Marketing strategy development for multinational companies

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 costs and profits hold, then this product will be successful. 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 branding the world over, which makes it easier for customers to understand what they are buying. Furthermore, you have think in terms of Google searches, where a person can sit on one side of the world and get a hit in another -- the brand has to refer back to the same product around the world to ensure that consumers are not confused about the product they are getting.

At $400, this computer will appeal to a mainstream audience, looking for a basic computer with basic functionality. It will also appeal outside of the mainstream Western audience, to people in the developing world who might not be in the market for a high-end computer otherwise.

In terms of distribution, the smart thing is to use the existing channels. In a nutshell, the existing channels for Lenovo are sophisticated, and they get the product around the world and into the hands of millions of consumers. Using a unique channel would put that at risk. The only justification for using a unique channel would be to seek out a unique target market. That is not the case here, with a standard $400 laptop. With a mainstream audience, the key is just to find a mainstream distribution channel and saturate that channel. Making it easy for customers to get the computer -- using both bricks & mortar channels and online channels -- is the key objective here. The laptop ecosystem is highly competitive, so it is essential that the company places emphasis on distributing in the channels where consumers are going to look for a new computer.

This should be done with a global strategy. A multicompany strategy does not make much sense. Lenovo works on a global strategy right now, so should not deviate from that source of strength.