DMA Case-Tean Assignment-Group4 v1
DMA Case-Tean Assignment-Group4 v1
By :
- July 2012 -
ECOLE HASSANIA DES TRAVAUX PUBLICS & ENPC SCHOOL OF INTERNATIONAL MANAGEMENT
Executive summary
DMA should make a decision on either going for marketing PC MacTerm at its end (Case n1) or outsourcing the whole process to Catalina (case n2).
Given the following: 1) NPV (case n1) is positive at 93%. 2) Product lifecycle best estimation is 2 years. 3) DMA remains confident thanks to encouraging feedback. 4) DMA motivation to broaden their narrow technical focus. We recommend that DMA market the software by itself.
Simulation model
Custom distribution for years to obsolescence which are considered the same for both cases, with the following probabilities.
Years to obsolescence 0 1 2 3 4 Probability 0,05 0,2 0,5 0,2 0,05
Triangular distribution for initial market size, initial market share, market growth rate, variable costs (only in the case n1), annual market share multiplier. Initial market size is considered the same for both cases. The simulation target is maximizing the NPV.
Simulation analysis
For case n2 no funding is needed from DMA to launch the product which involves a positive NPV at 100%.
In the case n1 we notice that uncertainty level for positive NPV is 7% which remains favorable to give the go for decision.
Sensitivity analysis
Through the sensitivity analysis it seems obvious that years to obsolescence is the most significant parameter followed by initial market size.
Sensitivity analysis
By considering the table below, we may conclude that DMA should market the product at its end if the number of years to obsolescence exceeds 1 year.
Years to obsolescence 0 1 2 3 4 NPV (Case n1) NPV (Case n2) Negative Inferior Superior Superior Superior Positive Superior Inferior Inferior Inferior
Years to obsolescence 0 1 2 3 4