Tablet Case Study
TABLET DEVLOPMENT- DEFAULT DECISIONS
1
Introduction & Corporate Strategy The stable of products at Tablet Development Corporation (TDC) consists of three different offerings. The X5 serves the entry-level, budget conscious consumer. The X6 caters to the technology savvy, performance conscious consumer. And the X7 balances the strengths of each. When Mr. Schmoe took over in 2012, TDC balances research and development equally among all three products. No product is focused on, assumedly due to Mr. Schmoe’s confidence in TDC products dominating the aggregate tablet computer market. What is missing from TDC’s business strategy is a focus on market segmentation, with a eye on product life cycle and profitability.
X5—Segmentation for Budget Focused Consumers
Marketed as the tablet for budget conscious consumers more concerned with price than performance, the X5 represents the median of TDC’s product line in terms of price and performance. X5 tablets are priced at $265 with a performance rating of 1.05 beginning in 2012. With the default research and development investment, these values remain steady.
X5 Price Performance
2012 2013 2014 $265 $265 $265 1.05 1.05 1.04 Table 1: X5 Product Performance Under Joe Schmoe
2015 $265 1.04
Early in its product life-cycle, the X5 performs favorably against competition. Sales grow steadily through 2012, but as the maturity phase develops during 2013, sales drop off sharply, (Marketing Teacher, 2000). Without the benefit of price cuts to stimulate further demand, the X5 rapidly transitions into the later stages of its product life cycle.
TABLET DEVLOPMENT- DEFAULT DECISIONS
2
X5
Sales Revenue Variable Cost Total Cost Profit (%)
2012 2013 2014 1,859,856 1,427,666 701,981 $492.86 M $378.33 M $186.03 M $269.68 M $207.01 M $101.79 M $348.94 M $286.27 M $181.05 M $143.92 M (29%) $92.06 M (24%) $4.98 M (3$) Table 2: X5 Financial Performance Under Joe Schmoe
2015 520,480 $137.93 M $75.47 M $154.73 M
1
Introduction & Corporate Strategy The stable of products at Tablet Development Corporation (TDC) consists of three different offerings. The X5 serves the entry-level, budget conscious consumer. The X6 caters to the technology savvy, performance conscious consumer. And the X7 balances the strengths of each. When Mr. Schmoe took over in 2012, TDC balances research and development equally among all three products. No product is focused on, assumedly due to Mr. Schmoe’s confidence in TDC products dominating the aggregate tablet computer market. What is missing from TDC’s business strategy is a focus on market segmentation, with a eye on product life cycle and profitability.
X5—Segmentation for Budget Focused Consumers
Marketed as the tablet for budget conscious consumers more concerned with price than performance, the X5 represents the median of TDC’s product line in terms of price and performance. X5 tablets are priced at $265 with a performance rating of 1.05 beginning in 2012. With the default research and development investment, these values remain steady.
X5 Price Performance
2012 2013 2014 $265 $265 $265 1.05 1.05 1.04 Table 1: X5 Product Performance Under Joe Schmoe
2015 $265 1.04
Early in its product life-cycle, the X5 performs favorably against competition. Sales grow steadily through 2012, but as the maturity phase develops during 2013, sales drop off sharply, (Marketing Teacher, 2000). Without the benefit of price cuts to stimulate further demand, the X5 rapidly transitions into the later stages of its product life cycle.
TABLET DEVLOPMENT- DEFAULT DECISIONS
2
X5
Sales Revenue Variable Cost Total Cost Profit (%)
2012 2013 2014 1,859,856 1,427,666 701,981 $492.86 M $378.33 M $186.03 M $269.68 M $207.01 M $101.79 M $348.94 M $286.27 M $181.05 M $143.92 M (29%) $92.06 M (24%) $4.98 M (3$) Table 2: X5 Financial Performance Under Joe Schmoe
2015 520,480 $137.93 M $75.47 M $154.73 M
References: Tables were all developed with default assumptions as available on the Tablet Development Simulation. Retrieved July 2011 from http://forio.com/simulate/jelson/tabletdevelopment-sim/simulation/#p=page0 Center for Business Planning, (1994). Market Segmentation. Retrieved July 2011 from http://www.businessplans.org/segment.html Investopedia, (2011). Market Segmentation. Retrieved July 2011 from http://www.investopedia.com/terms/m/marketsegmentation.asp Importance of Contribution Margin, (2009). Retrieved July 2011from http://www.accountingformanagement.com/importance_of_contribution_margin.htm Marketing Teacher, (2000). The Product Life Cycle. Retrieved July 2011 from http://www.marketingteacher.com/lesson-store/lesson-plc.html QuickMBA, (1999). The Product Life Cycle. Retrieved 2011 from http://www.quickmba.com/marketing/product/lifecycle/ Vakkur, Nicholas, (n.d.). Contribution Margin. Accounting 501 Lecture. TUI Univeristy.