NPD Business Cases - Group 1
NPD Business Cases - Group 1
Product Innovation
Charters………………………………………………………………………………....3
Part I. Scoping Review - Suitcase
Cart………………………………………………………………....…...4-6
Part II. The Business Case - Suitcase
Cart………………………………………………………………...7-17
Suitcase Cart Product
Description/Features……………………………………………………........7
Strategic
Fit……………………………………………………………………………………....….8
Product and Competitive
Advantage…………………………………………………………....…...9
Market Assessment and
Attractiveness……………………………………………………...…..10-12
Technical
Assessment……………………………………………………………………………...13
Core
Competencies………………………………………………………………………………...13
Sustainability
Goals……………………………………………………………………………..14-15
Financial
Analysis…………………………………………………………………………….....16-19
Part III. Scoping Review - Dog Communication
Board……………………………………………..…...20-21
Part IV. The Business Case - Dog Communication
Board…………………………………………….....22-34
Dog Communication Board Product
Description/Features………………………….………..…...22
Strategic
Fit………………………………………………………………………………………...23
Product and Competitive
Advantage………………………………………………………...……..24
Market Assessment and Attractiveness………………………………………………...
…….….25-27
Technical Assessment……………………….
……………………………………………………..28
Core
Competencies………………………………………………………………………………...28
Sustainability Goals…………………………………………………………………...
……………29
2
Financial Analysis…………………………………………………………………………....
….30-34
3
Product Innovation Charters
Suitcase Cart
Mission Statement
Our mission is to enhance lives by turning your “what if’s” into reality.
Vision Statement
4
The Suitcase Cart
(Q): Who cares the most about your product/service? Why? What else is like it?
(A): Travelers, specifically families or those with multiple units of luggage (winter
sports, long vacations, moving homes, etc.), are customers on the market who care
the most about the Suitcase Cart because they often struggle with moving their
belongings from destination to destination. Currently there are numerous types of
suitcases on the market, along with carts to help move suitcases (in which you
often have to pay to use). However, the Suitcase Cart provides a convenient,
foldable combination of the two.
(Q): What is different better about yours from the market’s perspective?
(A): The Suitcase Cart is different better than suitcases on the market because it
serves an additional purpose - the functionality of a cart. It specifically serves the
efficient aspect of the term “better”, as the cart allows for faster transportation of
luggage, allowing travelers to get to their destination quicker. Additionally, the
cart function allows for ease of transportation with minimal effort (effective).
(A): The Suitcase Cart is significantly different better than products that are
currently on the market, when dealing with travelers who carry more than one
bag. For users who only bring one bag, our Suitcase Cart still outperforms the
market in terms of quality but is not significantly different.
(A): Revenue in the Luggage & Bags segment amounts to US$28,453m in 2020, the
market is expected to grow annually by 1.1%. However, the luggage category
specifically is forecasted to grow 16.8% in the next three years. Additionally, there
is a rising trend in travel frequency, where the US has experienced a 4-5% annual
increase in air ticket sales over the past three years.
5
(Q): What is the basic technology?
(A): Fortunately, the Suitcase Cart only requires preexisting design and
manufacturing technology.
(Q): How much technology development is required? Who can develop it?
(A:) Not much technology development is required because of the simplicity of the
products. All of the top 10 suitcase manufacturers (by units) are located in China
so we are likely to work with them to manufacture them. As far as design, we will
have to partner with an industrial designer to determine specifications.
(A): We have set aside 12-18 months to research, design, and develop the product.
This time includes receiving samples and getting the products to our exact liking.
The product should be ready to be introduced to the market on January 1, 2022.
(A): The total product development cost is estimated to be $343,719.00, over the
span of 18 months. The breakdown per quarter is as follows:
6
The majority of the product development cost will be allocated to hiring an
industrial designer to assist with the R&D and the creation of a digital blueprint to
send to the manufacturer. This will cost about $200,000 of the total budget.
https://www.forbes.com/sites/amyfeldman/2018/11/20/next-billion-dollar-startups-
how-two-young-entrepreneurs-used-relentless-online-marketing-to-build-away-into-
a-700m-luggage-brand/#4fe2171c36a2
7
Part II. The Business Case
Product Description
trolley cart, designed to pull multiple units of luggage with ease. The product
essentially takes the form of a large luggage bag and it’s adjustable handle folds
down and outward to create additional space on wheels. Users can then load up to
three additional bags onto this cart feature, taking the effort out of moving your
belongings.
