concept to a final product detail design. We believe that we can gain a high market share in the global market in the future with this product.Our group are satisfied with the work in this report. . 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.

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Gender: Female Male Age: 17-20 years 21-25 years Over 25 years Do you drink any hot drinks at school? Yes No .Appendix-I Market Survey in ENGG 950 - Innovation and Design 2010 This survey is for students only.

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 How important is the price when buying from a bar or machine? 0 – 1 – 2 – 3 (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 purchasing from a bar or machine? 0

Number

Percent

0%

1 4,5

45 %

2 5

50 %

3 0.5

5%

Sum 10 100 % LAST QUESTION: Would you buy a Number cup like our or not? YES 6 Percent 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) . Don’t want a cord dangling off it.No power outlet where this person usually are (1 person) .Open drink are not allowed (1 person) . but is maybe interested on these criteria: .. would rather throw the cups away rather than washing them One person says NO.Depends on the cord connected to the cup. Persons answering YES say that: .Depends on the design of the cup .Laziness.

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