Rosafarbenes Nilpferd & Sons Engineering, Inc.

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Electronic Engineering Business Plan

Strategy and Implementation Summary

Rosafarbenes Nilpferd & Sons Engineering's marketing strategy will be to concentrate on the large telecommunication sector of the market (28% of 180 million units annually), as well as the smaller industrial automation, and the instrumentation sectors.  In keeping with RNSE's trim organizational structure, growth in sales will be closely keyed to success in its partnering relationships with Technology Manufacturer 1 (its main component maker), developers of operating systems, as well as with suitable VARs.  It will be necessary to augment sales staff.  This "push" marketing will be supported by some "pull" marketing in the form of advertising in specialized trade publications.  At the moment supplying Product Category One devices is a sellers' market, however, with demand projected to outstrip supply, more makers of these devices are likely to spring up.  It is important for RNSE to leverage its present ground-floor position in the supply of Technology 1 devices by building a market image that will make it difficult for later entrants to make in-roads into RNSE's target market sectors.

5.1 Competitive Edge

Rosafarbenes Nilpferd & Sons Engineering's competitive edge stems from the high technical specifications of its products.  The company develops top-of-the-line Product Category One devices that can work with all the major operating systems available in the market.  Further, RNSE has developed a very favorable partnership with Technology Manufacturer 1, who not only provides the chips but is also interested in promoting RNSE's products.  Moreover, RNSE's compatibility with all the first- and second-tier operating systems provides a unique opportunity to capture the market share.

5.2 Marketing Strategy

Rosafarbenes Nilpferd & Sons Engineering will concentrate on the more demanding sectors of the market and, in doing so, build an image for the highest cutting-edge technology among the various makers of Product Category One devices.  Pricing on the high side is consistent with that image, and alignment with Technology Manufacturer 1 (the premier CPU maker), and the first-tier developers of operating systems will further enlarge that image.  In addition, an investment should be made in image-bolstering advertising in targeted trade publications serving the chosen market segments.

5.2.1 Positioning Statement

Rosafarbenes Nilpferd & Sons Engineering's positioning statement is to stay on the cutting edge of Product Category One device technology by constantly improving its products ahead of the competition with such features as the Product Blennie for Technology Manufacturer 1's product.  RNSE will target customers in the demanding telecommunications, industrial automation, and instrumentation sectors rather than to market-segment a narrower field with lower Technology 1 requirements which tend to be more price-sensitive.

*Note: Propriety and confidential information has been disguised or removed from this sample plan.

5.2.2 Pricing Strategy

For projection purposes, pricing has been based on production costs at 40% of sales price, which is in line with the historical COGS of 38% for the first quarter 2000.  This pricing scheme seems to put Rosafarbenes Nilpferd & Sons Engineering's products on the high end of the ball park with the competition (see the section on Competitive Comparison), which is consistent with the image RNSE wants to build for its products.  Product Category One devices are not yet perceived as "all-the-same" commodities, with price being the only deciding feature.  In line with RNSE's positioning statement, RNSE's market sectors are the more demanding ones (telecommunications, industrial automation, and instrumentation).  These customers are installing RNSE's devices into sophisticated, expensive equipment, and are more likely to make a choice based on which Product Category One device has the highest technical specifications and flexibility in respect to operating system compatibility, choices in configuration, etc., rather than price.

5.2.3 Promotion Strategy

Although Rosafarbenes Nilpferd & Sons Engineering does have sales positions in the personnel plan, RNSE's promotion strategy will stress "partnering" as its main means of getting the word out concerning its products.  The importance of partnering with major industry players (see the section on Industry Participants) is explained below:

Partnering with Technology Manufacturer 1
Technology Manufacturer 1 has a large sales force and is the industry leader with its CPU chips.  All of RNSE's products contain this chip, which is a good foundation for Technology Manufacturer 1 wanting to promote RNSE's products wherever possible over other Technology 1 devices that use Technology Manufacturer 2's chip.  RNSE is already working directly with several direct-sales people from Technology Manufacturer 1 who are referring high volume Fortune 100 customer's to RNSE.  In addition, RNSE is receiving calls from Technology Manufacturer 1 reps who have lower volume opportunities.  RNSE will be placed on Technology Manufacturer 1's website as a member of its third party program.  This is expected to result in increased volume of inquiries to RNSE's website, and help build the desired image.

RNSE has awakened a great deal of special interest in Technology Manufacturer 1 by developing a Product Blennie for their product.  Technology Manufacturer 1 visited RNSE recently and expressed interest in using some of RNSE's products internally, or in some sort of joint-venture.

Partnering with Real Time Operating System (RTOS) Developers
As mentioned elsewhere in this plan, compatibility with existing operating systems is key to Product Category One device sales.  The following is a list of most of the first- and second-tier operating systems:

O/S Vendor Compatibility with RNSE Products

  • CCCC software completed. 
  • DDDD ready by end May. 
  • EEEE ready by end May. 
  • FFFF being done by FFFF. 
  • GGGG ready by end May. 
  • HHHH ready within one year. 
  • IIII ready within one year. 
  • JJJJ ready within one year.