Key Features
BluePrint
8
Strategic Fit
In our mind, the term strategic fit means that both the competitive and
supply chain strategies for our business have the same goal. For the development
of the Suitcase Cart, much of this emphasis is placed on the partnerships with the
industrial designer and our chosen manufacturer(s). Our two core values are
quality and sustainability and we have chosen partners who have implemented
those exact values into their business processes since day one.
And Bag Fittings Co., Ltd., a suitcase and leather factory founded over two
decades ago in Dongguan, China - a city famous for luggage and bags. Not only do
they have a top-grade reputation within the luggage market, but this
our brand and what we are striving to provide to our Suitcase Cart customers. Not
9
partner visits and a 360 virtual tour of the facility. Finally, as for their products,
(https://xinhuiluggage.en.made-in-china.com/company-Dongguan-Xinhui-Suitcase-
And-Bag-Fittings-Co-Ltd-.html)
Additionally, we have chosen Phase One Design to be our design partner for
engineering, and product rendering. The firm is built around developing long-term
relationships and has years of experience working with other seas production
sources. Their mission to help clients grow and their reputable clientele base has
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Product and Competitive Advantage
Our main competitor within the luggage market is Samsonite, who accounts
for just over 45% of the industry’s market share. In 2018 alone, they generated
about $3.79 billion in revenue globally, across their numerous product lines.
However, while they dominate the market, there is still plenty of opportunity for
competition, especially for products that are unique and offer never-before-seen
samsonite-worldwide/)
every physical function that Samsonite’s luggage is equipped with and so much
more. The Suitcase cart includes a mix of polycarbonate and leather material,
with all of this is the holy grail - the extendable handle that can turn the luxury bag
three additional pieces of luggage (or 150 pounds) with just the extension and
unfolding of the suitcase’s handle. On the bottom of the suitcase lies the additional
wheels for the cart, those which are hidden when not in use. Furthermore,
assembly of the entire piece takes only seconds, making it convenient for wherever
Strengths
➢ Has built an empire in the industry - they have a long history and it is the
most well-known brand in the market.
➢ Their luggage is stylish, flexible, and high quality.
➢ They are innovative (ex. Have scales in their suitcases)
➢ Numerous product lines.
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Weaknesses
➢ Do not have technology outside of their scale feature.
➢ Their product lines have grown so much that their positioning in the market
is somewhat unclear.
➢ Innovation, such as our cart feature, can pose a great threat.
Target Market: The Suitcase Cart was designed for upper-middle class families
Total Market Size & Growth: The luggage market alone is expected to generate a
forecasted to happen over the next three years. This substantial growth is
primarily due to the skyrocketing growth of the travel and tourism industry.
Essentially, these two markets are correlated and as the travel industry continues
its rise, so will the luggage and bag industry. Additionally, the luggage market has
luggage and suitcases, such as sports luggage, convertible luggage, smart luggage,
preferring multipurpose luggage, a category which our Suitcase Cart falls right
into. (https://analysis.technavio.com/luggage-industry-analysis-research)
12
Customer Need: As noted above, the rising demand for multipurpose luggage has
grown the entire industry substantially. Consumers have begun to expect more
from their bags, especially as the population has begun to travel a lot more. Also, it
is proven that tourists prefer to travel with partners, whether it be family, friends,
etc. With that being said, it is safe to conclude that more luggage is being
transported than ever before, raising a need for our two-in-one Suitcase Cart.
➢ 68% of family travelers will embark on a summer getaway, while 45% are
➢ Of people who traveled in 2016, 24% were solo travelers, 47% were adults,
https://blog.accessdevelopment.com/tourism-and-travel-statistics-the-ultimate-
collection
13
Customer Benefits: With our Suitcase Cart, customers can enhance their traveling
experience to measures that are not even imaginable. It offers travelers the
opportunity to have their own porter right at their fingertips. There won’t be any
more struggling to move the family’s luggage across the airport or waiting at the
hotel for the next luggage cart to be available. The Suitcase Cart offers users the
greatest convenience possible so that traveling can be stress free - like it should
be.
Opportunity Window: Now, more than ever (outside of the COVID-19 pandemic),
people are traveling the world. Not only has global tourism tripled in numbers
since 2000, but the luggage market has kept consistent growth throughout this
time as well. However, while the window of opportunity is wide open for products
introduced into the luggage industry. We have begun to see variations of “smart”
suitcases as well as very impressive designs, therefore it’s crucial to introduce our
Suitcase Cart on time in 2022, since we believe this window could start shrinking
by then.
