Zenith Hdtv

Topics: High-definition television, Marketing, Marketing research Pages: 20 (6500 words) Published: February 18, 2011
Harvard Business School

Rev. July 24, 1991

Zenith: Marketing Research for High Definition Television (HDTV) On August 1, 1990, Bruce Huber, VP of marketing at Zenith Electronics Corporation, was meeting with CEO Jerry Pearlman. They were discussing Zenith’s options regarding high definition television (HDTV), a new technology that produced higher resolution (i.e., sharper pictures) and superior digital stereo sound. It could also permit larger screen sizes and wider screen pictures. The company had to decide how to forecast demand for this new technology and whether to conduct a study to assess consumer preferences for the new wider screen format implied by HDTV. The recently retired president of Zenith’s Consumer Products Group, Bob Hansen, had recommended that Zenith study whether consumers preferred the 16:9 wide screen aspect ratio proposed for HDTV or the current, relatively square NTSC (National Television Systems Committee) standard of 4:3, found in all TV sets in the United States. (A TV’s aspect ratio was defined as the ratio of the image’s width to its height.) If consumers really preferred the 16:9 shape, Zenith would have to invest hundreds of millions of dollars in new plants and equipment to produce wide shape picture tubes larger than 28” in diagonal. For sizes under 28” the investment would be insignificant. Pearlman turned to Huber and asked a series of questions: “We need to know what are the forecasts of HDTV demand from 1992 to the year 2000 under a pessimistic, most likely, and optimistic scenario. How should we define these scenarios? How much of what we already know about color TV buyers will help us assess the market for HDTV? What additional marketing research, if any, should we do now in order to assess the situation related to HDTV introduction? Hansen was a proponent of the aspect ratio study, but what do you think of it?” As he listened to these questions, Huber recognized that answering them would be challenging.

Zenith Electronics Corporation
With net sales of $1.549 billion in 1989, Zenith manufactured consumer electronics products (mainly color TV sets and video recorders), color picture tubes, color computer monitors, cable products, and high-tech electronic components such as monochrome displays, power supplies, and automotive electronics. Headquartered in Glenview, Illinois, Zenith employed more than 32,000 people worldwide. Although brand and distribution were among its strengths, results from continuing operations were Professor Fareena Sultan prepared this case as the basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Certain quantitative data and other information have been disguised. Copyright © 1990 by the President and Fellows of Harvard College. To order copies or request permission to reproduce materials, call 1-800-545-7685 or write Harvard Business School Publishing, Boston, MA 02163. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of Harvard Business School.



Zenith: Marketing Research for High Definition Television (HDTV)

disappointing in 1989. Despite sales volume increases, Zenith saw a net loss of $17 million compared to a net loss of $11 million in 1988. Sales for continuing operations were $1,549 million in 1989 compared to $1,401 million in 1988. Zenith consumer electronics sales increased 9% from $1,186 million in 1988 to $1,288 million in 1989, due mainly to increased shipments of color TV sets, picture tubes sold to other manufacturers, and high-resolution color monitors. Color TV unit shipments also increased 9% in 1989, but the operating income of consumer electronics was essentially unchanged from 1988. Even though almost 22 million color TV sets were sold in the United...
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