Marketing
The following are estimates using the NPV calculator:
Expected Commercial Value (NPV)
$11,099,275
Probability of Commercial Success
Probability of Technical Success
Discount Rate
Cashflows
FY13
FY
Development Costs
$2,000,000
$1,000,000
Launch and Marketing Costs
$1,200,000
Forecasted Units Sold
$5,200
Forecasted Revenue (Unit Sales Price x Units Sold )
$2,080,000
Discounted Cashflows (10-Year)
Calculated
NPV Income
$22,200,816
NPV Development Costs
$3,720,341
NPV Launch and Marketing Costs
$2,941,037
FY15
FY16
FY17
FY18
FY19
$400,000
$200,000
$200,000
$200,000
$100,000
$800,000
$300,000
$300,000
$300,000
$150,000
$9,000
$11,000
$10,000
$8,600
$7,400
$3,600,000
$4,400,000
$4,000,000
$3,440,000
$2,960,000
FY20
FY21
FY22
FY23
$100,000
$50,000
$150,000
$100,000
$100,000
$100,000
$6,600
$5,800
$5,200
$4,800
$2,640,000
$2,320,000
$2,080,000
$1,920,000
1b.
The probability commercial success was an assumed input, a constant. It was 0.8. This figure went into the Expected Commercial Value calculation, which was the NPV multiplied by the probability of technical success and the probability of commercial success. The NPV and ECV calculations do not have the power to derive a new probability of commercial success.
The NPV, including the probability of commercial success, is $11.099 million. If the current assumptions about...
The current projections are for sales going out ten years that will deliver an NPV of $22.2 million, versus development costs and marketing costs of around $6.6 million. Even if the project has a probability of commercial success of 40%, it will still have a positive NPV, which indicates that the project should be greenlighted. If we have to cut the price, it will still be profitable, even with a price as low as $155.
We should also calculate the sensitivity to the discount rate, since a 6% discount rate is fairly optimistic. However, with these projections even a 30% discount rate delivers a positive NPV. This is because most of the cash flows are in the first couple of years, which reflects the normal life cycle of a new computer, as they tend to sell best when they are fresh, new technology.
2.
The first element of branding is that within the PC business, it is the manufacturer's branding that matters. This is because the product life cycle is relatively short, so product families within a given brand may only last a handful of years. Plus, the manufacturer will typically have a consistent brand image across its entire product line. An example of how this works is Asus. Asus makes a range of electronic devices, each featuring product brands. So while people who are avid consumers of a specific product will recognize a brand like EeeTop, for the most part people think in terms of category and manufacturer brand (PC World, 2010).
Lenovo in general has a good brand in laptops, because of the value proposition that the brand offers (Laptop Mag, 2014). Now, Lenovo has an established name, we will focus on that, so whatever you call this computer is not that important. At the end of the day, the Lenovo brand and whatever positioning this has are what matters. Co-branding is something you see sometimes with computers. The OS and chip makers in particular, but also sometimes other component makers, engage in co-branding. This used to be easy in older versions of Windows (Kroshan, 2009).
Internationally, the branding strategy should not change. The reason for this is that computers typically maintain the same…