Competition and Perceptual Map: For our competitive analysis, we have displayed
a variety of our Suitcase Cart’s competitors that currently exist in the luggage
industry, from the market leader, Samsonite, to some of the lesser-known brands
that could pose a threat to our sales As shown, we divided the market into the two
most prominent attributes for bags - quality and price, with quality taking into
account material, durability, features, and customer reviews. Essentially, the most
14
opportunity exists in the bottom right quadrant of the perceptual map, where
products would have high quality for a low price. Equipped with innovative
features and a sleek, modern design, the Suitcase Cart offers everything that the
consumers are asking for, at a lower price than most of its competitors.
Additionally, our product’s cart feature helps position our product well above the
15
Technical Assessment
design partner, Phase One Design. They will work to optimize our design to
produce the best suitcase that the market has ever seen. Fortunately, the technical
decades and multipurpose features have been explored with luggage bags. While
the industrial designer is set to partner with us throughout the entire 18 month
development period, this initial design phase is only expected to last a fraction of
it. From there, the rest of the time will be allocated toward creating a prototype
and working with the supplier to perfect each feature of the product through trial
and error. The chart below represents the product development costs by quarter,
where cost will slowly decrease as we get closer to the final product.
Core Competencies
➢ Innovation
➢ Logistics & Supply Chain
➢ Marketing - Awareness, Brand Image
➢ Environmental Sustainability
➢ Quality
16
➢ Customer Orientation
Sustainability Goals
footprint is projected to more than double in the next forty years. Without
change, the United Nations noted that almost three planets worth of natural
These eye-opening statistics have not only increased our awareness of the
global issue regarding our planet’s limited natural resources, but they have
plans to manufacture in Southeast Asia, our routes reside in two of the most
better future for all. We feel that in order for change to happen, it starts
with the most developed countries, and with that, we have developed a few
goals:
1) Our first goal is to choose a manufacturer whose values align with ours. For
and waste. With the freedom of choosing our own manufacturers, we will
find a global partner(s) that has sustainability goals in practice, even if that
17
means a higher cost per unit. Additionally, we feel that implementing
sustainability goals into our operations could allow us to drive up our retail
selling price, ultimately evening out the greater cost per unit.
recycling initiative, and doing our best to limit any wasteful materials in our
products’ designs.
3) Finally, the third goal that we have initially set for this project is to use
While we have recognized that some of the resources used can’t align with
as possible.
Though these goals are just small steps in implementing sustainability into
our consumption and production patterns, we feel that they are a great
ourselves, as well as our supply chain, our Suitcase Cart operations will
ensure environmental sustainability and make the world a better place than
18
Financial Analysis
Price Estimation:
Through our competitive analysis and consumer reviews, we took the price of the
Suitcase Cart into careful consideration. Based on our positioning, we priced the
product at $300.00, slightly below the average unit price of the market. This price
will not only assist us in gaining a competitive edge, but the margins are
Sales Estimate:
The majority of our sales estimates were based on past luggage company's success
and growth rates (a .05% market share in five years). We have forecasted the
Introduction Stage of the product’s life cycle to last two years, through 2024,
where sales will then experience rapid growth the following years in the Growth
Stage. Additionally, we have taken seasonal demand into account, where Spring
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Development Cost:
Assumptions:
competitor) annual report, we found that they spent about 7% of their sales
what our total product development cost would be from when our business efforts
start (7/1/2020) to when our product enters the market (1/1/2022). From this total
a breakdown by quarter:
➢ Q3 (2020) - $103,115.70
➢ Q4 (2020) - $85,929.75
➢ Q1 (2021) - $68,743.80
➢ Q2 (2021) - 51,557.85
➢ Q3 (2021) - $25,778.93
➢ Q4 (2021) - $8,592.98
Variable Cost:
According to the Economic Census study, the average total cost of materials for
point, we increased our beginning variable cost per unit by $5.00, taking into
consideration a smaller unit volume and additional materials for the cart feature.
However, we have forecasted the variable cost per unit to decrease as greater unit
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1-999 units = $51.61
1,000-9,999 units = $50.61
10,000-49,999 units = $47.61
(https://www.census.gov/prod/ec97/97m3169a.pdf)
Margins:
For the first 27 months (Year 3, Q1) the unit contribution margin is $248.39.
