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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)


EXECUTIVE SUMMARY

The objective of this project is to develop an engineering design product from preliminary

concept design stage to final product detail design. Our group needs to narrow from three

initial concept design products to the only one final concept design product included the

assessment of selected design products, product market research, product costing estimation,

product risk assessment, team motivation assessment, business structure and design financial

management plan.

Through a weighted constraint matrix, we have decided that our final design product is

automatic temperature control cup named Smart-Cup which not only responds customers’

needs but also offers benefits to the investors. Moreover we decided to establish our own
manufacturing factory to manufacture to produce the product and focus on Australian

markets firstly, and then global markets as our future business goal.
Table of Content

CHAPTER ONE-INTRODUCTION..............................................................................6

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

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

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

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

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

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

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

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


2.2.1 Product conceptualization approach on “Flashlight without Batteries” 10

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

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

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

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

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

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

3.2 Differentiation............................................................................................20

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

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


3.6 Six Market Research Questions..................................................................22

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

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

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

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

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

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

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

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

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


Step 1: Identify the targeted marked............................................................32

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

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

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

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

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

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

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

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

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


4.1.2 Expenses..............................................................................................40

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

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

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

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

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

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

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

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

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


5.2.2 Decision tree........................................................................................50

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

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

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

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

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

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

6.3 Logical Organization Charts of the 1st and 3rd Year of Business Operation........................62

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

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


7.1.1 Business Loan Index.............................................................................65

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

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

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

CHAPTER EIGHT-CONCLUSION AND RECOMMENDATION.....................................69

Reference............................................................................................................71

Bibliography.........................................................................................................74

Appendix-I Market Survey in ENGG 950 - Innovation and Design 2010...............75

Appendix-I Market Survey in ENGG 950 - Innovation and Design 2010


CHAPTER ONE-INTRODUCTION

Countless evidences show that innovation plays an important role in any industries which

from serve to manufacturing sectors in decades. Companies such as Apple and Toyota who

pay attention on product innovation result in creating core competency and achieve grand

success in their business.

The purpose of this report is to develop an engineering design product by utilizing the

innovation methodology. Firstly, three problems were identified by the group brainstorming.

According to weighted constraint matrix, the product of Smart cup which had the highest

scores was chosen as the final product. Then, methodologies such as survey, market trends

predict and SWOT analysis are utilized in the marketing research. After that, cost-plus

method was used in this report to define the selling price of Smart Cup. At the same time, to
make sure the success of Smart Cup’s development, risk management which includes

identification, quantification, and protection was implemented. Then financial management

was conducted for the business assessment. The Maslow’s theory was also applied in the

group assignment for planning and stimulating the efficiency and effectiveness of the group

members.

1.1 Report Objective

The main objective is to write a report about an engineering design product including the

product selection, market research, product costing, risk assessment and financial strategies.

The whole report started from preliminary conceptualization stage to the final product

embodiment; and also providing the corresponding information for the product such as cost

estimating, risk involvement in the design phase and motivation of the group members.
1.2 Definition of the Major Assignment

At beginning our group members had to come up with three concept design products by

brainstorming. After several evaluations and constrains analysis, these concepts were

narrowed to only one concept design product (this part is explained in design product

selection). Next, in order to explain and support further about our final concept design

product, the report applied some necessary evaluation, such as: design product market

research, design product costing evaluation, design product risk assessment, design team

motivation and business internal structure and design of financial management plan.
CHAPTER TWO-DESIGN PRODUCT SELECTION

2.1 Three Problem Definition Statements

In this preliminary stage of design product selection, our group has three problem definition

statements (shown below) after brainstorming; those are Life-Safe Flashlight, Green Roof

and Smart-Cup.

2.1.1 Problem definition statement of Life-Safe Flashlight

Most people have faced the situation that no battery when you want to use the flashlight. That

is something everyone has experienced in their life, and it is really annoying that it does not

work when it is needed. The flashlight is usually not something people use every day, but it is

used when they not have any other source of light. Often people suddenly need to use it, for

instance when the car suddenly strikes in the middle of the night, or the electricity in people’s
homes goes away for a while. How annoying is it then if the battery does not work, just

because nobody remembered to check it earlier. Many people love to camp and walk in the

nature. When the night comes they need to have some light too be able to see. People are

usually assured that they bring enough batteries for a trip, but in many cases this is not

enough and they run out of power. To run out of power in the flashlight when it is really

needed is a big safety issue, and can in the worst cases make the difference between life and

death.

Another problem is when people run out of electrical power in their cell phone, and they find

themselves in an emergency or they really need to make a call to say they are all right. That is

impossible to do if their cell phone is dead. What could then be better than a chargeable

flashlight that not only just give light, but also charge your cell phone with enough power to
make one or two calls? By having this opportunity people reduces the risk of not being able

to make important calls when it is really needed.

The solution to this issue is a flashlight that can be charged by using mechanical power to

generate electrical power. It can work without the need of any batteries in it; and will be able

to give light and charge cell phones. This could give enough light and power to save lives; if

a person is being searched for, he can use light to flash and easier be detected or charge his

phone to make important emergency calls.

2.1.2 Problem definition statement of “Green Roof”

As we known, many environmental issues such as loss of Arctic sea ice, global ocean

temperature and sea level increase caused by the world climate change. The main reason that

result in climate change is green gas emission which from automobile transportation,
industrial business, traditional energy consumption. Most of the energy used in commercial

and residential building is produced by non-renewable sources such as coal, gas, and

petroleum which emission green gas (CO2) heavily. To mitigate the stress of environment

protection, renewable energy resources should be utilized efficiently and broadly. It is

estimated that the built environment contributes around 25-40 percent of energy consumption

in developing countries. And the energy used in building’s ongoing operations contributes

80% of total energy consumption. Also with the consumption of traditional non-renewable

resources, the price for the electricity has been raised even higher than previous. So one type

of green roof which can combine the function of reducing thermal transmission, natural

ventilation, solar heating is quite necessary and urgency. As a result, the “Green Roof” can

reduce building’s life cycle energy consumption and protect our environment as to reducing

the negative impact on the environment caused by human beings. Also the cost for the user

on energy consumption is saved.


2.1.3 Problem definition statement on Smart-Cup

People often need to reheat water, milk, or other drinks in their daily life. The traditional

heating methods are by using microwave or hotplate which is limited by environmental

conditions such as in workplace where may not have traditional heating equipment’s. Also

some appliances such as hotplate cannot control the temperature that the user desires.

Moreover, it is a waste of time and energy when people are waiting for the drinks to be cool

down due to the uncontrollable temperature of reheating is too high. Why there is no

temperature controller and indicator there to show the temperature.

The modern pace of life is just too fast and people are very busy all day. So people

(especially the career people) usually do not want to spend too much time on waiting for the

hot drink in queue. And as we know, most of electricity generated from the non-renewable
resources such as coal, gas, and other fossil resources which emit plenty of green gas which

raises environmental issues such as climate change (green house effect). To reduce the

consumption of non-renewable resources and protect our environment, a new type of Smart-

Cup which characters functions including auto-control temperature, visual colour changing

system to show the temperature and energy saving is desired.

2.2 Three Product Conceptualization Approaches

According to the three problem definition statements above, we had to generate three product

conceptualization approaches.

2.2.1 Product conceptualization approach on “Flashlight without

Batteries”

This idea is about having a flashlight that does not rely on whether the batteries inside it are

charged or not. It is about having an own little generating station inside the flashlight that by
human mechanical power can generate electricity so that the flashlight can work without any

batteries. This flashlight gives light whenever it is needed without any concerns; it also has

the extra feature too charge cell phones.

This concept is the same as the wind energy concept. There is a power that makes a stick to

move around and around. This stick is connected different sizes of wheel gears that then

move around, and these gears are finally connected to a generator that produces electrical

energy.
http://renaissanceronin.files.wordpress.com/2008/11/wind-turbine-dwg.jpg

Figure2-1

People these days are very concerned about safety in whatever they do. By having this

flashlight available on a camping tour reduces a lot of risk and makes the whole trip safer. An

opportunity to have reliable light at night, or charge a phone so people can do important calls

from the nature, can make the big difference between life and death.
Table 2-1 Morphological Chart for “Life-Safe Flashlight”

Number Method of Size Extra Features

of LED’s Generating Power

1 Shaking Small None

2 Mechanical handle Medium Charge phone

3 Mechanical string Big

4 Extra big

4*3*4*2 = 96 different combinations


2.2.2 Product conceptualization approach on “Green Roof”

According to brainstorming, a “Green Roof” consists of solar panel system, wind turbine

system and electricity storage system which can provide sufficient energy for occupants to

use. By the meaning of “Green Roof”, renewable energy is produced corresponding to green

gas emission which is reduced in the building as well.

2.2.2.1 Regulating indoor temperature and natural ventilation

The first function of “Green Roof” is regulating indoor temperature by air conditioning which

use electricity produced by solar panel and wind turbine. The power for the air condition is

supplied by the energy which is collected by the solar panel. Also the purpose of wind turbine

is to maintain the room temperature at a constant level that the people feel the most

comfortable.
2.2.2.2 Heating the water

The solar energy is not only for the air conditioning system, but also can be transferred to the

thermal energy to heat the water tank to provide the hot water. The benefit is to reduce the

requirement of the electricity came from the power supply company.

