Memorandum: Info-Tech Research Group Harvard Case Solution & Analysis

Memorandum: Info-Tech Research Group Case Study Solution

More of it, the company should select the price that generates high return on investment (ROI). The return on investment on low, medium and high level of sales are -0.24, 0.06 and 0.09 respectively. It is evaluated that high level of sales have high return on investment (ROI). Additionally, the low payback period is favorable for the company. The medium level of sales shows a high payback period, while the high level of sales shows low pay back period.

Shortly, the price skimming strategy recommended to the company is $995. The price level is comparable to the market rivals and acceptable by the customers. Not only this, it would also generate positive cash flows, which would be easier for the company to recover cost in minimum period of time, and would have high return on investment as well.

Info Tech Advertisement Budget

It is evident to note that the company would spend its advertisement budget on the direct mailing method, due to the fact that it involves sending information which is related to the 6 packages to its potential customers with the intent to place the order in an easy manner through email. The approximate annual cost of advertisement budget is provided in the exhibit which the company could further use in other market arena in case of success of campaign in the Canadian market.

To develop the direct mailing program for the purpose of advertising the 6 methodologies for IT decision managers; the required services are the professional printer to print and design the envelops, packages, sealing, stuffing and delivery cost, mailing cost and lists of companies’ name or brand cost.

McLean’s one-year payback goal

Following the quantitative analysis, one year payback period goal for the purpose of launching the IT package provides the best practice knowledge in a concise as well as clear manner, in order to help the IT managers to accomplish the projects independently and with the help of professionals and experts, is not making any sense due to the fact that the low payback period at the high level of price in which the ROI is higher as compared to other level of price is around 10 years.

Exhibit A

United States DollarsLowMediumHigh
Price295495995
Sales250200100
Revenue737509900099500
Sales Discount3687.549504975
Net Revenue70062.59405094525
Initial development cost
Technical Staff43859.6491243859.64943859.649
External review cost7017.543867017.54397017.5439
Total Production Cost50877.1929850877.19350877.193
Post Production Cost3508.771933508.77193508.7719
Total Initial Development Cost54385.9649154385.96554385.965
Production Cost
CD Production cost526.3157895421.05263210.52632
Printing and Packaging Cost6043.8596494835.08772417.5439
Total Production Cost6570.1754395256.14042628.0702
Advertisement Cost29239.7660829239.76629239.766
Total Cost90195.9064388881.87186253.801
Cash Flows from each methodology-20133.40645168.12878271.1988
Cash flows from six methodologies-120800.43931008.77249627.193
Return on Investment-0.260187480.06678860.1068901
Payback Period–                3.8414.9726119.355401

Exhibit B

Required Investment Low MediumHigh
External review cost        60,000     60,000     60,000
Initial development Cost      375,000   375,000   375,000
Post production cost300003000030000
Printing and packaging cost           8,613        6,890        3,445
Account payable              718           574           287
Initial Investment      464,282   464,426   464,713

Exhibit C

Advertisement Budget US$
Brochure Design Cost              225
Printing Cost           6,250
Sealing and Delivery Cost           3,750
Mailing Cost        11,200
List of Company Names Cost        13,750

 

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