Once order sizes break 1,000 units, in Q2 of Year 2, the unit contribution margin
will increase by $1.00 to $249.39 for the next two years. In Q2 of Year 5, the order
size will exceed 10,000 units and the contribution margin per unit will be $252.39
our gross margin as a percentage of sales is about 35.9%. We then applied this
percentage to our forecasted revenues to get our gross margins for each quarter.
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Breakeven: Fixed costs have been forecasted to represent approximately 15% of
sales for each quarter. Below we have created graphs to present projected
revenue/sales, relative to the costs that will be incurred each quarter. Ultimately,
these findings display how long it will take the Suitcase Cart to break even in
terms of both time and units sold. As shown, breakeven is forecasted to occur is
Sensitivity Analysis: Let’s be honest, forecasts are never exactly right. We have
included sensitivity analyses for both Year 5 alone, as well as the entire project
from Years 1-5. As shown, even in our estimated ‘worst case scenario’ (a 25%
unfavorable swing in our forecast), we will make profits - profits that are just
getting started. We are aiming to get this project started as fast as possible in
22
23
Dog Communication Board
(Q): Who cares the most about your product/service? Why? What else is like it?
(Q:) What is different better about yours from the market’s perspective?
(A): This product is different better than others on the market because the most
similar products on the market still essentially serve a different purpose. The dog
communication app is more of a novelty thing and less of a serious means of
communication. The device that has a sound that prompts the dog to walk in front
of a camera is more similar, as it requires the dog to react to a stimuli, but is more
simplistic and doesn’t allow the dog to communicate back. Our board will be more
effective and complex than this device.
(A): Our board is different better because it includes a manual and allows you to
teach your dog how to communicate back to you via 5 different buttons which act
as 5 different stimuli. Their dog will be able to tell them when they want to eat or
go outside through buttons as opposed to barking. The dog being able to actively
learn how to respond to their owner through stimuli is our major differentiator.
(A): The value is the ability to feel closer and communicate with your pet. This
value is hard to quantify because it obviously will vary depending how close the
consumer is to their pet. This product will be targeted at high-income pet owners
and will likely be comparable to high end dog toys.
24
(A): The board would have 5 buttons; “yes”, “no”, “outside”, “food”, and “love you”.
It uses stimuli to teach dogs to learn and communicate these messages.
(Q): How much technology development is required? Who can develop it?
(A): Our product development team would work with a dog trainer and speech
pathologist to optimize the board and create a manual to go along with it that is
easy to understand.
(A): It would take a bit of time to create the manual to make it simple for the
average person to teach their dog to use the board. The technology is already
possible as a viral video surfaced about a month ago of a dog using a home-made
board effectively. We have estimated a 2.5 year time frame for development before
the product is made available to the market.
(Q): Does it make sense to move forward with our product/service idea?
(A:) Yes, we believe there is a spot on the market for a product like this and there
is a realistic path to develop it. If this product is developed correctly and effectively
it will be revolutionary to the pet industry.
25
Part IV: The Business Case
Product Description
level. The product’s design is hardly complex; the Dog Communication Board
takes a rectangular shape and includes 5 different buttons. These buttons, when
pressed on, communicate messages from dog to owner. The messages are: “Yes”,
“No”, “Outside”, “Food”, and a heartwarming “Love you”. The product comes with
properly understand and then use the device to communicate with their owners.
Key Features
BluePrint
26
Strategic Fit
The Dog Communication board is a great strategic fit for us because it aligns
perfectly with our businesses mission and core values. Our company vision is to
communities we interact with. The Dog Communication board fits this vision
because it is not only a new and innovative product but also one we believe can
have a positive impact on consumers lives and make their experience with their
dog better and easier. To achieve this goal it is crucial for us to develop an
we find the right partner to help us develop it. After a bit of research we found the
similar, yet more complex, board for her dog and became a viral sensation because
of it. Christina already has experience with developing a board similar to ours so
we believe she would be a catalyst in helping develop our product. We believe she
would be excited about the opportunity, as she has information on her website on
how to create your own board, but she does not sell any product or related product
on her website. She is someone we believe fits our core values and would be a
great business partner to develop this product. We see this opportunity as a win-
27
win as she receives compensation for her viral idea, but we help get her idea to a
widespread audience, which she makes clear is important to her on her website.
