Cause and effect relationships in writing

Ancient Computers was the vendor of a database product that was in a product life cycle commonly referred to in the industry as the cash cow stage. What this meant, among other things, was that the product continually provided positive cash flows that the company could use to invest in new products. Ancient Computers felt that this would be a wise move because the cash cow exhibited low growth even though it dominated the market and management feared it would eventually become obsolete.

Near the end of 2003, Ancient was presented by one of its board members with the opportunity to acquire a data integration vendor called SnapTogether. Ancient was thrilled with the proposal for many reasons. First, the data integration market was poised for huge growth. Secondly, the data integration market was highly complimentary to the database market and Ancient therefore believed there would be synergies with its existing product and domain expertise. Thirdly, Ancient's board member that had presented the opportunity was also on the board of SnapTogether, giving Ancient an insider's perspective on the company and technology that would help it quickly make the acquisition a success. Based on all these factors, Ancient moved forward with the acquisition of SnapTogether in the first quarter of 2004.

By the end of 2004, Ancient has been disappointed with the revenues of SnapTogether's products. Ancient had positioned the product for the large enterprise market as a lower-cost alternative to competitors. However, much to its surprise, Ancient soon discovered that the enterprise market for data integration seemed to be price inelastic. In other words, the low-price strategy was not enough to motive enterprise customers to purchase SnapTogether's solution.

Market research revealed several factors contributing to price inelasticity. Most importantly, Ancient's competitors were far larger competitors that raised financial viability concerns for Ancient in sales deals. Further, competitors offered bundles of software products that were far large than Ancient's database and data integration line. Some of Ancient's prospects had expressed that they were fearful that a lower price meant that the product was inferior to more expensive offerings even though Ancient did not believe that there were major differences in functionally between its data integration product and those of the competition.