According to the table 2-2, there are 960 kinds of “Green Roof”. The concrete roof we choose

has the characters as follow: rectangle shape, a front location wind turbine, a 5KW solar

panel and white color.

Table 2-2 Morphological chart for Green Roof


Roof Shape Position of Material Paint The power

wind Colour of solar

turbine panel

Square Front Concrete Green 15KW

Circle Middle Aluminium Yellow 10KW

Triangle Left side Steel White 5KW

rectangle Right side Black 2KW

Back

Total amount of possible choice= 4*5*3*4*4=960

2.2.3 Product conceptualization approach on Smart-Cup

Compared to products which are already existed in the market, the Smart-Cup has several

advantages as following:
2.2.3.1 Auto-control temperature

A temperature sensor and monitor is designed with the Smart-Cup to control the drink

temperature, an effective heating device is set in the base of the heating-cup which can

transfer the electricity to thermal energy. According to the auto-controller, user can set the

desired temperature by the individual favour which leads to energy and time saving.

2.2.3.2 Change colour with temperature accordingly

Colour-changeable paper with chemicals inside is put in the Smart Cup’s double-layered

wall. The special paper can change colour according to drink’s temperature inside the Smart-

Cup. With the colour changeable it is much easier for users to directly view the drink

temperature changed. The measure’s range of the colour-changeable paper is from 0~30°C,

30~60°C, 60~100°C.
2.2.3.3 Convenience of carrying and using

The base of the Smart Cup has a heating device that can be altogether with the body of the

cup or can be separated. The capacity of the cup will be designed at 500ml for general

purpose. The Smart Cup is divided into inner and outer layers, inner layers is made up with

the plastic of polypropylene which can prevent burning the lips. The outer layer is made of

stainless steel.

2.2.3.4 The structure of the Smart-Cup

As conclusion, the basic structure of the Smart Cup includes a plastic inner liner, an outer

metal shell, and an insulation-filled space there between. There are two heating elements in

the cup. First heating element is located within the insulation filled space and is wrapped

around the lower portion of the plastic inner liner. The second heating element is located on

the bottom if the cup. Both heating elements are connectable to the power supply. The plastic
inner layer is curved over the upper edge of the outer metal shell to form a drinking rim that

is safe to the touch when the cup contains a hot beverage. The combination of the heating

element and plastic inner liner produces a diffuse slow heat that heats the liquid to a desired

temperature, but does not burn it, which typically occurs when using present electric liquid

containers with metal inner layer. The outer metal shell imparts strength and durability to the

cup, while the insulation-filled space prevents the metal shell from becoming warm to the

touch.

According to the table 2-3, there are 1800 kinds of smart cup. The 500ML volume, stainless

steel smart cup we choose has the characters as follow: circle cross section area, gray color,

and 240V power supplier.

Table 2-3 Morphological chart for Smart-Cup


Material Cross Section Volume colour of cup Type of power

Area supplier

P.E.T Square 500ML Red USB(22V)

Steel Rectangle 1L White Battery

Stainless steel Circle 350ML Yellow 240V supplier

Porcelain Ellipse 1.5L Black

P.P Triangle Green

Gray

Total amount of possible choice = 5*5*4*6*3=1800

2. 3 Weighted Constraint Matrix

Regarding to brainstorming and morphological chart, our group decides three possible

products: Life-Safe Flashlight, a Green Roof and Smart-Cup.


Those three products are the best design concepts results of our group brainstorming, thus it

is difficult to choose the best choice among them. There are a few things can affect the choice

of our final products, such as customers and investors. Therefore, it is necessary to provide

some constraints and targets of design product concepts that satisfying both investors and

consumers.

Next, certain product selection constraint weights are used to find precedence using 1-10

rating scale; in where buyer and investor are considered as the importance rating, because

each of them requires different preferences and requirements to the design products,

especially investors need product that can make the profit to them, while buyers need more

reliable and valuable product.


It can be seen from Table 2-4 that the “attractive to buy” might be the most important

constraint for both buyers and investors. Furthermore, consumers are focus on the visually

attractive, high reliability and life cycle, investor are concentrated on the risk rate for

investment, high reliability and proven market share. Table 2-5 is used to help creating a

group product selection using a weighted constraint model.

Constraint Importance Rating (1-10) Constraint Weight (%)


Customer Investor

Attractive to buy 9 10 19

Easy to produce 2 5 7

Low risk rate for investment 1 7 8

Easy to maintenance 6 4 10

Life Cycle 7 5 12

Upgradeable 6 4 10

Proven market share 3 6 9

Visually Attractive 8 2 10

High Reliability 8 7 15

Total 50 50 100

Table 2-4 Product Selection Constraint Weights

Group Design Product


Product Selection

Constraint and
Life-Safe Green Roof Smart Cup

Weight (%)
Flashlight

1-5 Concept Rating and Weighted Constraint Score

Point Score Point Score Point Score

Attractive to buy (19) 4 76 3 57 4 76

Easy to produce (7) 3 21 1 7 4 28

Low risk rate for 3 24 1 8 4 32

investment (8)

Easy to maintenance 1 10 2 20 3 30

(10)

Life Cycle (12) 1 12 4 48 1 12

Upgradeable (10) 1 10 3 30 1 10
Proven market share (9) 2 18 3 27 2 18

Visually Attractive (10) 2 20 1 10 4 40

High Reliability (10) 2 20 3 30 2 20

Total 19 211 21 237 25 266

Table 2-5 Group product selection using a weighted constraint model

2.4 Associated Logic for Choosing a Single Product

As a result, according to Table 2-5, the most preferable product for buyers and investors is

the Smart-Cup which has a total score of 266. Although the Smart-Cup is not a new invention

in the market, it has some innovative features in it and it has a wide range of application and

huge market requirement. Furthermore, there will be an innovation to combine the existing

function such as heating, temperature control and scale of temperature by colour in one cup.
Investors need fewer funds for investing on the Smart-Cup, compared to the Green Roof

which requires larger budget and capital investment because of quite a few new technologies

need to be invested. Furthermore the Green Roof has a high risk of the product failure. In

addition, although the Life-Safe Flashlight might spend the least investment among others,

compared with the market requirement and application, the figure of flashlight is quite lower

than the Smart-Cup. Moreover, the cup has a higher profit margin than the flashlight.

Combined all the reasons above, Smart-Cup is our final choice.

2.5 Product Concept Embodiment Sketches using Google

Sketch Up

2.5.1 Life-Save Flashlight


Figure 2-2

2.5.2 Green Roof


Figure 2-3

2.5.3 Smart-Cup

Figure 2-4
CHAPTER THREE-DESIGN PRODUCT

MARKET REASERCH

3.1 Understanding the market and customer needs

To create a successful new product the seller must understand its customers, competitors and

the markets, and develop a product that deliver a superior value to the customers. A market

research is important to understand what the market really need and want when it comes to

different products. It is really important that we know that the customer that buys our cup

does not really want just our cup; they want hot/boiled water. Our cup is just a tool for them

to make what they really want. The more research being done, the better understanding a

producer can get about these needs and the producer can more easily satisfy them. Every

organization or company that offers products or services needs to access knowledge about the

different markets, if not there is a big chance that the product will fail. A research study of
700 consumer and industrial firms shows that overall just about 65% of new product success.

[1]
Many products fail in the market due to incorrectly positioning, too high priced or poorly

advertised.

In this particular case we are producing a cup that can heat and boil drinks (water). When

people want boiled water in a cup that is what we want to give them; a tool for making

hot/boiled drinks. We will conduct our marketing activities by the “product concept”. The

product concept holds that consumers will prefer products that offer most quality,

performance and innovative features. We will give them good quality, performance and a

new innovative feature (boiling and heating with a smart in-built cord).
When looking at the different purchase behaviours in a market there is some things we have

to think about and try to answer in this report. These are things like:

 What is the customer need or want, and why is it wanted.

 What kind of information does the customer seek, how much information do they need,

what kind of information is needed, what kind of information channels should be used

and in what form should the information be given.

 How does the receiver interpret this information, do they understand what the seller tries

to sell and is the information relevant for the customer.

 What determines the customer conduct, appreciation and preferences? What is important

for them?
 How to the buyers decide to purchase the product, and what happen after they have

bought it.

3.2 Differentiation

Our product is a cup that can heat up drinks, due to an electronic heating element inbuilt in it.

Some products like this are already in the market. But the special feature about this product is

that is has a power cable that can roll in and out from the cup and be connected to the main

240 Voltage power grid. This is the main differentiation this product offer to its consumers

compared to competitors. Consumers only need a water source and a power source to boil up

the water. They do not need a kitchen or a place where boiled water can be accessed. This

makes the product very handy and user-friendly.


3.3 Positioning against tea consumption

So who need a cup that can boil water wherever there is a power- and water source, do people

really need to have boiling water at any time? This is a good question, and it is here the

position part comes in the picture. We want to position our product up against the tea

consumption that exists in the market. From Berry’s[2] article made in 2009 we got different

information about tea. Tea is the world’s second most consumed beverage after water. Tea

has a history of being refreshment driven, but over the last 5 years there has been a significant

repositioning from being refreshment driven beverage to be a beverage which is rich in health

and wellness. It is thought to prevent aging of cells and to benefit the immune system, and it

can emotionally be used to provide a natural energy boost and give persons more relaxation.