Some of these top echelon O/S developers have hundreds of salespersons which translates into sizeable promotional activity, as virtually all customers for operating systems have Technology 1 in their plans.  Partnering with the first tier O/S developers will also serve to build that all-important image for RNSE products.

Partnering with Market Integrators
Market Integrators are heavy users of Product Category One devices.  Hundreds of these VARs have sprung up who have developed software, and attached hardware designed to address problems, or save time and money for a specific industry.  Most, if not all, of these VARs utilize Technology 1 as part of their value added offering.  Special instrumentation or monitoring devices which attach to hospital beds that can sense wet sheets or patient body temperature are good examples.  These devices all require satellites units located at each bed have a Technology 1 device like RNSE's Product Wrasse.  Considering the number of hospital beds alone, it is easy to see why the VARs represent prime customers for Product Category One devices.  These VARs may first hear about RNSE's products through one of the operating system developers or via a search through the Web.  In addition, RNSE plans to get out a direct mailing to a list of 300 VARs.

*Note: Propriety and confidential information has been disguised or removed from this sample plan.

5.2.4 Distribution Strategy

There are no immediate plans to wholesale Rosafarbenes Nilpferd & Sons Engineering's products.  There might be opportunities to distribute some Technology 1 devices to one of the major component wholesalers, but this could only be possible in limited configurations.  All sales are expected to be direct sales.  This should be qualified as many major customers out-source their manufacturing.  XYXY, for example, is a customer of RNSE, but they subcontract to SRSR who actually purchases the enabling devices from RNSE.  In the case of VARs, they would purchase from RNSE and install them in the equipment being sold to someone else.  The target market customers addressed in RNSE's positioning statement should have unit requirements of 100-10,000.  With annual sales volume projected reaching 30,000 in the third year, direct sales should not be a problem logistically.

*Note: Propriety and confidential information has been disguised or removed from this sample plan.

5.2.5 Marketing Programs

The most important element in Rosafarbenes Nilpferd & Sons Engineering's marketing game plan is to complete programming of its products to be compatible with the top tier operating systems (see the section on Promotion Strategy).  Completion is planned for the end of May 2000.  As soon as this has been done, partnering activity with those operating systems developers can begin in earnest.  Informational releases via email to O/S sales forces containing data specifications should be encouraged.  Opportunities to speak at O/S developers' sales meetings should be sought.  This will be coordinated by the new sales manager position.

In conjunction with the above activities, a direct mailing to VARs should be undertaken.  An up-to-date list of 300 VARs can be obtained through Software Manufacturer 1.  A budget of $1,000 has been provided for in the cash flow projections.

Since many first impressions of RNSE's products are made by a visit to its website, it is important to give RNSE's website a face lift.  The Cyber Design Group as well as other professional website designers are being considered.  A budget of $15,000 has been provided for in the projections.  This is the shop window first seen by potential Technology 1 device customers.  The website design must put the desired image at the top of its priorities.  Included in this budget are some ad agency costs, as most Web designers are really technicians who have little knowledge of the art of image building.  The website technician and the advertising specialist need to work together to get the right result.

To help increase awareness of and build the desired image for RNSE's products, advertising should be done in targeted trade publications.  A media specialist should be consulted to help in selection.  In keeping with RNSE's positioning statement, trade publications which reach OEMs in the telecommunication, industrial automation, and testing and instrumentation sectors of the market should be favored.  It is important to provide an adequate budget to make certain of attracting notice.  A media specialist can examine the "noise level" (the amount of competing ads) to suggest how much needs to be spent to break through the noise level and be heard.  Until a proper media analysis can be done, a budget will be initially set for year 2000 at $50,000 growing to $250,000 in year 2002. 

5.3 Sales Strategy

The general sales strategy is to concentrate efforts on those sectors of the more demanding 32-bit microprocessor market that have volume needs of 100 to several thousand.  Despite the dramatic increase in visits to Rosafarbenes Nilpferd & Sons Engineering's website, a more proactive policy needs to be taken by directly approaching heavy users of Product Category One devices. Calls must be made on selected VARs, and OEMs who fit the parameters set by RNSE's marketing strategy.  Referrals from RNSE's partnering program (operating system partners, Technology Manufacturer 1, and other industry players) will be stressed. RNSE plans to add a sales manager as well as other sales personnel (see the section on Personnel Plan).

5.3.1 Sales Forecast

Over 400 units of Rosafarbenes Nilpferd & Sons Engineering's first generation product were sold in the first quarter of 2000 without any dedicated sales staff other than the owner and an administrative assistant.  In keeping with RNSE's need to stay on the cutting edge of technology, a faster, smarter, smaller improved product is now ready which should easily succeed in reaching the company's sales goal of 1040 units by the end of the year, increasing to 3000 and 9000 in the second and third year respectively.  This is not an unrealistic achievement considering the market demand for this product, as evidenced by RNSE's actual sales growth in the past year and the growth in visits to RNSE's website which have grown from a few thousand a year ago to over 30,000 website visits monthly as of May 2000.  With sales prices set at 2.5 times variable costs, gross profits are expected to reach nearly $1 million in the first year and nearly $9 million in the third year.