Source: https://www.hungerforwords.com
and market as it does not have a fully defined industry and is in short trying to
create its own industry and brand. We believe it has both functional utility and
hedonic values as it teaches the dog to communicate better to their owners but
also gives the owner a feeling of closeness and an increased personal relationship
with their dog. We believe us having the ability to offer value in both of those ways
We believe our product's value proposition balances value dog owners are
looking for and if executed correctly could create a unique position for our product
in the market. If our product is fully developed and works as intended we believe
it will be efficiently spread through social media and word-of-mouth as the dog
community is very outgoing and close and is always looking for ways to be closer
to their dogs. For these reasons it is worthwhile to develop this product and
28
attempt to leverage this competitive advantage into an advantageous market
Market Assessment
Customer Need:
dog training devices that can be used directly by the consumer at the comfort of
their own home. The coronavirus has led to an increase in dog adoptions and
fostering according to CNBC and people practicing social distancing can’t pay an
outside trainer to help potty-train and house-train their dogs. We see our device as
a catalyst in training their dog and we think our product is perfect for anyone with
29
https://www.cnbc.com/2020/04/11/coronavirus-increased-pet-adoptions-now-
rescuers-face-new-challenges.html
Customer Benefits:
We see the customer benefitting from our product in two main ways. First
they will gain a utilitarian value from being able to communicate better with their
dog. With our product dogs can communicate to their owners when they need to
use the restroom or eat as well as giving them yes/no responses. We hope this will
allow owners to understand their pets better and can be a valuable training tool for
both young and older dogs. We believe our product can also benefit young dogs
with potential bathroom problems as well if the owner uses our manual effectively.
We believe that our product will make dog-lovers feel better and closer to their
pets and even if it doesn’t work as effectively as we’d hope customers will still see
the value in the product. The customer simply hearing their dog “talk” with the
Opportunity Window:
evidence that there is a need for our product and it could sell effectively. Due to
coronavirus and social distancing, dog trainers can’t visit people’s houses directly
anymore and people are seeking assistance on how to train their dog on their own.
While we have recognized that the Dog Communication Board would have been the
perfect solution during this pandemic, we still see a lot of opportunity in the future.
30
It’s clear that social distancing could be encouraged for a while longer,
opportunity to make the Dog Communicator Board the perfect training device to
use for remote workers who are always around their pets, kids, and so much more.
Once it hits the market, one thing is for sure - there won’t be any more boredom
adoption and fostering rates, giving us yet more opportunity in the market. With all
this being said, we are looking to take advantage of this new era as soon as
possible. While we have recognized that this pandemic will likely pass by the time
our product enters the market, we will be able to take advantage of future
pandemics, a greater pet market, a growing industry, and the overall consumer
https://www.latimes.com/california/story/2020-04-02/requests-to-foster-and-adopt-
pets-surge-as-coronavirus-keeps-us-at-home
Competition
Our research indicates that our product will be the first of its kind to hit the
market. However, while the Dog Communication Board is categorically unique and
unprecedented in its level of sophistication for this particular market, there is still
products that may be considered include dog shock collars, dog treat training
pouches, and clicker training kits. Thus, the primary competitors to be accounted
for include: DogRook, the maker of Amazon’s best selling bark shock collar, Paw
Lifestyles, the maker of Amazon’s best selling dog treat training pouch, and
EcoCity, the maker of Amazon’s best selling clicker training kit. Below is a
31
perceptual map of the competitive landscape of the market. The perceptual map is
divided into two attributes: price and value, where value includes quality, features,
and training caliber. As the perceptual map displays, DogRook’s product is the
Strengths
Weaknesses
● Batteries required
● Innovation, such as the Dog Communication Board, can pose an existential
threat
Perceptual Map
32
Technical assessment
The Dog Communication board is our more complex project, so it would take
more time to develop to ensure it is effective and technically sound. Dog’s have a
history of responding to stimuli in the form of sound and changing their behavior
due to their reaction to these stimuli. The most famous example of this is Pavlov’s
of a bell. Our product takes this idea a step further and has the dogs press the
33
One of the biggest obstacles we will face in developing it is creating our
would work with a speech pathologist who loves and understands dogs in order to
ensure we cover all bases to make the manual tailored to both dogs and their
owners. It would likely take some time to develop with them which is why the
research and development of this product will take longer than the suitcase cart.