Consumers are becoming more aware of the specific antioxidants that are found in tea. We

want to use this in our marketing strategy so that people can see the benefits of drinking tea,

and that our product can help them to drink more tea easier, cheaper and more often.
3.4 Segmentation and target market

We have to identify which parts of the market we can serve best. The questions to ask are

who drinks tea, where they drink tea and if they are willing to make their own tea.

 Geographic segmentation

We want to start offering our product in Sydney in Australia. This is the second largest city,

and since we are located closest to Sydney we find it less risky to start there.

 Demographic targeting

We will mainly focus on students, but also people that are focused on health and wellness,

with an age between 13 – 60 years. We know that many Chinese people lives in Sydney and

that they have a strong tea-culture, so we will target them as well. Instead of buying a cup of

tea every day for a high price, they can easily and cheap make it by themselves whenever it

suits them.
We assume that children up to 10 years will not need this product, since it involves hot water

and often do their parents make them what they need to drink. We also think that older people

use much time at home and make their hot drink in other ways. People working at offices at

daytime usually have machines that make them hot drinks. People in a high social class will

probably not use this product either, but rather go to a restaurant/coffee shop and buy their

hot drink there. The household will not be considered in our targeting, because they will

probably make their hot drinks in the kitchen with their kettle (automatic or not).

3.5 Collection of data

We have one product that is targeted against tea and other hot drinks consumption. It is hard

to find useful and relevant secondary data about this. Secondary data is information that

already exists somewhere and has being collected for another purpose. There has not been

done much research about what kind of cups the market wants and how they want them,
especially not for this purpose. So in this case we also need to collect primary data, which

consists of information that are being collected for the specific purpose.

To gather primary data we have used a structured questionnaire survey that aims for students.

The questionnaire was produced after we found out what segments we want to target and

what the competitive substitutes to our product are. Our sample size is only 12 students,

which is a too small sample size for reliable results so we should be careful drawing

conclusions from these. But we will get some main ideas, and it will make it easier for us to

do a bigger survey later; where we can use data programs like JMP to calculate the outcomes.

We asked 6 females and 6 males, and the survey question and results can be found in the

appendix for this report. We printed out with wrong price, but changed it with a pen before

sending it out to the students.


3.6 Six Market Research Questions

3.6.1 Market size

To start with we will sell our product in Sydney, trying to reach people between 15-60 years,

mainly students in the first round. All of our statistics are found at ABS webpage.[3]

The population in Australia is increasing for every year. From 30 June 2008 till 30 June 2009

Australia recorded 301 000 births, which is the highest recording since 1977. The population

growth rate in total for 2009 was 2.1%, which is the highest growth rate in 40 years. Sydney

is the second largest city in Australia, with a population of 4 119 000. In 2007 there was

about 930 000 students that studied in Sydney, counted from the secondary school and up to

the highest education level. The distributions of these students are like this:
Student distribution Sydney Numbers In percent
Secondary school 270 000 29%
Technical or further education 100 000 11%
institutions
Universities 180 000 19%
Other not stated educational 380 000 41%
institutions
Total 930 000 100%

Table 3-1

There are also 145 000 people from China living in Sydney, and many of these are students.
From our market survey we can see that no students use to make their own hot drink at

school. This means that we have a large market to enter in the beginning. If the product

becomes a success among students and Chinese people we will increase our market

geographically to the bigger cities in Australia. And if this will succeed we will expand our

business to the global market.

3.6.2 Market competition

In this case we only have one product to produce and sell, which makes it difficult for us to

find the exact competitors in the market. A competitor will often produce and sell many

different products in different categories. This makes it very hard for us to find some useful

secondary data. But market competition does not only consist of other firms that are

competing with each other with the same products and services; it also consists of substitutes

that are available in the market. A substitute is a product or service that offers a similar

benefit to the consumers, but by a different process.


The substitutes that compete with our cup are listed in the table under.

Table 3-2

Substitutes: Thermos bottles Coffee/tea Coffee/tea Cup warmers 1

machines shops/bars

Advantages + - Larger volume - No need to - No need to make - Keeps drinks

make it yourself it yourself warm

- No need for

- Often found - Often found at - Can place any


power source

many places at a some places at a cup on it


- No need for school school

water source

- Quick delivery - Medium quick

delivery time,
- No need for

depends on queue
bringing a own

cup or flavours

- No need for

bringing own cup

or flavours
- More social

- Good assortment

Disadvantages - - Need to make it - Costly - Very costly - Cannot boil

before it is needed water


- Assortment is

limited
- Need to have a

- Gets colder after


shop/bar available

some hours
- Need to have a

machine
- Gets quickly

- Not fresh available


cold
- Cannot make - Smaller volume

new when it is of drinks

empty - Gets quickly

cold

1
E.g. USB Cup Warmer [4]

This is our products main competition. What do the customers prefer; price, performance,

convenience or a mix of these? From our survey we can find that 83 % of the people drink

hot drinks at school. Most of them drink coffee (80%) and half of the asked drinks it now and

then while other half drinks a couple of day. When it comes to price half of the asked persons

find it important while the other half find it less important. An interesting finding in this

survey is that 80% of the asked persons purchase hot drinks from a coffee or tea shop, 20%
from a machine and no one brings or makes their own drinks. It should be a large potential in

this targeted student segment for our product.

3.6.3 Market trends

People do always need to drink water, it is a physiological need that they need for survival.

To consume this water most people use a glass, but when consuming tea most people use a

cup. We cannot imagine that the trend to use a cup for consuming tea will change. Since we

want to position our product up against tea consumption, we have to have a closer look at the

tea consumption trend, so that we can use this information in our further marketing process.

People have changed some of their lifestyle the past years and that seems to continue. People

are these days more concerned about the environment and their own health and wellness.
Sharma[5] has done a lot of research about market trends in the food market (beverages

included). He writes that the three most identified trends and drivers for functional food

innovations are pleasure, convenience and health[6]. Tea does match these criteria at a perfect

level; it has a great taste, the packing are small and convenient, it is available in every

convenient shop’s (gas stations included), and its state of nutrition is very good. Tea and

coffee products sales grew in the US by 4% from 2002-2003.

In the article Back to Basics[7] it is written that the herbs that one can find in tea has been used

for ages when it comes to medicinal purposes. Herbs are good source for nutrition that

contains substances that play a role in health and cancer prevention. The article describes an

increasing trend in the consumer market that wants a tea with all-natural remedies for modern

consumer’s health needs. Consumers are these days looking for beverages that not only taste

great, but also offers them some sort of health and wellness benefits.
This is a positive trend that we can use in our advertisement for the product. They can drink

healthy tea more often to a cheaper price.

According to ABS’ website the trend of people attending educational institutions and

finishing their education is increasing. The main growth is happening in the largest cities in

Australia (like Sydney). From 1996 – 2006 there was an increase of people attending an

educational institution in the major cities of about 6% - 7% in the age group 15-19 years and

5 % between 20-24 years.

Graphs from ABS website


Figure3-1

Projections for year 2056 estimate that Sydney will be the largest city in Australia followed

by Melbourne. The population of Australia is expected to rise between 24 and 33 million by

2051. All these trends are good news for our Smart-Cup.

3.6.4 Market price

Our market survey shows that 50% of the people that did not want to buy our cup (for

$40.10) said that the cup was too expensive. We have to convince these people that in the

long-term run a cup like ours will save them a lot of money. Since 100 % of the people in the

survey that drink hot drinks at school purchases the drinks from a machine or bar, we need to

find these prices and show them that there is a lot of money saved by making it themselves

instead of buying it. In the first table we will present the prices for our main competitor
substitutes, the coffee/tea bars and coffee/tea machines. Prices that are used in the table under

are observed at University of Wollongong in May 2010.

Prices main substitutes Tea Coffee Hot chocolate

Campos Coffee (2 shops) $3 $3.10 $3.60

Rush Coffee N/A $3 $3

Picasso Espresso Bar N/A $2.60 $2.80

Panizzi Café $3 $2.60 $2.90

Vending Machine $2.60 $2.60 $2.80

Average price $2.80 $2.80 $3.10

Table3-3

These prices are for small cups. Our survey shows that about 50% of the people purchase a

couple of drinks each day. If we use the smallest price, which is $2.80, and assume that every

student go to school at least 3 days a week they have to pay $2.80 * 2 * 3 = $16.80 every

week. A semester at school consists of 12-13 weeks, which mean they will be ending up
paying over $200 each semester just for purchasing hot drinks at school. This is useful

information for us to use in our advertisement campaigns.

Prices on some of the other substitutes to our cup are shown in the table under.

Other substitutes Price Comments

Mr Gadget USB Cup Warmer $ 15.95 Was apperantly $29. Need to boil water another way.

Another USB Cup Warmer * $ 19.95 Cost $25 in retail shop. Need to boil water another

way.

Thermos travel cup * $ 12 Smaller cup


Large thermos 1* $ 75.91

Large thermos 2* $ 94.05

* See “Substitute prices” for direct reference links[8]

Table 3-4

By having a look at all these prices our cup should be strongly competitive in the market

when it comes to the price.

