Situational Analysis:

TerraCog, a private company founded in 1977, specialized in high-quality Global Positioning

System (GPS) and fishing sonar equipment for serious boaters and fishermen. TerraCog’s
strong relationship with its major accounts and sound grasp of its customers’ preferences had
given it an edge over GPS manufacturers. Although TerraCog was never the first to market
their products, they were known for their durability and value-added features.

In the summer of 2006, their competitor Posthaste introduced a new GPS prototype called
“BirdsI” with static satellite imagery which was not appreciated by TerraCog team initially.
Pondering over the buzz, TerraCog’s executives debated to upgrade to satellite imagery but
soon realized that adding the features to the existing platform required upgrades to processor
speed and memory. Thus TerraCog decided to drop the idea of the upgrade as they believed
that their core customers would value durability and performance over new graphics.

Fueled by BirdsI’s success, TerraCog’s president Richard Fiero went ahead with Ed Pryor,
Vice President of Sales to start Project Aerial without consulting the company’s key
stakeholders and without having any consensus around the timing for its implementation as the
product team was already working on other products.

Fiero and Pryor met Allen Roth, director of design and development, and decided to launch
Aerial by 2008 holiday season which didn’t go well with the product development team
members as they felt that a redesign of the total platform would need an extension of six more
months to make it a superior product. Besides, they had several ideas to position TerraCog to
capitalize on cycling and fitness GPS applications.

It all came down to Emma Richardson, the new executive vice president, to oversee the product
launch and she scheduled a meeting in early March with the concerned teams. In the meeting
regarding the pricing of the product, Pryor estimated Aerial to cost at $550 for maintaining
their margin which Cory Wu, Manager of Software and Firmware Design, found surprisingly
high. Alice Gorga, Manager of Hardware Design, found the price to be realistic and was
wondering about positioning it in customers’ mind. Tony Barren, Director of Production, was
in no mood to change the cost citing quality issues. It was clear that everybody was having
their own individual objective and nobody was in a mood to align with the team’s objective to
price the product fairly.
They all met once again on March 14 and were also joined by Becky Timmons, the CFO, and
Harold Whistler, TerraCog’s co-founder. Emma passed the copies of the new price estimates
that Roth and Barren cut down by approximately 8% by making minor changes to the prototype
and estimated the price to be at $475 which again came as a surprise for Cory Wu who was not
able to understand the differences between their pricing and Posthaste. This led to disputes
relating to pricing and consequently, the meeting broke into several conversations. Emma, after
realizing this, asked the group to set a price making sense for the company as they had got the
estimates.

Pryor suggested keeping the selling price relative to the competition. Posthaste was offering at
around $250 meaning they were retailing for around $400 and Garmin had just announced their
version at around $395. Pryor suggested a final price of $425 if they had to recapture their lost
share of the market to which Timmons and Roth were in disagreement as they felt the price
was already cut down to the minimum.

Problem Statement:

Emma needed to take a decision whether to go ahead with the Project Aerial at a competitive
price in the hope of a future cost cut or abandon the project looking at everyone pointing fingers
on one another and not able to come to one decision as she needed to bring them on the same
page.

(Count: 631 words)