Here are the numerical facts that I saw in the case:
"Top management has mandated that new thermostat devices must be able to achieve an actual market share of 30 percent and must be profitable."
"Projected annual profits: ............................. $0.5 million
Projected market share: ............................... 25% "
I think there is a market for the product because it states that it will be 65% more reliable. I'm not sure if there should be more testing done on the product because there is such a big liability associated with it if it doesn't work properly. Based on the numbers alone, I'm skeptical about launching.
Any thoughts?
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Its clear from the case that there is definitely a market for this product. I am confused though, if the projected market share stays constant at 25% over a period of time. By what time does the company hope to capture 30% share? Is there a threshold for the number of years the company is willing to wait that we should assume?
And I agree with Kendra regarding the testing - it has already passed that phase with about $3 million spent. Without a clear number for the costs associated with liability lawsuits and the probability of them happening (now that the product has been extensively tested), I do not think we should need to spend more on testing.
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