3.6.5 Relative benefit product

Our cup has some special features that make it more beneficial compared to other cups. The

main benefit is that is easily and fast can boil up water. This is being done by plugging a cord

from to cup into the power outlet in the wall. The power cord and its plug are in-built in the

cup. The cord goes in and out from the cup with the same mechanism as in the vacuum
cleaner. This makes it very easy in use for the customers, since they not need to concern

about bringing a loose to plug in their cup.

Our cup has a button that makes it available to adjust the preferred temperature the user wants

the drink to hold. Maybe do the users want to make hot chocolate with milk without boiling

the milk (milk should not be boiled). Our product will give them this opportunity. There is

also a color system feature in our product, which shows the user what the temperature is in

the cup at any time. This is useful for the user since nobody like to drink the hot drink

immediately after it has been boiled. So instead of drinking a sip of the cup to find out if they

can drink it or not, they can just have a look at the color system that shows them the

temperature.
3.6.6 Market share goal

Our market share goal is 2% of all the students in Sydney which is about 20 000 people

within the first year. This is an acceptable and feasible goal, about 9 000 product sales after

break-even is reached (break-even circa 10 000). We have to do a lot of advertisement,

especially in the first year. The more market-share a business or product want to gain, the

more advertisement there must be done. We find that 2% market share shot not be too hard to

obtain. But we have to try to increase our market share quickly if this product become a

success. This is because we not want other companies to start competing against our product

by making the same product as we got.

After the first year we want to continuously gain more and more market share in Sydney, but

we will probably not need to advertise as much as the first year. The word-of-the-mouth is a

very strong and powerful communication among consumers, and we believe that this will
help us gain more market share in the future. This means that we do not need to communicate

as much to them by advertisement.

If we succeed in Sydney the first year, we will expand to Melbourne and go for the same

tactic down there; trying to gain 2% market share of the targeted students within the first

year.
3.7 SWOT Analysis

This analysis will identify the main strength, weaknesses, opportunities and threats that our

product faces.

Table 3-5 S.W.O.T Analysis

SWOT – analysis

Strengths: Weaknesses:

➢ Large market compared for us ➢ Cost to produce

➢ Not many competitors in the targeted ➢ Big and heavy compared to a regular

market cup
➢ Should be competitive with the ➢ New product in market

threatening substitutes
➢ Cannot be used in the washing

➢ Easy and handy to use


machine

➢ Practical in use, does not need hot ➢ Easy to copy

water; just cold water and an


➢ Poor equity and liquidity

power outlet

➢ Covers a small geographical part of

➢ Good positioning strategy, clearly


total Australian market

defined

➢ People drink more tea due to

health and wellness benefits

Opportunities: Threats:
➢ Expand to other market segments ➢ Aggressive and stronger

competitors
➢ Expand to other cities

➢ To high market share goals

➢ Expand to the global market

➢ Substitutes

➢ Goodwill in market

➢ Expanding business when it should

➢ Reach the positioning strategy goal


not be expanded

➢ Complaints

➢ Wrong positioning

➢ Our surveys are totally opposite of

the market

➢ Bad, wrong or poorly


advertisement

➢ Product cost analysis is not reliable

- cost over-run.

3.8 BCG Product Ratings

Market share and market growth are the two critical variables that forms the BCG Matrix.

The matrix is used to show in which category out of four a business is in, based on the

business’ market share and the market growth rate. A star is a preferred position, while a dog

is not a preferred position to be in.

BCG Matrix
Image taken from: http://www.cleptestreview.com/supporting-images/BCG-matrix.gif

Fig3-2

It is hard to decide what high and low share or growth mean in this situation.

We think that since our product is positioning against tea and it is a smart product that can be

used almost everywhere, there should be a high market growth for our product. Our market

share is very low, due to just offering our product in Sydney. Therefore will we place our

product into the question mark category. This is a question mark and wonders if our product
will gain a high market share and become a star, or it will lose market share and become a

cash cow. To become a start involves a lot of heavy investment, which is a problem for our

company in the beginning. So it is more likely that our product ends up in the cash cow

category if we not grow and expand very fast. This is due to aggressive and much stronger

competitors that maybe will produce similar products as ours.

But we have to try our best to get into the star category. If the market growth fails in a way,

we have to assure that we gain much market share so we not end up like dogs. Business in the

dog category is recommended to divestment or close down.

3.9 Strategies for product promotion

It is not enough for us to develop a new innovative product that we price low and make

available to our targeted students. Marketing also involve communicating the products value
proposition to the potential and actual buyers. To develop an effective communications and

promotion program we need to: identify the targeted marked; determine the communication

objectives; design a message; choose media through which to send a message; select a

message source; and collect feedback.

We will use a push strategy for the product to reach its market. This involve that we push the

product through the marketing channels and to the final customer.

Step 1: Identify the targeted marked

We are mainly targeting people that go to secondary school and upwards.


Step 2: Determine communication objectives

In this step we need to know where the target audience stands when it comes to the product.

Are they aware of it; do they know anything about it; do they like it; do they prefer it; do they

need to be convicted to buy it or do they need to be reminded to purchase the product. A cup

is definitely not a new product in the market, and people are not aware of it either. Our cup is

just a little bit different to other cups, but not so much that the audience not knows what it is

all about. The problem is if we should go for the stage that is about if people like our cup, or

if we should go for the preference part, where target audience like the product but not prefer

it to others (our substitutes).

After thinking about it for a while we find it most important to make the objective about the

preference part. When looking at the surveys, 50% of the people answered that they would
not purchase the cup due to high price. We have to convince them that this product is cheaper

to use than to buy hot drinks from a bar or a machine.

Step 3: Selecting a message

In this step we need to develop an effective message. This message should ideally get

attention, hold interest, arouse desire and obtain action (AIDA model). This part will include

three different parts: message content (what to say), message structure (logically) and

message format (symbolically).

 Message content

We will give a message that shows people our products benefits, showing its quality,

economy, value and performance. We will also try to involve an emotional appeal that

involves some love, joy and humour into our message.

 Message structure
We want to give the audience two-side argument and draw a conclusion for them. This two-

sided argument is the negative things about buying hot drinks and the good thing about

making it on their own - with our product.

 Message format

We need to have a strong format for our message. Since our starting market is in Sydney we

will only use printed ads to begin with. We want to attract attention, so we will use an eye-

catching picture and headline with a good colour balance. The message size will be medium

large.

3.10 Choosing Media

There are two broad types of communication channels, personal or non-personal. We will use

both the channels in our promotion, but mainly the non-personal channel. In a personal

channel two or more people communicate directly with each other, while in the non-personal
a message is sent out without personal contact or feedback. We are going to use signs,

posters, ads on buses, and webpage as our non-personal media selection. In our personal

communication we will have stands at the largest universities and schools.

3.10.1 Selecting the message source

Our message out to the audience has to be trustful and liked. To success with this we want to

add some quotes in our advertisement from nutrition experts that can say something about the

importance of the positive health effects by drinking a lot of tea. We may also make some

experts to say something about the environment effects of using own cup instead of using

paper cups for one-time usage.

3.10.2 Collecting feedback

We have to know the effects of our message after it has been sent. In this stage we will go out

to our customers and ask them personally about whether they remember the message; if they
remember the main points from it and if they liked it or not. How many did actually buy the

product? This will give us answer if our message (advertisement campaign) were successful

or not.
3.11 Design Product Brochure
Figure 3-3
CHAPTER FOUR-DESIGN PRODUCT COSTING

4.1 Design Product Selling Price

It is important to determine the design product selling price for launching and selling

commercial products to the business market. Design product selling price includes prime

cost, overhead and profit. Prime cost consists of direct labour and material cost, while

overhead cost including manufacturing, marketing, and general expenses. The selling price

equals the sum of primary cost, overheat expenses and target profit.
Table 4-1 Cost-Plus Selling Price for a Manufactured Product (Lemass, B. 2010,)

The temperature control devices and heating elements are purchase from outsourcing. The

cost of these equipments is based on the purchasing price. In our business, we produce the

inner and outer layers for the cup, and we assemble all the units by assembly line.

The volume of the cups is 500ml, and from the manufacturing point of view we use the

plastic injection moulding machine for manufacturing the inner layer, and apply the stainless

steel casting technology for the outer layer. The time for the plastic injection moulding time

is only 0.4 min, which is suitable for mass production, the time for casting products will last

for 3 minutes because the cooling time is much longer than the casting time. We applied the
assembly line for assembling the products. The production rate will be determined by the

slowest station, there are 8 working stations including altogether, all the components will be

assembled automatically. The production rate will be 1 product/min. The table below shows

the information of manufacturing cups

Process Time

Injection Moulding Process 0.4 min

Casting Process 3 min

Assembling Process 1 min

Other Transport Time 2 min

Total 6.4 min

Table 4-2
4.1.1 Prime Cost

4.1.1.1 Direct Labour Cost

From the report of major labour cost in industry released by ABS[9], employee earnings

accounted for 86.6% of total labour costs. Superannuation was the next largest component at

7.6%. Payroll tax and Workers' compensation costs were 2.9% and 2.2% respectively, while

Fringe benefits tax was the smallest component at 0.8% of total labour costs.

According to Employee Earnings and Hours [10], it can be found that average weekly earnings

paid for full-time non-managerial adult employees on manufacturing are $1057.

