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Overview

Quarter 1: Organize the firm and set up shop

Name the company.

Sell 2,000,000 in stock.

Assign corporate responsibilities to the team.

Establish personal goals, team norms, decision-making process.

Analyze the market survey.

Establish corporate goals and overall business strategy.

Choose the target segments.

Design a brand for each target segment.

Schedule the opening of the first sales office.

Build a factory.

Quarter 2: Go to test market

Sell 1,000,000 in stock to executive team.

Establish employee compensation packages.

Hire factory workers and sales and service personnel.

Review brand design for each target segment.

Establish brand price and priority.

Design an advertising campaign.

Select your web marketing tactics (if appropriate).

Schedule production.

Purchase market research.

Quarter 3: Skillful adjustment and market expansion

Sell 1,000,000 in stock.

Review the market, financial and production data from the test market.

Adjust the firm's strategy and tactics (brand design, pricing, advertising, sales and service personnel, web
marketing tactics, compensation packages, production) as needed.
Review also financial and production data from the test market.

Schedule the opening of a new sales office if you choose.

Quarter 4: Invest in the future

Prepare a business plan and seek investment from venture capitalists

Invest in research and development in order to introduce new brand features to the market.

Substantially expand market coverage by adding web tactics, new sales offices, and new factory capacity

Adjust the firm's strategy and tactics (brand design, pricing, advertising, sales and service personnel, web
marketing, factory workers, development of human capital, production) as needed.

Quarter 5: Expand the business strategy

Study the market, financial, and production data to determine how to better meet customer needs, motivate
employees, improve production economies, add to the bottom line and surpass the competition.
Introduce new brands with the new R&D

Continue with market expansion by adding sales people, new offices, new internet capabilities, and production.

Explore licensing opportunities and the development of strategic alliances.

Quarter 6: Refine the business strategy

Study the market, financial, and production data.

Adjust the firm's strategy and tactics as needed.

This represents the whole of the world you will compete in. From this point forward, you will receive information as you need
it. You will also be given an ever-expanding set of decisions to make. The sequence follows the way in which an
entrepreneurial firm develops a new market in the real world.
Getting Started:
Now that you have a feeling for the business in which you will compete, take a quick look at what's in store for you in the
current quarter and in the near future.
In quarter 1, the goal is to set up your company.
These are the decisions that you must make:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Name your company;


Organize your team, decide on corporate responsibilities;
Invest the initial 2,000,000 in your new company;
Review the market research and current business capabilities;
Establish corporate goals and strategic direction;
Design two brands, one for each segment targeted;
Open a sales office and/or web center for future sales;
Build a plant;
Make sure there is at least 1,000 in the cash account.

Looking ahead to quarter 2, you will study the market research and set things in place to start test marketing.

Marketing Research
Initial Goal: To obtain an overall feel for the market
Your market research firm conducted a survey of potential end users. Your initial goal in reviewing the market research is to
obtain an overall feel for the market. There are three market segments and four geographic markets. Each segment has a
unique set of needs and wants.
Try to form a mental image of each segment. This is called profiling a segment.

These profiles for each segment will help you to select geographic markets for sales offices, design new brands, price your
products, and develop an advertising campaign.
DECISION TIP
It is recommended that you print all of the market research data as it is presented.
Next steps:
1. Review the relevant marketing data.

2. Decide on an initial business strategy.

3. Design one or two brands for your target segments.

4. Initiate the opening of a sales office or web center and the construction of your factory.

Customer Needs
Understanding what customers value
The market research data focusing on customer needs can be very helpful. It allows you to
examine the costs and benefits of potential products. However, this data is incomplete, and will
tell you very little about which components best suit the customers' needs or what values are
desired as the product is used.

Customers do not buy components or features; they buy benefits.


DECISION TIP
In the Workspace, review the customer needs. These needs are listed down the left side
of the table and reflect how the segment wants to use personal computers and the
Internet. The segments are listed across the top. The numbers within the table
quantitatively indicate how important the need is to that segment.
An average rating is 100. A need is important if it is rated over 110 by a segment and
very important if it is rated over 120. Be sure to pay attention to all needs with a rating
over 110.
To sort the needs by a specific segment, click on the picture of that segment.
Customer value hierarchy
It is your job to figure out how to deliver the value desired. A good way to start is to apply the
logic behind the means-end hierarchy. Take the most important benefits desired by each segment
and speculate on which components or services will be necessary to deliver these benefits.
Personal and organizational goals (core values, guiding principles). "Ends" which are served by the product/service
"means".
Desired End States

What the product does for the user (subjectively defined) realizations, benefits, desired and undesired outcomes, sacrifices,
costs, etc.
Consequences

What the product is (objectively defined) features, activities, options, parts.


Attributes

Use Pattern:

Segments By Application

Communications with other computers


Presentations
Word processing
Data management
Business graphics
Engineering/design
Bookkeeping, budgeting
Manufacturing process control

Workhorse
120
115
126
121
111
80
122
85

Mercedes
120
103
110
110
85
119
91
130

Traveler
130
127
118
108
113
86
95
68

Price Willing to Pay


Consider the price that the market will bear.
Your brand design decision must include consideration of the price the market is willing to pay. There is always a
price/performance trade-off. Higher performance features will generally cost more than lower performance features. Will
the target market pay more for the additional capability?

Your Market Opportunity Analysis should help you to determine how sensitive your target market is to price versus
performance.
The graph in the Workspace lists the average price each segment is willing to pay for the ideal brand. Consider these prices
to be the maximum a segment is willing to pay. As you raise your prices above this threshold, fewer potential customers will
enter the market to buy. Customers will always be happier with lower prices.
DECISION TIP

Consider establishing a price point for each segment and then designing a brand within that
constraint. A good rule of thumb is to multiply your total materials cost for the component times two
or three to obtain an estimate of what the brand would retail for. (The component cost estimate will
be computed for you as you design your brands in the Marketing section)
If the projected brand price is higher than you think the market will bear, you should consider scaling
back the design to fit the price. In some cases, you may even be able to add features and stay within
your price objective.

Price Willing To Pay


Workho Merce Trave
rse
des
ler
2,500
4,100
3,000

Market Size Your market research firm has tried to derive an estimate of the markets potential by segment and
market. The researchers asked each customer:

How likely they would be to purchase computers in the next 12 months

How many units each customer would be likely to purchase if the customer decided to buy

Finally, the researchers counted the number of customers in each geographic market by segment.
In order to estimate market potential, the researchers applied the following equation:
FORMULA
Market potential = probability of purchase X number of units X number of customers.
YOUR TASK
Review the potential market size of each segment and geographic market. The data indicates how many units could be
purchased over the next 12 months. There is a separate estimate for market potential for each segment in each city.
DECISION TIP
Normally, you might assume that 25% of the market potential would be realized in any quarter (as there are four quarters in
a year). However, in the early stages of the market, the quality and quantity of the marketing will be less than ideal. It will
take a few quarters for customers to warm up to the industry, causing actual demand in the early quarters will be much less
than potential demand.

12 month potential demand

Chicago-NORAM
Sao Paulo-LATAM
Paris-EMEA
Shanghai-APAC

Workhorse
9,374
7,414
8,334
9,081

Mercedes
8,005
3,729
6,730
4,802

Traveler
5,762
3,266
5,528
3,938