Writing Homework Help

Competition (Sun Tzu Style)

Sun Tzu says – “Attack him where he (your competitor) is unprepared, appear where you are not expected”

Innovacom Networks was faced with a problem. Being much smaller than most of its other competitors, it relied heavily upon existing, identified, and reliable customers. When competitors started trying to engage these very same customers, Innovacom found itself boxed in – meaning that its competitors were trying to take away some of its customers. Innovacom’s very existence depended on these customers, and Innovacom could not attack its competitors’ customers, because it was too small to adequately respond to the product needs of these customers. So, what was Innovacom to do? The answer was to attack the competition where it was weak, i.e., where they had inadequate resources to properly counter Innovacom.

Innovacom began to formulate plans to sell into the consumer market via a normal consumer sales channel, namely Fry’s Electronics, Best Buy, etc.. In other words, instead of focusing on commercial customers, like hospitals, and community colleges, or on government agencies, like the L.A. County Sheriff’s Dept., or White Sands Missile Range, Innovacom would sell shrink-wrapped systems through consumer product outlets like Fry’s. In this way, the company would continue to market its products to commercial organizations (commercial market), but at the same time, it would sustain its revenue stream via another avenue of revenue production (retail market).

The planning and follow-through were straight forward, and relatively simple. First, the company needed a partner (supplier/ vendor) from whom Innovacom could obtain high-resolution, video cameras which could be private labeled. Next, the company needed to strip down its capture software so it would be suitable for consumer usage (the interfaces and selection menus had to be trimmed and made more understandable for the average consumer). Third, the video captured could be played back to a computer either in real-time, or stored and played back later. The real-time playback would be an extra cost software option. Finally, the company had to establish a sales channel through which the systems could be marketed and sold, e.g., Fry’s, Best Buy, Walmart, etc..

The sales outlet was designated to be Fry’s Electronics, at least initially, and with the accomplishment of the other two items (stripped down capture software and stored or real-time video playback), the stage was set for initial sales. The question now was what initial sales volume should Innovacom plan on? The initial decision was for 2 sales per week at one store, building up to 50 per week across 22 stores. The pricing was pegged at $199 per master control unit capable of handling 2-video feeds, with options for 4-, or 6-video feeds which would cost $299, and 399 respectively. Cameras were sold separately at $49 each. The profit margin was established as follows. The chassis, Mpeg card and interface card, and labor were estimated at $89. The margin was $210.

The private-labeled cameras were obtained for $19 each. The margin for these was $30 each (the sales target price stated above as $49 – the cost per camera.

Even though the use of such a system was not fully specified, for example, as a home security system, it was identified as a security monitoring device. This term is a little less specific, than how it should have been advertised, but ended up as a winner in spite of the ineptness of its creators. About 6 months into the program, the sales were very close to projections, but revenues were not the barn-burners that were expected. Then, all of a sudden, the company got a call from a security company who wanted to stop by and discuss a possible partnership.

The company wanted to explore the possibility that Innovacom had the expertise, capability, and capacity to produce home security systems using video as the principal method of data gathering. The technology to be offered required frame-grabbing, and that was very doable. There was even talk of doing feature recognition and/or extraction where certain overt actions, e.g., taking hold of a door or window would be recognized, and a frame would be transmitted to a control center for verification, and follow up with the police.

The technical staff immediately launched into a preliminary analysis, followed by internal decision making, then prototype development, and finally a sales/supply channel evaluation. The questions for Innovacom management were:

1.Would Innovacom entertain the idea of a partnership where profits would be shared, or a licensing agreement concluded?

2.Would Innovacom consider selling part of the intellectual property involved, i.e., the architecture and software?

Remember, that the criteria for business partnership decision making included:

1.Is the anticipated partnership within the company’s expertise and interests?

2.To what extent is the company willing to share its technology with a potential partner?

3.What constraints would the company like to impose upon a potential partner?

4.What does the potential partner bring to the party, i.e. does it have an edge in name recognition, marketing, sales channeling, manufacturing, logistics and so on that our company does not have?

If you in charge of the Innovacom negotiation team, what position would you take, and what issues would you be willing to compromise on? Would you be willing to discuss any form of ownership transfer (software or architecture or hardware design), and if so, under what circumstances (amounts of money, or percentage of sales, etc.? (Two paragraphs)

Finally, what do you think of the initial idea of branching out into the retail market world? (One paragraph)