Based in the information above, the total of labour cost per week have been list in table 4-3

which are $1222.


Item Amount (A.U. $)

Employee weekly earning $1057

Superannuation $93

Payroll Tax $35

Workers’ Compensation $27

Fringe Benefits Tax $10

Total $1222

Table 4-3

There are 52 weeks in a year, so the total annual cost is $63544.

Annual Hours are 38 hours per week[11] with 52 weeks

Total annual hours=52×38=1976 hours

Calculation of leaving time has been list below.[12]

 Annual leave is 4 weeks=4×38=152 hours


 Sick leave 2 weeks=2×38=76 hours

 Public holidays 9 days=9×385=68.4 hours

 Long service leave 6 days=6×385=45.6 hours

Total deduction=342 hours

Actual Annual Hours is 1634 hours

True directly labour cost per hour =635441634=$38.89/hour

Because the production rate is 6.4min/unit

Annual production rate is 15319 units

So one direct labour cost=$4.15/unit

Because there are two workers working at the same time, so the direct labour cost of our

product is $8.3
4.1.1.2 Direct Material Cost

The material we applied for inner layer is polypropylene (P.P) which is the ideal material for

injection moulding machine. The volume of the cup we designed is 500ml, so the dimensions

and cost of the inner layer have been shown below.

Diameter 80mm

Height 150mm

Thickness 1mm

Volume of P.P 42.73cm3

Density of P.P 0.946g/cm3

Selling Price of P.P[13] $1322/tonne

Cost of P.P $0.05

Table 4-4
Because the design of the cup is double layers for insulation purpose, so the dimension of the

outer layer will be larger than the inner layer.

So the detail design and cost of the cup outer layer has shown below.

Diameter 10 cm

Height 14 cm

Thickness 0.1 cm

Volume of stainless steel 51.84cm3

Density of stainless steel 8000kg/m3

Selling price of stainless steel[14] $4354.2/tonne

Cost of stainless steel $1.82

Table 4-5

Design for the Lid of stainless steel

Outer Diameter 8 cm
Height 3 cm

Thickness 0.3cm

Volume of stainless steel 101cm3

Cost of stainless steel $3.54

Table 4-6

Items Costs ($)

Heating Coil Element[15] 10.3

Temperature Senor[16] 0.6

Plastic Inner Layer(P.P) 0.05

Chemical Components 0.6

Stainless Steel Outer Layer 1.82

Middle Relay 1.3

Fuse[17] 1.86

Stainless Steel for Lid 3.54


Total 20.07

Table 4-7 Cost of raw material components per unit

Fig 4-1

4.1.2 Expenses

4.1.2.1 Manufacturing Expenses

(a) Indirect labour:

 Supervisor Cost

Supervisor (brief/quality control) = $34/hour[18]

We do the quality control for 5 samples from 500 products, the time spend for quality control

is 48 minutes, so the cost of supervisors =$0.05/unit


 Security labour

The annual wages for security guards is from AU$36,281 - AU$47,816[19]

The security cost per year is $42048

The security cost= $2.75/unit

 Administration labour

Administration = $20/ hour[20]

The average administration time we spend on one batch of 500 products is 2 hours for the

paper work, shipment, and order time etc., so the cost of administration is= $0.08/unit

 Research and development labour

R&D cost= $10,000 per year

The cost of R&D for each unit=$0.65/unit

Indirect Labour Cost (A.U. $)/unit


Supervisor Cost 0.05

Security Labour 2.75

Administration Labour 0.08

R & D Labour 0.65

Total 3.53

Table 4-8

(b) Indirect material

The equipments being used in the factory are plastic injection moulding machine, stainless

steel casting machine, and components assembly line. All the equipment will last for 5 years

Item Cost (A.U. $)

Plastic Injection Moulding Machine[21] $35,000

Stainless Steel Casting Machine[22] $30,000

Assembly Line $35,000

Office Facilities[23] $5,000


Total $105,000

Table 4-9

The cost over 5 years = $105,000/5yrs = $21,000/yr

The units/year=1634hrs/6.4mins per unit=.15,319 units/year

Therefore, cost per unit = ($21,000/yrs) / (15,319 units/yr) = $1.37/unit

(c) Utilities

The price of electricity is 17.3cents/kwh.[24]

The total consumption of the electricity is 81Mwh/year

The electricity utilities=$14013/year

There are 8 people involved in the whole company.


Electricity, water and telephone fees = [($15,000/yr) / 8 people] / (15,319units/yr)

=$0.11/unit

(d) Insurances

Insurances, which include professional indemnity, theft, public risk and property damage, are

about $18,000/yr[25], because the insurance can be considered as fix cost.

Thus, the cost per unit = ($18,000/yr) / (15,319unit/yr)/(8 workers)= $0.15/unit

Therefore, the total manufacturing expenses = $(3.53+1.37+0.11+0.15) = $5.16/unit

4.1.2.2 Marketing Expenses

(a) Training

The training cost of health and safety is $3720.[26]

The training cost per unit = ($3720/year)/(15319unit/year)=$0.24/unit


(b) Business advertising & promotion

There are two types of advertising we choose, the first one is the web advertising, which cost

$275 per week[27], so the total cost is $14300

The second one is the bus advertising, which cost $300 per week[28] the cost for the whole

year is $15,600.

The cost of advertising & promoting of company is $29,900 per year, the amount of products

manufactured in one year is 15319 units

Advertising and promotion cost per unit is $1.95/unit

The total marketing expenses=$1.95+$0.24=$2.19/unit


4.1.2.3 General Expenses

There is no relationship between the general expenses and number of staffs, so when we just

divided the general expenses by number of units produced each year to get the general

expenses per unit.

a) Leasing

The leasing fee for the factory is $550/week+G.S.T which is 10%, which contains 262 sqm of

floor area & 110 Mezanine , kitchen & toilet facilities, Auto rollar door & 5 car parking

spaces.[29] So the cost of leasing for one year is $31,460.

So the leasing cost=$41600/15319 units=$2.05/unit

b) Accounting Cost
Because we decide to hire a professional accounting firm to do the financial report for our

company, the cost will be $5000 per year

The financial cost is $0.33/unit

c) Publication fee

The publication fee for one year is $2000

The publication fee per unit is $0.13/unit

The total general expenses for one unit is=(2.05+0.33+0.13)=$2.51/unit

According to our group literature research as it can be seen in Table 4-10, we could predict

the cost for producing Smart Cup including its initial cost, product R&D, manufacture and

general cost.
Items Cost (A$)
Direct material/ per unit 20.07
Direct labor/ per unit 8.3
Prime cost/ per unit 28.37
Manufacture overhead/ per unit 5.16
Market Expense/ per unit 2.19
General Expense/per unit 2.51
Cost/ per product 38.23
Selling Price 46.1
Table 4-10 Cost for producing Smart Cup

To determine a suitable selling price of our product, we use target profit method by assuming

a 20% profit. So we figure out that the selling price of each product is $46.1.The figure 4-2

shows the percentage of each cost which consisted of total selling price.

Fig 4-2

4.2 Break-even volume

According to Table shown below, TVC, TFC and TP can be calculated as:
Total Fixed Cost (A.U. $)

R&D Cost 10,000

Investment Cost 21,000

Administration Cost 44,182

Utilities 15,000

Insurance 18,000

Marketing Expense 33,620

General Expense 48,600

Total 190,402

Table 4-11

Variable Cost (A.U.$) per unit

Direct Labour Cost 8.3

Direct Material Cost 20.07


Total 28.37

Table 4-12

Variable Cost per unit (Total Direct Labor + Material Cost+ Q.C.) =$28.37/unit

Total Fixed Cost (Total Fixed Overhead Cost) =$190,402/year

Selling Price =$46.1

TFC + TVC = V.x

where: TFC: total fixed cost

TVC: total variable cost

V : output volume

X : selling price
From the previous calculation which is shown in direct material cost section, the selling price

is $46.10, and to calculate the total variable cost, it is essential to multiply the prime cost by

the output volume (V) as shown below:

– Total variable cost (TVC) = Prime cost * V

= $28.16/unit * V

– Total fixed cost (TVC) = $190402

– V.x = TFC + TVC

Then, since profit is included:

TFC+TVC = Vx

190402+28.37×V=46.10×V

Break-even amount V=10738


Finally, based on the above calculation the break-even volume will be 10738 units.

Fig 4-3

However, this values are just set based on theory, thus further financial decision should be

established under the consideration of changes Breakeven


and interestPoint
rate which are going to be

discussed in Chapter 7.

4.3 Cross Checking the Selling Price

For checking our design product selling price, we do the comparison between our prices with

other competitors’ price. The purpose is to avoid to lose the market share by too high pricing

and to keep maintaining a fair price.


We check our price with the similar function of cup that already existed in the market; the

information has been list below. From the table we found that there are most three types of

catalogues in the market. The first type is the kettle, which can heat the water but hard to

maintain the temperature, and not convenient to carry. The price is quite close to our product.

