You are about to start a new company that will enter the international microcomputer business.
As the executive team, you will provide the seed capital (investment money) to start up your business. You can use this money to build a factory, open sales offices, and design brands. You will invest 1,000,000 in each of the first four quarters. Your executive team has the next 2 years (eight quarters or decision periods) to get the company off the ground. Within this time frame, you should become a self-sufficient firm, earning substantial profits from your operations. Your goal is to be the best competitor in the marketplace.
You will have the capability of introducing a new line of microcomputers into 20 international markets.
Within the PC industry, other firms will be entering the market at the same time. The microcomputer industry is in the introductory stage of the product life cycle. There is no history and there are no established competitors. All competitors, including your own company, will start with exactly the same resources and knowledge of the market.
All manufacturers will sell through company-owned sales offices in twenty major metropolitan markets around the world and also via a web channel. Your target market will be the business sector. You will not be selling to the home market and you will not sell through retail stores. Thus, your business strategy will be tightly focused on direct sales to business customers.
The international market is in constant flux. Market potential will rise and fall according to local and worldwide economic conditions. The fluctuating economic situation will, in turn, affect the exchange rates between regions. Changes in both the economic conditions and the exchange rates will impact the attractiveness and cost of business in each market.
There are five market segments to serve in the PC market. They are referred to as the Cost Cutter, Innovator, Mercedes, Workhorse, and Traveler segments.
The Cost Cutter segment is a large segment that needs a computer that's very easy to use for basic office applications. The segment is extremely price sensitive.
The Workhorse segment is the largest group of customers. They want a PC for a variety of office workers to use. It should have substantial capability and flexibility, although not top of the line. Ease of use is more important than high performance. It should also be modestly priced.
The Innovator segment is a small segment that needs a computer to handle large computational problems (accounting, inventory management, engineering). This segment wants the latest technology and will pay a small premium for this high performance.
The Mercedes segment is looking for a high performance computer to use in sophisticated engineering and manufacturing applications. Mercedes customers are willing to pay substantially more for high performance.
The Traveler segment wants a practical computer to use on the road. Traveler customers are executives and sales people who travel a great deal. This segment is moderately price sensitive.
The five segments are portrayed in the accompanying graph. The circles are positioned to indicate the price and performance requirements of each segment. The size of the segment is portrayed by the size of the circle.
Each segment has different needs and wants and requires a different market strategy to appeal to it. One of your first decisions will be to select two initial segments to target. Having selected your target markets, you will develop and then execute a very focused strategy to profitably serve those segments.
DIRECTIONS FOR QUARTER 2: Each team must prepare a Ã¢â‚¬Å“Memo to the Board ChairmanÃ¢â‚¬Â. The memo explains current strategic thinking and a brief description of the current quarter decisions.
As part of your experiential learning exercise, the memo involves applying effective communication. Keep in mind what you want the board chairman to know in order to reply with meaningful comments. What the chairman cannot do is anticipate your reasoning for the decisions. The memo should provide a perspective of the teamÃ¢â‚¬â„¢s strategic thinking, as well as the resulting tactical decisions. For example, what is your overall market segment strategy, and how does that result in the segments selected for the test market? What is your overall strategic approach to geographic markets, and how does that relate to the selection of sales office locations. In other words, describe your strategy and how you derived your tactics to implement the strategy. The memo is not a lengthy document. The memo can be well done within two or three pages.
The following is a brief outline of basic memo components. Headings are important.
1- Overall Strategy: What is your general approach to the market? For example, do you plan to aggressively pursue high-end technology users, or will you employ a penetration strategy to develop a volume business among customers with lower technology requirements? What overall goals and objectives do you have at this stage of business development? The strategic planning links in Marketplace help guide your overall strategy development, but you can use knowledge acquired in your education program and your experience to support decisions.
2- Target Segments: How did you select target segments for the coming quarter based on your overall strategy?
3- Product Designs: The chairman does not need to see the designs. Rather, what is your brand strategy? What brands did you design, and how did you utilize available market research to design those brands?
4- Advertising: What is your marketing communication strategy? What ads did you design, and how did you use available market research to design and place those ads?
5- Pricing: Pricing works several ways in your plans. What is your pricing strategy? How did you set prices and make decisions about price adjustments (rebates) based on your strategy? What, if any, financial implications came to bear on the pricing decisions?
6- Sales Channels: What is your geographic market development strategy? How did you select sales office locations/web center locations based on that strategy? Remember to include staffing /web feature decisions for the current quarter, as well as openings for the coming quarter.
7- Manufacturing: Again, what is your overall strategy regarding market development.
How did you project demand for the current period based on your strategy? What is your projected demand for the current quarter, and how is that reflected in your planning for fixed capacity? How are you managing production to meet demand?
8- Financial Planning: How will your projected financial results support your overall strategy?
9- Human Resources: Before you begin to make tactical decisions, it is important to have an overall human resource strategy to guide these tactical decisions. Review the available information on employee compensation by region and then formulate your human resource strategy. You need to advise the sales channel and manufacturing executives regarding the compensation tradeoffs of different sales outlet and factory locations.
HUMAN RESOURCES COMPENSATION PACKAGES
Industry Sales Force Compensation DATABYTE, Inc.
There is a compensation package for all of your sales people. The package includes an annual salary, health benefits, vacation time and a contribution to the employees' pension fund.
There is great competition among employers for the best sales people. Thus, your ability to recruit and retain the best employees will be directly affected by how well your compensation package compares to your competition and the norm for the electronics industry. The higher you are above the norm, the more motivated your employees will be to succeed, and consequently, create more demand for your products.
In the table below, you will find the typical salary, health benefits, vacation and pension for all international electronic firms. This set includes sellers of computers, photocopiers, telephones, pagers, etc.
The importance value indicates how strongly the sales people feel about improvements in each area of their compensation package. You can expect these numbers to change over time.
Industry Factory Worker Compensation DATABYTE, Inc.
There is a compensation package for all of your factory workers. The package includes an annual salary, health benefits, vacation time and a contribution to the employees' pension fund.
There is great competition among employers for the best factory workers. Thus, your ability to recruit and retain the best employees will be directly affected by how well your compensation package compares to your competition and the norm for the electronics industry. The higher you are above the norm, the more motivated your employees will be to succeed, and consequently, the more effective they will be on the production line.
In the table below, you will find the typical compensation package for the electronics industry factory workers in the general area of your factory. This set includes manufacturers and distributors of computers, photocopiers, telephones, pagers, etc.
The importance value indicates how strongly the factory workers feel about improvements in each area of their compensation package. You can expect these numbers to change over time.