Essay on Case 1 Performance Indicators Memo V2

1348 Words Jul 26th, 2015 6 Pages
Discussion Questions for the Performance Indicator Case Synopsis
The case of Performance Indicator (PI) provides a nice application of the basic economics underpinning strategy decisions facing firms, as summarized by the Value Creation & Capture Framework. The central question to think about is the following seemingly inconsistent set of facts: (1) From the description in Osinski and Winskowicz’s (Robb and Bob) sales pitch and the supporting calculations presented in the case (especially Exhibit 5), PI seems like an obvious source of profits for golf-ball manufacturers.
(2) Not a single golf-ball manufacturer has adopted and implemented Performance Indicator’s technology.
Assignment:
1. What is PI selling, exactly?
PI is selling
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3. What determines PI’s potential customers’ willingness-to-pay?
The amount of benefit (i.e. increased profits) the manufacturers expect to earn from adoption of the technology determines their willingness-to-pay. Specifically, if we consider the ‘Value Creation & Capture Framework’, manufacturers are thinking about how this will impact the value creation & capture framework in relation to their customers. For example, will a golfer who buys new balls feel any new value from the implementation of the technology? The answer is, probably not, so the prices will not change. However, if a manufacturer feels that it will push the outer edge (quantity) out and increase profits, then the increase in quantity * gross profit less the increase in cost will determine the manufacturers willingness to pay. See chart below.

B Price C

In determining how the edge will move, there are multiple assumptions each manufacturer must make such as, will anyone else in the industry do this where I will get the benefit from them as well? Is it beneficial if I’m the only one? Will this put pressure on pricing since customers will have to purchase new balls? Will there be additional costs to educate the end consumer so they understand what the color means? Is there a negative impact of seeing my ball grey that
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