The second type is the traditional mug without heating function; where the main function is

to try to maintain the high temperature as long as possible. But the selling price is quite

cheaper. The third type is the mug which is quite similar to our products, but the disadvantage

is that the temperature is not adjustable, which means the liquid in the mug will be heated

into a certain temperature, which is not efficient. Based on the research above, we can say

that the price of our product is acceptable for the customers with its multifunction.
Items Costs (A.U. $)
Brugo Mug without heating[30] 30
Farberware FCP280 Millenium Automatic 70.8
Coffee Percolator With Automatic
Temperature Control[31]
Electric Kettle with Automatic Temperature 80
Control and Indicator Light[32]
Smart Travel Mug With Temperature 38
Control[33]
Our products 46.1

Table 4-13 Cup, Mug, Kettle Prices


CHAPTER-FIVE DESIGN PRODUCT RISK ASSESSMENT

Risk management is a process that identifies loss exposures faced by an organization and

selects the most appropriate techniques for treating such exposures. New creation such as an

innovation engineering design that enters current business market will provide a riskier

situation than others because new creation generally is an unknown product. For efficient risk

management, there are four steps included: identify loss exposures, analyse the loss

exposures, risk control, and implement and monitor the risk management program will be

utilized in this report.


5.1 Risk Identification

5.1.1 Risks exist in the product design

There are many technological problems should be solved in the innovation process. First of

all, the technology combine insulation with heating is a big challenge. Then, there are many

materials utilized in our design product. Materials choice is a key element to achieve

innovation success. All of the factors mentioned in the previous part maybe result the design

error which is a main risk resource in the innovation design. Furthermore, Intellectual

Property risk may involve investors for owing the novel invention of Smart Cup.

5.1.2 Risks exist in the product manufacturing

Health and safety risks should be considered in the manufacturing process. There are several

physical risks exist in the manufacturing process. Hazardous material may be harmful to the
workers’ health. Accidents such as explosion and fire may be happened during the

manufacturing process and not only injure the employee but also bring financial loss.

Furthermore, environment protection risk maybe exists due to the incorrect material

management. There are many different kinds of materials in the Smart Cup and the incorrect

mixture maybe result in pollution. If environment pollution happens, our company would not

only be punished by the government, but also damage the company’s reputation. Actually,

many companies ignore the responsibility of environment protection, as well as suffer huge

financial loss and damaged reputation.

At the same time, many evidences show that poor product quality result in increasing

manufacturing cost and customer dissatisfaction. Machine breakdown, workers’ mistake, and

poor quality of materials can cause the unqualified products. The other natural disaster such
as earthquake, flood, and hurricane should be considered, although the probability is very

low.

5.1.3 Risks exist in the marketing

Although marketing research was implemented before the product enters to the market, there

are still several risks exist. The future target market of our product is the whole global

market. As we know, customer habit and purchase power are different from one country to

another. At the same time, the government polices also heavily impact the marketing. The

risk of trade barriers due to the local government policies should be considered carefully.

Another risk exists in marketing due to the exchange rate. The exchange rate maybe

dramatically influence during a short period. However, the product price cannot be changed
frequently, and the dramatically change of exchange rate may result in poor performance of

marketing.

Finally, market is difficult to predict, although market trends had analyzed in the marketing

research. If the market trends become pessimistic, the product is hard to sell and it will bring

disaster to the company.

5.2 Risk Quantification

5.2.1 Quantification by probability and severity

Risk type Cause Severity Probability

Design error Lack of knowledge Medium Medium


Intellectual Cooperation with other company Low Low

property risk

Safety and health Hazardous materials, High High

Production safety accident

Environment Incorrect material management High Medium

pollution

Quality problem Machine breakdown, mistake of High High

worker, poor quality of materials

Natural disaster Earthquake, flood, hurricane High Low

Trade barriers Government policy High Medium

Exchange risk Influence of exchange rate Medium High

Market trends Demand decline High Low

Table 5-1
5.2.2 Decision tree

At the same time, in order to predict the outcomes of risk exist in the product of Smart cup,

the methodology of decision trees which provide useful information in representation of

possible decision taken and outcome results is implemented in this report.

In this report, we will take health and safety risk in the manufacturing process as an example

and use the decision tree to predict outcome.

As mentioned in the previous part of report, there are several causes to result in the health and

safety risk which will bring financial loss to company. And the following figure shows the

decision tree schematic on health and safety risks.


If do nothing, the probability of health and safety risk is 30%, and the loss is 50,000 dollars

per year

If more advanced equipment utilized in the manufacturing process, the cost is increased as

8,000 dollars and the probability of health and safety risk will decrease to 15% and the loss

declined to 40,000 dollars per year.

If enhance employee safety training, the cost is increased as 3,000 dollars and the probability

will decrease to 20% and loss declined to 45,000 dollars per year.

If more advanced equipment and employee training implement at the same time, the cost is

increased as 11,000 dollars and the probability will decline to 5% and loss declined to 15,000

dollars
If do nothing EMV=50,000*30%=15,000

If utilize advanced equipment EMV=8,000+40,000*15%=14,000

If enhance training EMV=3,000+45,000*20%=12,000

If utilize advanced equipment and enhance training EMV=11,000+15,000*5%=11750

Comparison those outcome, the more advanced equipment and enhance training method

should be taken to reduce the potential financial loss which from the health and safety risk in

the manufacturing process. The decision tree as follow:


Fig 5-1

a 1 means do nothing

a 2 means utilize advanced equipment

a 3 means enhance training

a 4 means utilize advanced equipment and enhance training

a 11 means risk happen

a 12 means risk not happen


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

5.3 Risk protection and insurance

There are three categories which include avoidance, mitigation, and acceptance in risk

protection. Avoidance means that specific threats are avoided by eliminating the cause of

risks. Mitigation means that threats are offset by reducing the EMV (Expected Monetary

Value) of a risk event by either lowering the probability of undesirable occurrence or

reducing the risk events. Next, acceptance means that specific threats are actively or passively

accepted.
As defined in the previous part of the report, to control risk effectively and efficiently, all the

risks can be divided to three parts. The detail information as follow:

Level Condition Categories

First High probability, high Quality risk, health and safety

severity risk, environment pollution,

Second Medium probability and/or Design error, exchange rate,

moderate severity

Third Low probability and Natural disaster, market trends

limited severity

Table 5-2

The first level of risk which has high probability and high severity should be handled at the

highest priority. Some risks such as environment risk can be avoided by using non-toxic
materials. Other risks such as health and safety risk can be mitigated by using advanced

equipment and enhance employee training.

At the same time, assurance can be used for risk sharing and risk transfer. The main function

of insurance is the creation of the counterpart of risk, which is security. It can reduce the

probability of financial loss connected with the event.


CHAPTER SIX-DESIGN TEAM

MOTIVATION AND INTERNAL

STRUCTURE

6.1 Needs Assessment and Design Team Role

Group members’ motivation is the most vital element for accomplishing team’s goal

successfully which is based on their basic ability of skills, knowledge and experience.

Motivation’s contribution to business success has been increasingly recognized by the

management authorities. In the fast-growing and intensive competitive environment the

motivation is undoubtedly becoming more and more significant for business management.

Table 1 shows the relationship between motivation, ability and performance. It is noticeably

apparent that high levels of motivation and ability will result in high levels of performance.

The area of High Performance is what is desired most by the management.


Table 6-1 Relationship between motivation, ability and performance (Brett Lemass)

Abraham Maslow, a USA famous psychologist, developed the Hierarchy of Needs model in

1940-50s. Maslow divides the human needs into five levels which are shown on the

following hierarchy pyramid. The bottom level is the most basic survival need that everyone

experiences then to the top of the most superior level. According to his theory, human

motivations are driven and end up with the satisfaction of their needs.
Figure 6-2

The needs in any single group only become an important motivation factor when the needs in

all groups below have reached an acceptable level of satisfaction. For example, a person will

have little motivation toward the need to social need if his basic security or physiological

needs are unsatisfied” (Brett Lemass)


Take the physiological need as an example which is the basic need for human to sustain life,

when a person is hungry, he starts to think about food firstly. If this need is not satisfied the

tension relative to hungry is raised until he finds food to satisfy his starving need. Once an

individual has moved up toward the above level, all of needs in lower levels have been

pleased. If needs under lower levels are not met, the individual would be trying to pay

attention on the unsatisfied lower and basic needs.

For the highest level of self-actualization, self-actualizers are mainly focused on self-

actualizing but are still motivated to eat and socialize. Similarly, homeless folk whose main

focus is feeding themselves and finding shelter for the night can also be, albeit to a lesser

extent, still concerned with social relationships of how their friends perceive them, and even

the meaning of life.[34]


Although Maslow’s theory created more than half an century ago, its explanations and

interpretations of the human condition remain fundamentally helpful and significant in

understanding and addressing all sorts of social and individual relevant behaviours

surrounding our modern world in terms of workplace management. In the Maslow’s self-

actualization, it sees problems in terms of challenges and situations requiring solutions, rather

than sees problems as personal complaints or excuses. Democratically, it prefers a fair and

non-discriminating that is embracing and enjoying all cultures, races and individual styles. It

advocates a combination of reliant on own experiences and judgment (independent) and also

reliant on culture and environment to form opinions and views. It encourages creative,

inventive and original ideas. It also encourages people excitement and interest in everything,

even ordinary things. It seeks comfortable with oneself despite any unconventional

tendencies. It is in favour of a few closer intimate friends rather than many surface

relationships.
Maslow’s concept has been used increasingly as an effective way to help people deal with

depression, low self-esteem, poor life circumstances, etc., help themselves to improve and

develop more effectively and profitably. The theory remains valid today for understanding

human motivation, management training, and personal development.

