TerraCog Case Analysis

BUSA 305-02 Behavior in Organizations

Austin Miller
11/12/2015
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TERRACOG CASE ANALYSIS

TerraCog is a privately held company that produces Global Positioning Systems (GPS)

and fishing sonar equipment. TerraCog has been around since 1977 and over the years has built

themselves a reputation for high-quality products, which they specifically market to campers,

hunters, hikers, and fishers. In the past, the company has had no trouble not being the first to

market. They have been free to lag a bit behind the competition because of the quality of their

products and their customer satisfaction.

The problem began in 2006 when Posthaste, a competitor, introduced a new GPS

prototype dubbed “BirdsI”. BirdsI displayed satellite imagery by using static satellite

photographs and stitching them together to create one image, much like Google Earth.

At first, TerraCog dismissed this new product because they believed it did not offer that

much of an improvement to the existing GPS technology. While they knew it had a visual

appeal, TerraCog did not believe that BirdsI had a substantial performance improvement over

their existing maps in TerraCog’s GPS system.

BirdsI launched in October 2006, successfully, earning impressive sell-through rates

nationwide. TerraCog was still confident that the popularity of BirdsI would not last. Fast

forward to the spring of 2007 and TerraCog starts noticing customers increase in demand for a

GPS with satellite imagery like BirdsI. TerraCog realizes their mistake now and starts plans for

their own satellite imagery GPS, which they name “Project Ariel”. In order to cut down on

development time and costs, they decide to redesign their existing GPS product.

After a couple of meetings with the higher-ups of the company, they find that the

redesign is going to cost them a lot more than originally anticipated. The pricing team states
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TERRACOG CASE ANALYSIS

that $475 is the lowest they can sell Aerial for and still meet the margin. The sales team thinks

that price is way too high and suggests a price of $425 to capture the market share that

TerraCog has lost as of late.

Basically, the decision has come down to Emma Richardson, the recently promoted

Executive Vice President. TerraCog needs a go or no-go decision, and Richardson needs to push

them to one side or the other.

There are a few definite problems within TerraCog that are making things more difficult

than they need to be. After reading the case, it is clear that during their meetings there is no

clear cut leader. Conversations are free flowing and you also have people calling others out,

such as when Ed Pryor, the vice president of sales, calls out Becky Timmons, the CFO, for not

understanding how competitive the market is. At times, the conversations have even split off

into smaller groups, even though they were all at the same meeting sitting at the same table.

Another problem was how quickly they wrote off BirdsI. They could have done more

research after BirdsI was announced showing that people wanted satellite imagery in their GPS.

They ignored the buzz the product was getting and waited almost an entire year to respond

with their own ideas.

Another mistake was not being as innovative as they probably could be. They decided to

just redesign their existing GPS system to save time and money. The problem is that TerraCog is

known for their high-quality products. It wouldn’t be surprising if their customers did not care

for Aerial, since it was the same product, just upgraded a bit. With their resources, TerraCog

could have designed the next big thing in the GPS market.
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TERRACOG CASE ANALYSIS

Ed Pryor also seems to cause a minor problem because he end of the first meeting, he

says he won’t even try to sell the product if the price is not lowered. It makes it seem like he

cares about his own goals more than the company’s.

The main problems going forward with Aerial is that there is a rush to market before the

holiday season and also because they have been lagging behind their competition for almost a

year now. They need to decide on a price soon or they are just going to hurt themselves

further.

One organizational behavior theory you can apply to this case is the negotiation process.

The negotiation process is a five-step theory t negotiation tactics. First, you want to start with

preparation and planning. To do this effectively, it helps to goal set. TerraCog could have

executed this step better by laying out a plan detailing how to respond to BirdsI. When they

first heard of it, they mistakenly wrote it off as a fad and did not bother to come up with any

ideas of how to compete with it. They were determined that it would just go away, and that is

not a successful plan to lead a business with.

The next step of the negotiation process is to define the ground rules. TerraCog partly

did this in their first meeting, stating that they want to get Aerial on the market quickly, making

clear that the processing speed of Aerial was not an issue and also saying that Aerial would

have all the same features of their current GPS products. Once Aerial was designed, though,

they were surprised by the cost that was required to build it. They could have laid down ground

rules about how much they can or cannot spend.

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TERRACOG CASE ANALYSIS

After the ground rules are laid it is important to take the next step and make sure

everyone is on the same page. Clarification and justification are necessary, but TerraCog did not

do a great job of it in their meetings. At times, things got a little confrontational even. People

kept bringing up the same things that had already been talked about, such as the processing

speed of Aerial and telling the designers to cut back on costs again when they had already done

everything they could.

Bargaining and problem solving is the next step in the negotiation process. In the

meetings when TerraCog is trying to decide on a price for Aerial, no one seems to have a

solution to the problem. $475 is much too high for the sales team to even consider, but it’s

hard to push the price down because of the margin requirements. The negotiation is at a

standstill at this point for TerraCog.

Lastly, the final step in the negotiation process is closure and implementation. TerraCog

needs to come up with a solution, and it seems like that has landed on Emma Richardson’s

shoulders. She needs to push one way or the other so that the company can come to a decision.

The way I see it, there are a few options Richardson can pursue. The first option is to go

ahead and market Aerial as planned with a $425 starting price. This would put them in the

market again before the holiday season and stop them from continuing to lag behind their

competition. They could continue to look for new ways to improve the design in order to cut

more costs since they would be very close to their margin requirements if they sell Aerial for

$425. The main problems with this are the decreased profit from the reduced price and it

would also put more pressure on the design team to reduce costs even further.
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TERRACOG CASE ANALYSIS

Another option Richardson could look into is to scrap Aerial all together and look into

underserved markets. The case mentions that in early 2007 TerraCog started looking into sub-

markets such as fitness and cycling. They could scrap Aerial altogether since they are lagging

behind their competitors already and focus on a new market. They wouldn’t have to decide on

a price point anymore, which is putting a lot of pressure on all the team leaders. This option

could take a lot of stress of everybody in the business and potentially make them a lot of

money tapping into an underserved market. TerraCog would have an early mover advantage if

they went with this option. Yet, this would also hurt their brand image by not focusing on the

products that the company was founded on.

One last option is to scrap the Aerial launch for now and go back to the drawing board.

This would disappoint the design team but would be ideal for the rest of the company. The

design team would have to put other projects on hold but if given more time, they could

potentially design the next big thing in the world of GPS. The problem with this option is that it

would cause them to lag behind their competitors even further, along with missing the holiday

season. It’s a high risk/high reward kind of move. Either they successfully design the next big

thing in GPS or they try to and they fail, which would cause massive problems for TerraCog.

Taking all things into account, my recommendation would be to go with the last option,

to push the launch date back in hopes of launching the next big industry-changing product, just

as the BirdsI was. As I said before this is high risk, but in the end it seems like a good idea.

TerraCog is known for their high-quality products and has built a name for themselves in the

GPS industry. Companies known for premium products can usually lag behind the competition

for a bit as TerraCog has in the past. They would lose some money waiting for the new launch
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but if they do design something amazing, they would surely gain back their market share. Their

design team is one of the best in the business, and they also have a very motivated leader in

Allen Roth. TerraCog’s reputation is too much to risk if they chose another option. With this

decision, TerraCog would maintain their status as high-quality producers.

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References

Robbins, S. P., & Judge, T. A. (2015). Organizational Behavior (16th ed.). N.p.: Pearson.

Beer, M., & Yong, S. (2008, April 11). TerraCog Global Positioning Systems: Conflict and
Communication on Project Aerial. In harvard.edu.