Terracog Global Positioning Systems

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Letter of Transmittal
ToEd Pryor- VP, Sales
Harold Whistler- VP, Design & Development
Tony Barren- Director, Production
From
Emma Richardson- Executive Vice President
Date17/03/2008
Subject: Pricing strategy & viability of “Project Aerial” Enclosed report deals with the launching price problem being faced by TerraCog for its forthcoming GPS product Aerial, different options that are available to the company, selection criteria for evaluation and proposed solution along with action plan and contingency plan.

Executive Summary

There is significant disagreement over the proposed pricing of Aerial between the different departments. Presently TerraCog has 3 options. It could offer the product at a price which is substantially higher than its competitors, try to offer the product at a price which is slightly higher than its competitors or defer the launching. Each of the 3 options is assessed separately against the 3 criteria that have been used for evaluation. Conclusively, it is recommended that the launching should be deferred by 3 months. A contingency plan is also discussed which suggests that the product should not be launched to the market at all.

(Word Count- 106)

TABLE OF CONTENTS: PAGE NO.

SITUATION ANALYSIS………………………....................................................6

PROBLEM STATEMENT………………………................................................. 7

OPTIONS……………………………………….......................................................7

CRITERIA FOR EVALUATION…………………............................................... 7 (In descending order of priority)

EVALUATION OF OPTIONS……………………............................................. 8-10

RECOMMENDATION…………………………................................................. 11

ACTION PLAN………………………………….................................................... 12

CONTINGENCY PLAN……………………….................................................... 13

Situation Analysis:
In October 2006, Posthaste introduced their handheld GPS “BirdsI” based on satellite imagery which subsequently turned out to be a success & posed serious threat to TerraCog’s Market share in handheld GPS. Understanding there was a demand on the marketplace for satellite imagery handheld device, TerraCog decided to develop its own product Aerial which is now ready with its prototype & supposed to be launched in 2008 Q3. Target retail price of Aerial was set at $400 during project launch earlier in 2007. However, Director, Production after due consultation with Director, Design have informed during a launch meet on March 14, 2008 that Aerial could not be priced lower than $475. Sales department has voiced their concern that Aerial could not be marketed at such a premium without any significant product differentiation from its competitors. Competitors:

The only available satellite imagery based handheld GPS in the market BirdsI from Posthaste is presently being sold at $400. A similar product from Garmin is supposed to be launched at $395. The technical features of these products are same as that of Aerial. Market:

The GPS handheld market is growing considerably and according to VP, Sales unless TerraCog takes quick steps to tap the market potential, its sales could be down by 10% during the present year.

Problem Statement:
When & at what price Aerial should be launched?
Options:
A.Defer the launching by 3 months, go for product development & price it at $475. B.Launch it according to schedule at $475.
C.Launch it according to schedule at $425.
Criteria for Evaluation (In descending order of priority):
1.Profitability
2.Increase in Market Share
3.Performance of the device

Evaluation of Options:
A.Defer the launching by 3 months, go for product development & price it at $475. 1.Profitability
Earlier also development team has asked for an extension period to make the product technically superior. If...
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