Maslow's work and ideas extend far beyond the Hierarchy of Needs. Maslow's concept of

self-actualization relates directly to the present day challenges and opportunities for

employers and organizations that are to provide real meaning, purpose and true personal

development for their employees, for life - not just for work. Maslow saw the fact that

employees have a basic human need and a right to strive for self-actualization, just as much

as the corporate directors and owners do fifty years ago. Increasingly, the successful

organizations and employers will be those who genuinely care about, understand, encourage

and enable their people's personal growth towards self-actualization the way beyond

traditional work-related training and development, and of course way beyond old-style
management autocracy which still forms the basis of much organized employment today. The

best modern employers and organizations are beginning to learn at last: that sustainable

success is built on a serious and compassionate commitment to helping people identify,

pursue and reach their own personal unique potential self-actualization. In fact virtually all

personal growth, whether in a hobby, a special talent or interest, or a new experience,

produces new skills, attributes, behaviours and wisdom that is directly transferable to any sort

of job role. The best modern employers recognize this and as such offer development support

to their staff in any direction whatsoever that the person seeks to grow and become more

fulfilled. Maslow is obviously most famous for his Hierarchy of Needs theory, rightly so,

because it is a wonderfully simple and elegant model for understanding so many aspects of

human motivation, especially in the workplace.

It is apparent that the group motivation is driven by how well the team is organized and how

suitable its environment is set to meet the needs of its members. Although the needs vary
from one member to another some may have achieved certain personal objectives and are

searching for social need, some may seek for the self-actualization need through the

leadership in their job. Therefore an organization should pay positive attention to focus on its

employees and create the atmosphere to gain a win-win result of fulfilling the individual

needs and company’s goal throughout the business practice.

To encourage cohesion between team members, a “Needs Assessment” for group members

should be studied before the project starts in terms to build the basis for achieving the ideal

performance during the project process and to manage the human resources effectively and

efficiently. Based on individual member’s characteristics the needs assessment for group

members on physiological, security, social, esteem and self-actualization consideration are

listed in the below chart.


6.1.1 Needs assessment of group member

Physiological ➢ Suitable working environment

➢ Appropriate length of working

➢ Fitting infrastructure and equipment

➢ Flexible working time which could fit

for personal agenda

➢ Physical demands in the work

Security ➢ Protection of working environment

➢ Security of employment
➢ Regular pay

➢ Superannuation

➢ Sick leave and other working related

service leaves

Social ➢ Friendly working environment

➢ Pleasant social interaction &

recreation with colleagues and friends

➢ Proud of being part of the team and

the business.

Esteem ➢ Confidence on completing their job

➢ Authority and responsibility for job


➢ Recognition from business and

Colleagues

➢ Enjoy the obligation and right

➢ Collective goals and shares of

knowledge and joys

➢ Rewards, admiration and benefits from

their job

Self-actualization ➢ Chance on improving ability to

decision-making

➢ Joyful satisfaction from job fulfillment


➢ Great chance for promotion and

challenging working condition

Table 6-2

In order to fulfil the job successfully, the tasks have been divided into six part, every group

member undertakes about one part according to the individual’s characteristics and personal

needs description for team members. If the needs of each member are satisfied then the

motivation will be encouraged to accomplish the job productively. Below is the chart about

the responsibility of each group members.

6.1.2 Responsibility of group members

Group member Responsibility

Xuedan Pan In charge of product selection, including integrating all of the resources,
making decision when group confront problem, making timetable and

dividing tasks for each member.

Responsible in group motivation and internal structures. Including

collecting motivation data from existing industry, creating needs

assessment of group members, analyzing the researched comparative

benefit of our design product business structure and providing logical

organization charts for the 1st and 3rd year of business operation.

Per Morten In charge of conception of flashlight, sketch-ups, design product market

Bjerkli research, including market research with six market question, collecting

data form market, analyzing the current marketing situation and SWOT

analysis, BCG product ratings, promoting strategies for design product. He

makes the brooches and presentation in week 13.


Jiaqi Pan In charge of design product costing, including collecting cost data,

benchmarking the similar product price such as labour cost, material cost,

as well as deciding price of our product using either cost-plus or

breakeven or target profit methods.

Weichun Gong In charge of design product risk assessment, including collecting risk

assessment in similar industry, benchmarking the risk between comparable

company, identifying and assessing the risk in product statement, making

risk quantification and risk insurance for our final product.

Lu Jiang Responsible in conceptualization approaches for products, lighting our

product technological advancement, creating weighted constraint matrix,

finishing the product concept embodiment sketches by using Sketch up

and making design product brochure.


Jinyu Cui Responsible in design product financial management plan, including

researching capital investment and initial cost in comparable company,

analyzing the monthly operating costs, making and providing the profit

realization time and appropriate financial strategy of our final product.

Table 6-3

6.2 The Researched Comparative Benefits of Design Product Business

Structure

When deciding what structure to choose for business such factors as taxation, type and size of

business, compliance requirements, insurance cover, finance requirements and establishment

costs should be considered which will influence the decision on the business structure.

According to the Industry & Investment NSW regulation[35], the most common business

structures are sole trader, partnership, proprietary limited company, association and co-
operative. The main features and major legal requirements for each type of business are listed

in table 6-4. Additionally, as the businesses grow up the business structure could be changed

accordingly. Each business structure has different characteristics. The income tax for

company is 30% in Australia except the Sole Trader whose tax is paid at personal tax rates

which means the owner of the business might pay tax less than or more than 30% depending

on his total income.[36] Detailed tax regulation can be found from the Industry & Investment

NSW and ATO website.


Business Features and main legal requirements

Structure

A sole trade is a person carrying on his or her own business as an

individual. The business can have employees like any other kind of

business. This is the simplest and least expensive business structure to set

Sole trader
up. No requirement to disclose any financial details to the public, which

means that the business has privacy.

A partnership is defined by the Partnership Act 1892 (NSW) as the

relationship which exists between persons carrying on a business in


Partnership

common with a view to profit. It is often called as a firm. The business

can have employees. The firm may have a maximum of twenty members.

It involves an agreement between two or more parties to enter into a


legally binding relationship and is essentially contractual in nature.

It is a privately-owned company as distinct from a publicly-owned one,

limited by shares and with issued share capital. Its name ends in the words

“Pty Ltd” regulated under The Corporation Act and Law 2001.

Proprietary

A private company is a more complex business structure formed by one or


limited

more people who wish to have a business that is a separate legal entity to
company

themselves. It runs by directors and owned by shareholders.

A minimum of one director, a minimum of one shareholder and maximum

of 50 non-employees shareholders. A public officer appointed for income

tax purposes.

An association is an alternative to forming a company for small non-profit


Association groups. It has similar advantages as a company but is not as expensive to

set up or legally maintain. An association can trade but this cannot be its

main objective. Any profit from the trading should be put back into the

association and not given to its members.

A co-operative is a form of business organization which is member-

owned. It must consist of five or more people. Co-operatives are

distinctive for fostering a democratic style of work, pooling resources to

Cooperative
be more competitive, and sharing skills. Co-operatives supply goods and

services to their members or to the general public in areas as diverse as

retailing, manufacturing, labor hire, printing and agriculture.

Table 6-4
Compared the features of each business structure, we have the results: at the beginning stage

of the business, the partnership business structure will be chosen because its comparative

benefits and suitability to our new business to set up. Here the advantages and disadvantages

comparison for the first three structures are shown in the following table.

Advantages Disadvantages

The simplest and cheapest ownership Have unlimited liability for the debts.

Sole trader structure to establish and operate under.

Exclusively owns and controls the Afford all the strains. May no

business, makes decision by himself. holidays.

Any profit belongs to the trader personally. Any loss is the owner’s liability

personally.
Partnership Can arise more capital to run the business. Share the profits of it.

Each as a principal can make decision and Sometimes it is hard to make a

run it together. decision.

Share each as an agent for the other, have Each is bound by the other’s contract.

more relax time.

Share the strains and risk together.

Can have a holiday in turn.

Proprietary Can arise more capital to run the business Cannot raise funds by inviting the

Company and make more profit. public to invest in it.

Can make decision and run it together. Share the profits of it.

Share the strains and risk together. Sometimes it is hard to make a


decision.

Can keep personal assets separate from the Risk is higher.

business.

Can have a holiday. Each is bound by the company’s

contract.

Table 6-5

6.3 Logical Organization Charts of the 1st and 3rd Year of Business

Operation

At the beginning operation of our company, the business will include four main departments

which are design, marketing, human resource, manufacturing department. Design department

is in charge of the product design and innovation together with the manufacturing

department. Marketing department will research the market to integrate the customer needs of
market which is one of the critical elements for further operation. Human resource

department is responsible for management of employees. Manufacturing department is in

charge of the whole in-house and outsourcing and assembly business related to products. The

company’s structure of first year is shown below. We will focus on the market around such as

Wollongong and Sydney then if we succeed in Sydney the first year, we would expand to

Melbourne and go for the same tactic down there.

