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ASSIGNEMENT #1

UJJWAL VASISHT
61910552

Techsonic Industries, Inc.:


Humminbird—New Products
New product Development Decision
The objective of the exercise is to zero in on the best possible product offering out of the three
options, analyze their market strength, potential size, profitability and the qualitative and salient
aspects affecting the acceptance of that product in the consumer market.
In this analysis, we also need to look at the strength areas of Techsonic Industries, their
competitors, channels, customers, business situations, history and the ease of doing business in
the segment and the product.
The product options available to the company are:
1. Project 901,
2. VHF Marine Radio, and
3. Navigation Products
We will comparatively analyze each product offering on the following criterion:
A. Customer Interest,
B. Market and Sales Potential,
C. Product Features,
D. Margins, and
E. Profit and Loss Forecast

ANALYSIS
A. Customer Interest
This will largely consider the acceptability of the product as obtained by the MRF
(Market Research Foundation) appointed by Techsonic. It will be based on the focus
group reviews, interview responses, telephonic acceptance, etc. Moreover, it should draw
in the past record of Techsonic being one of the favorable brands for the customers.

a. Project 901 –
i. It was a clear winner
ii. High Uniqueness
iii. High purchase likeliness
iv. In line with past reputation of Techsonic
v. Highest intention to buy (Compared to LCR 1984)

b. VHF
i. Purchase intention as a replacement for an older unit
ii. 42% Hummingbird customers owned CB radio, can capture those
customers easily
iii. Introduction to a new product line
iv. Fragmented market players, hence can build a brand extension
v. Boat shows, Fishing Tournaments good advertising opportunity
c. Navigation Product
i. Considerable lack of conscious involvement in the category,
ii. A strong future potential
iii. GPS showing a greater utility but not cheap

B. Market and Sales Potential


This deals with the sales projections as given in the exhibits in the case over a period of 3
years. This can compare or even surpass the previous sales figures, but obviously, the
new product line extensions will see a lower sale than the flagship product line

Year 1 Year 2 Year 3 Total


Project 901
Unit Sales (Standard) 28,000 32,000 60,000
Unit Sales (Delux) 4,000 12,000 20,000
Total Unit Sales 32,000 44,000 62,000 138,000
Market Size 320,000
Revenue Projected $ 101.85 mn

VHF
Unit Sales 5,600 20,000 24,000 49,600
Revenue Projected $ 16.72 mn

Navigation Product
Unit Sales (GPS) 400 6,000 16,800
Unit Sales (LOCATOR) 4,000 12,000 5,600
Total Unit Sales 4,400 18,000 22,400 44,800
Revenue Projected $ 45.88 mn

C. Product Features
These are the features that bring in the value for the customer, and they are actually the
buying triggers. They should be in line with the customer needs, wants, market trends,
and competitive.

a. Project 901
i. Features are essential for purchase
ii. Additional features in the Deluxe model
iii. Easier to read and understand for customers
iv. Catching fish easier

b. VHF
i. Durable
ii. Good Battery
iii. Waterproof
iv. Dependable

c. Navigational Product
i. All weather functions
ii. High accuracy
iii. No interference
iv. Total Coverage
v. Appropriate pricing

D. Margins
This pertains to the Dealer’s margins being at least 15% in the distribution channels. That
will be one of the main drivers for the product to be sold by the dealers as well as them
pushing the products.

a. Project 901
i. Margins 15% - 40% depending on the channel
ii. The past products offered a greater margin to the dealers (42% and 46%,
ID-1 and ID-10 respectively)

b. VHF
i. 15% to 35% dealer margin for the mass merchants
ii. Troublesome channels
iii. Marine dealers are the major channel, weak relations with them
iv. Again, less margin than other products, won’t take another SKU off the
shelf for a lower margin

c. Navigational Product
i. 15% - 40% margin on GPS products
ii. Higher than those of competing LOCATOR products

E. Profit and Loss Forecast


This basically pertains with the final EBITA being significantly higher than the
expenditures. Techsonic needs to make money out of the product, that requires a good
profitability potential.

Year 1 ($) Year 2 ($) Year 3 ($) Total ($)


Project 901
Standard model
Revenue 10,920,000 10,560,000 16,800,000 38,280,000
EBIT&A 1,251,000 1,158,000 1,409,000 3,818,000
Deluxe model
Revenue 1,760,000 4,500,000 6,400,000 12,660,000
EBIT&A 135,000 529,000 539,000 1,203,000

Total EBIT&A 1386000 1687000 1948000 5021000


Capital Expenses 610000
Total Profit 4411000

VHF
Revenue 1,092,000 3,500,000 3,768,000 8,360,000
EBIT&A (294,600) 302,000 565,200 572,600

Capital Expenses 57,6000


Total Profit (3,400)

Navigation Product
GPS
Revenue 320,000 4,224,000 10,416,000 14,960,000
EBIT&A 34,688 1,351,680 3,749,760 5,136,128
Capital Expenses 764,000
Profit 4,372,128

LOCATOR
Revenue 1,800,000 4,500,000 1,680,000 7,980,000
EBIT&A 180,000 31,5000 50,400 545,400
Capital Expenses 301,600
Profit 243900

Total EBIT&A 214,688 1,666,680 3,800,160 5,681,528


Capital Expenses 1,065,600
Total Profit 4,615,928

We see that the Navigational product has the highest profit potential, followed by
Project 901, and the VHF is an unprofitable product as per the market research forecast.
A strong caveat to consider while doing these calculation is that these projected sales
numbers are based on the respondents saying that they’ll buy Techsonic’s products.
This is a risk reward scenario as the buying intentions might not be the same once the
product comes into the market, there may be many market forces affecting the purchase
intention.
Hence, according to the above discussed factors, my analysis would be that both the
Project 901 and the Navigational Products should be launched.
Project 901 would further enhance the existing product line and consolidate Techsonic’s
presence and strength in the existing market, and the Navigational GPS product will
allow the company to foray into a new product field and expand on the range of products
offered.
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