Our goal for this manual would be to avoid complexity and try to simplify the
believe we could offer a unique product to our customers that could help bond
Core competencies
➢ Innovation
➢ Forward Thinking
➢ Brand Reputation
➢ Value
➢ Managing Change
➢ Building Relationships
Sustainability goals
Our dog communication board would be a high-end device for pet owners,
and these pet owners would likely be environmentally conscious and care a lot
about animals and their surrounding environment. The board itself would be
34
relatively cheap to develop, so we will make the board using only recycled
materials, and we would also make our manual out of solely recycled paper. This
relates to the 12th U.N. goal for sustainability called “Responsible Consumption
and Production” which emphasizes reusing paper, plastic, glass, and metal. Our
and wildlife protection are likely issues that matter a lot to them, and we gain
customer trust by displaying that our institution is doing our part to help improve
these issues. We would place a graphic on both our product and our manual
stating “made of 99% recycled materials” so our customers are clear about our
commitment to this issue and how we are being environmentally responsible and
transparent. Our product fits this U.N. goal because the purpose of our product is
were damaging the planet for all animals while developing it. We believe members
of our target market would be even more likely to purchase our product with the
35
Financial analysis
Price Estimation:
within the pet product industry. Because of the extensive R&D involved, we found
$80 to be the optimal price point to get returns on our investment, while reflecting
the value of our product. This price point will remain constant throughout both the
Sales Estimations:
Our analysis of the pet industry indicates that the market for training-specific pet
products will have reached around $3.2 billion by the year 2024. However, it is
important to remember that this projection is for the pet industry as a whole, while
our product is designed for dogs in particular. Looking at this particular segment
of the market, the market value for training-specific dog products is projected to
operate under the assumption that we capture .27% of this market segment by
year 7. A quarterly breakdown of both sales revenue and unit sales can be seen
below.
36
Development Cost
Assumptions:
Texas Instruments' annual report and assumed that our numbers would be similar,
given the technology that our product requires. This R&D percentage for TI
equated to 10% and we added an extra 2% for safety measures, given that our
product requires dog training insights as well. We then came up with a calculation
(above) to determine what our total product development cost would be from when
our business efforts start (7/1/2020) to when our product enters the market
➢ Q3 (2020) - $98,374.50
➢ Q4 (2020) - $84,321.00
➢ Q1 (2021) - $70,267.50
➢ Q2 (2021) - $70,267.50
➢ Q3 (2021) - $56,214.00
➢ Q4 (2021) - $56,214.00
➢ Q1 (2022) - $42,160.50
➢ Q2 (2022) - $42,160.50
➢ Q3 (2022) - $28,107.00
➢ Q4 (2022) - $14,053.50
37
➢ Total: $562,140.00 in 30 months
Variable Cost:
In order to assume the variable cost for our Dog Communication Board, we
researched the manufacturing prices for the materials that our product is made of.
We learned that push buttons cost about $1.16 per unit, of which we would need
five for each individual Dog Communication Board. Furthermore, we learned that
the board frames in which the buttons are implanted cost about $.92 per unit and
then next we estimated direct labor and packaging to equate to $4.00, and finally
the manual printout will cost around $.10 per copy. In total, that brings the
assumed that our variable cost per unit will start at a higher rate to account for
inventory holding costs, given that the minimum order quantity from most
Margins:
38
percentages of 31.3% and 33.6%. Using these numbers, we averaged the two to
(https://www.fool.com/investing/general/2006/06/26/a-closer-look-at-petsmart-and-
petco.aspx). As for our contribution margins, the CM per unit will be $62.18 for the
first two years, $65.18 for the following 7 quarters (until Year 4, Q4), and then
$69.18 for the remaining time - given that variable costs per unit will decrease as
order size and production increase. Below are graphs to reflect the changes in
Breakeven:
Fixed costs have been forecasted to represent approximately 22% of our sales.
costs that will be incurred each quarter. Ultimately, these findings display how
long it will take the Dog Communication Board to break even in terms of both time
39
and units sold. As shown, breakeven is forecasted to occur is Year 5, Q1 where
Sensitivity analysis: Below we have included sensitivity analyses for both Year 7
alone, as well as the entire project from Years 1-7. As shown, there are two
possible scenarios that produce unfavorable financial results, given that the ‘worst
case scenario’ presents itself: selling price and market entry time. For selling
price, our sensitivity analysis essentially just shows that our unit selling price
should not be 25% cheaper ($60), which is a factor that we took into consideration
when pricing the Dog Communication Board at $80. As for market entry, this
analysis shows that we would have yet to break even if we are to be delayed by
25%. However, this does not take into consideration future sales, that would result
in profits just later down the road. Through this analysis, we have realized that
market entry should be our main priority and it could lead to massive profits if we
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