Organization chart of the 1st year

Fig 6-3

At the third year, the business would be consolidated and progressed so the business structure

has to be changed accordingly. The new departments and added functions to the existing

departments are shown below. Marketing department will be of China, USA and New
Zealand due to the globalization of the business. Financial department will provide support

on detailed financial plan data and objectives, assess the costs and profit of new product and

company, as well as provide specific effective financial management strategies to run

business. The QC (Quality control), procurement, in-house and outsourcing and assembly

branches are added to the manufacturing department. After-sales service department would

be set to improve the service quality and get feedback from clients. The company’s structure

of third year is shown below.


Organization chart of the 3rd year

Fig 6-4
CHAPTER SEVEN- DESIGN FINANCIAL

MANAGEMENT PLAN

7.1 Researched Capital Investment and Initial Costs

In this chapter, we did the basic research of the capital investment, initial costs and monthly

operation costs which would support our financial management plan. Because of the structure

of our business is quite small, so the capital investment and initial cost is limited. In order to

achieve the success of our product, we decided to get the financial support by bank loan. The

benefits are quite obvious that we have enough funds to purchase the flexible machine,

advertise our product into the new market and provide good quality of customer services.

Based on the information provided by NAB, the detail business loan and interest and

principal annual repayment has been calculated and list on the table.[37]
7.1.1 Business Loan Index

Item Value

Loan Amount $200,000

Loan Term 60months

Payment Frequency Monthly

Interest Rate (APR) 10.23%

Monthly Service Fee $100.00

Application Fee $1875

Monthly Payment $4372

Table 7-1
The information of bank loan is got from NAB Business Center, Wollongong.[38]

7.1.2 Interest and Principal Annual Repayment

Year Beginning Interest Principal Annual Ending

Balance Charged Payment Payment Balance

1 200,000 21,440 32,294 53,734 167,706

2 167,706 17,978 35,756 53,734 131,950

3 131,950 14,145 39,589 53,734 92,361

4 92,361 9,901 43,833 53,734 48,528

5 48,528 5,202 48,532 53,734 0


Table 7-2

Our capital cost includes the purchase of machine, training, office equipment and so on,

which will be list below.

Capital Cost Costs (A$)

Legal & licenses Fee $1,000

Training $3,720

Electricity and telephone $500

installation

Office equipment $5,000

Vehicles $30,000

Purchase of machine $100,000

Security system $1,500

Business structure $10,000

Application fee $1,875

Bank Loan Deposit $15,000

Building Cost $10,000


Total cost $178,595

Table 7-3 Researched capital costs investment

The calculation of initial cost of our company is based on the period of one year. The

information of initial cost is provided by the table below.

Initial Cost Costs (A$)

Wages $54,964
Initial promotion $14,300

Lease $31,460

Loan Establishment $15,000

Electricity, gas & telephone $500

Stationary and office supplies $5,000

Computer software $5,000

Statutory charges $1,000

Association member fee $1,000

Insurance $18,000

Printing and artwork $5,000

Total Cost $151,224

Table 7-4 Researched initial costs investment

7.2 Researched Monthly Operating Costs

Next, Table 7.3 illustrates a researched monthly operation cost of manufacturing and

marketing the Smart cup product for the first three months.
Item Month 1 Month 2 Month 3

Leasing 2420 2420 2420

Outgoings 500 500 500

Wages 33842 33842 33842

Staff amenities 50 50 50

Advertising 2300 2300 2300

Wrapping 500 500 500

Maintenance & Repair 1000 1000 1000

Electric & Gas 1250 1250 1250

Waste disposal 300 300 300

Workcover 200 200 200

Monthly Service by NAB 100 100 100

Payroll tax 140 140 140

Capital repayment 4478 4478 4478

Motor vehicle expenses 100 100 100

Accounting fee 417 417 417

Travel & 300 300 300

Accommodation

Subscription 200 200 200


Legal fee 200 200 200

Total 48297 48297 48297

Table 7-5 Researched monthly operating costs (in A.U $)

7.3 Profit Realization Time

Due to the huge requirements of the Smart cup and its new concept design, we anticipated the

sales volume of our cups would be 20,000 each year, so the revenue of our company would

be $922000. So the cash flow statement of our company has been list below, the

corresponding net present value of our company has been calculated as well. The annual

discount rate we applied is 12% which equal to the sum of rate of inflation (5.4%) and bank

interest rate (6.5%)

Item  Year 0 Year 1 Year 2 Year 3 Year 4 Year 5


Revenue   922000 922000 922000 922000 922000

Cost   579564 579564 579564 579564 579564

Net Cash   342436 342436 342436 342436 342436

Flow

Initial cost -151224          

Capital cost -178595          

Borrowed -200,000          

Fund

NPV of each -529819 285363 237803 198169 165141 137617

year

Table 7-6 Annual Income Statement

Finally, a payback period could be predicted at the end of third year in where the net present

value changes from negative to positive. After year 3, it could be a good time for us to

expand our market share and the size of our company; we can promote our product into the

global market.
CHAPTER EIGHT-CONCLUSION AND

RECOMMENDATION

In summary, through the preceding analysis on product conceptualization by utilizing a series

methodology from product concept design to financial management, we have strong

confidence that the Smart Cup product is viable and will have a great potential success in the

future. One major reason is that consumers are these days looking for beverages that not only

taste great, but also offers them some sort of health and wellness benefits. Moreover they can

drink healthy tea more often to a cheaper price. We need to convince the students that in the

long-term run a cup like ours will save them a lot of money.

Although we define that the Smart Cup has an increasing market, due to ever-changing

environment such as the varying economic environment and increasing technology


innovation, the actual market trend would still keep dynamic and uncertain. Logically, in our

assessment, most of materials are bought overseas so situations such as influence of exchange

rate and material prices variation were ignored. All of those will impact on the business

success of the Smart Cup. We should bear in mind of those limitations so adjusting our

business strategies dynamically.

So for recommendation, as our business expansion, many unpredictable conditions maybe

have negative effects on the business success. In order to create and maintain core

competences, continual innovation for our product, dynamic quality management and risk

management should be implemented. Furthermore, methodologies such as PESTEL and Five

force analyses would be used in company’s strategic management to help us continuously

keep up with the vibrant and growing market.


Our group are satisfied with the work in this report. We have reached our goal in developing

an engineering design product from preliminary concept to a final product detail design. We

think that our Smart-Cup will be a great success in our targeted markets, with a smart

position strategy up against the tea market. We believe that we can gain a high market share

in the global market in the future with this product.


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http://www.fairtrading.nsw.gov.au/Businesses/Business_structures.html.

37. Park, C. S. 2007, Contemporary Engineering Economics, fourth edition, Pearson Prentice

Hall, New Jersey.

38. Predl, N 2010, email, 25 May 2010, npredl@nab.com.au.

Bibliography

 Lemass, B., 2010, Lecture Note, University of Wollongong.

 Kotler, A, Denize, A 2009, Principles of Marketing, 4th edition, Pearson Education

Limited, Australia.
Appendix-I Market Survey in ENGG 950 -

Innovation and Design 2010

This survey is for students only.

Gender: Female Male

Age: 17-20 years 21-25 years Over 25 years

Do you drink any hot drinks at school?

Yes No
If No, jump to last question.

What do you usually drink?

Tea Coffee Hot chocolate

How often do you drink this?

Couple of drinks each day Circa one each day Sometimes now and then

Where do purchase these drinks?


Coffee/tea bar Bring or make my own Hot drinks machine

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

(3 is most important and 0 is not important at all)

LAST QUESTION:

If a product came to the market where you could boil your own water in a cup by easily

plugging it into the power outlet, would you be interested in using that product at a cost of

$25?
YES NO

If NO why not:

THANK YOU VERY MUCH FOR ANSWERING THE QUESTIONS

Results from the market survey

Gender Number Percent

Females 6 50 %

Males 6 50 %
Sum 12 100 %

Age Number Percent

17 – 20 years 7 58 %

21 – 25 years 4 33 %

Over 25 years 1 9%

Sum 12 100 %

Do you drink hot drinks at school? Number Percent


Yes 10 83 %

No 2 17 %

Sum 12 100 %

What do you usually drink? Number Percent

Tea 1 10 %

Coffee 8 80 %

Hot chocolate 1 10 %

Sum 10 100%
How often do you drink this? Number Percent

Couple each day 5 50 %

Circa one per day 1 10 %

Sometimes now and then 4 40 %

Sum 10 100 %

Where do you purchase these drinks? Number Percent

Coffee/tea bar 8 80 %
Bring or make my own 0 0%

Hot drinks machine 2 20%

Sum 10 100 %

How important is the price when Number Percent

purchasing from a bar or machine?

0 0%

1 4,5 45 %

2 5 50 %

3 0.5 5%
Sum 10 100 %

LAST QUESTION: Would you buy a Number Percent

cup like our or not?

YES 6 50 %

NO 6 50 %

Sum 12 100 %

Reasons for not being interested in the cup:

- Too expensive (3 persons)


- If there is a power outlet she may as well have a kettle (1 person)

- No power outlet where this person usually are (1 person)

- Open drink are not allowed (1 person)

- Laziness, would rather throw the cups away rather than washing them

One person says NO, but is maybe interested on these criteria:

- Depends on the design of the cup

- Depends on the cord connected to the cup. Don’t want a cord dangling off it.

Persons answering YES say that:


- As long as it is very small and portable (1 person)

- It has to be easy to use (1 person)