The sales projections forecast three RNSE products, made up of a main product (Product Wrasse) and two other products (Product Parrotfish and Product Damselfish) each of which constitute the main product with several add-ons (see the section on Product Description). 

Within these three products, customers have several choices in the configuration in respect to the amount of FLASH (from 1 Mb up to 32 Mb) as well as SDRAM (8 Mb up to 64 Mb).  Depending on the configuration options, the costs of materials range as follows:

  • Product Wrasse: $132.10 up to $193.85. 
  • Product Parrotfish: $210.60 up to $272.35. 
  • Product Damselfish: $150.10 up to $211.85.

To simplify projections, we will assume only one configuration for all three products.  This configuration is with 32 MB DRAM and 4 MB of FLASH.  The costing then will have the following breakdown for the basic product, the Product Wrasse:

*Note: Propriety and confidential information has been disguised or removed from this sample plan.

The Product Parrotfish starts with the basic Product Wrasse ($165.85) and adds Technology 1 components ($27.00), a modem module ($35.00) and several other minor parts ($16.50), bringing the cost up to $244.35.

The Product Damselfish starts with the basic Product Wrasse ($165.85) and adds an audio interface ($10.00), Technology 2 components and connectors ($10.00), bringing the cost up to $183.85.

See the section on Pricing Strategy for explanation of pricing policy.

Sales Forecast
2000 2001 2002
Unit Sales
Product Wrasse 1,040 3,000 10,000
Product Parrotfish 1,040 3,000 10,000
Product Damselfish 1,040 3,000 10,000
Other 38 0 0
Total Unit Sales 3,158 9,000 30,000
Unit Prices 2000 2001 2002
Product Wrasse $412.00 $412.00 $412.00
Product Parrotfish $610.00 $610.00 $610.00
Product Damselfish $457.00 $457.00 $457.00
Other $1,995.00 $1,995.00 $1,995.00
Sales
Product Wrasse $428,480 $1,236,000 $4,120,000
Product Parrotfish $634,400 $1,830,000 $6,100,000
Product Damselfish $475,280 $1,371,000 $4,570,000
Other $75,810 $0 $0
Total Sales $1,613,970 $4,437,000 $14,790,000
Direct Unit Costs 2000 2001 2002
Product Wrasse $165.85 $165.85 $165.85
Product Parrotfish $244.35 $244.35 $244.35
Product Damselfish $183.85 $183.85 $183.85
Other $630.00 $630.00 $630.00
Direct Cost of Sales
Product Wrasse $172,484 $497,550 $1,658,500
Product Parrotfish $254,124 $733,050 $2,443,500
Product Damselfish $191,204 $551,550 $1,838,500
Other $23,940 $0 $0
Subtotal Direct Cost of Sales $641,752 $1,782,150 $5,940,500

5.3.2 Sales Programs

The most important sales program is the program based on "partnering" (see the section on Promotion Strategy).  By constantly being in touch with the activities of Technology Manufacturer 1, and the operating system developers, and by developing relationships with their extensive sales teams, referrals can be expected to VARs and OEMs who fit the parameters set in the marketing strategy.

Once a solid sales prospect has been identified in this manner, more specific action can be taken directly with the prospect.  This action would include more technical discussions between Rosafarbenes Nilpferd & Sons Engineering and the prospect's engineers.  "Starter Kits" can be arranged which make it very easy for the prospect to integrate hardware and software between the Technology 1 devices and the appliance.  Once a starter kit has been sold, telephone follow-up is necessary to convert the original opening into a substantial sale of 100 or more units.

5.4 Strategic Alliances

As already explained (see the section on Promotion Strategy), strategic alliances between Rosafarbenes Nilpferd & Sons Engineering and Technology Manufacturer 1, the chip manufacturer, and the top tier operating system developers like WWWW, XXXX, or LLLL are essential to success in selling large quantities of enabling devices.  Partnering leads to referrals which can be filtered as to needs, and many referrals can be expected to transform into completed sales. 

The prospects for a deeper strategic alliance with Technology Manufacturer 1 is possible as a result of Technology Manufacturer 1's recent visit to RNSE.  Technology Manufacturer 1 is especially interested in RNSE's development of a Product Blennie for the Technology Manufacturer 1 product.  Technology Manufacturer 1 expressed an interest in working together to exploit the product.

5.5 Milestones

The attached table lists the major milestones in the first year that are key to the success of the company's overall market strategy.

Milestones
Milestone Start Date End Date Budget Manager Department
Mailing to 300 VARs 7/1/2000 7/1/2000 $1,000 B. Nilpferd Admin
Website Design 8/1/2000 8/1/2000 $15,000 B.Nilpferd Marketing
Trade Journal Ads 9/1/2000 9/1/2000 $50,000 B.Nilpferd Marketing
Five Major O/S Programming 6/1/2000 6/1/2000 $0 B.Nilpferd Technical
Second Tier O/S Programming 12/31/2000 12/31/2000 $0 B.Nilpferd Technical
Partnering Banners/Links 12/31/2000 12/31/2000 $0 B. Nilpferd Marketing
Totals $66,000