Alternatives:

1. To replace TEL with a direct sales and service organization.

2. Going for a Joint Venture with TEL under which CV has to provide technical and
service support to TEL and TEL has to deploy its sales force for greater penetration in
the market.
3. Taking full responsibility of TEL’s servicing and supporting activities so that TEL
can deploy extra sales force to achieve CV’s target.
4. To search for new distribution channel, agents apart from TEL to increase the
penetration
5. Exploit CVJ organization to expand market coverage.

Critical Evaluation of the alternatives:

1. Going for a direct sales and service organization will not be a good idea for CV as it
leads to enormous cost for them. It is explained as follows:
1983($ M) 1984($ M)
Estimated sales 42 109
Cost
S, G & A (20%) 8.4 21.8
Cost of Credit (10%) 4.2 10.9
Shipping, Insurance (15%) 6.3 16.35
Warranty (1% of .5M X 9 3.78 9.8
months X no. of systems)
Preinstallation (1% of .5M .42 1.09
X no. of systems)
New System Modification 26.6 187.6
Total Cost 49.7 247.54
Loss (7.7) (138.5)

If we see the above calculations the cost of product modification is too high for CV
hence going for a direct sales and service organization is not a viable idea for CV.
 2. The profit for the year 1983 if they go for joint venture is as follows:

1983(Estimated) ($ M)
Sales 42
Cost
Operating Expenses 37.33
Profit 4.67
Profit for CV (50%) 2.34
Licensing Fee (5%) 2.1
Total 4.44

The profit if they don’t go for joint venture comes out to be $6.84 M which is more
than when they go for joint venture so they should not go for joint venture.

3. Looking at the above calculation it is clear that if they don’t go for joint venture but
only provide them with full service and supporting than they can earn more profits so
it is one of the viable options they can pursue.
4. They have discussions with two large companies Toyota and Sony to enter into
multiple distribution arrangements. These companies have strong presence within
their group and have the capability to sell volumes which is in line with CV short term
and long term goals.
5. Exploiting CVJ organization to expand coverage is not the viable option as the quality
of support provided by them is not up to the mark. Also, they don’t have enough sales
force to get the penetration they want.

Recommendation:

1. They should take full responsibility for servicing and supporting installed systems, for
product adaptation which allow TEL to deploy its sales force for better penetration of
the market
2. They should have multiple distribution arrangements to achieve their targets.
3. They should increase their presence in other areas of Japan other than Tokyo which
are equally fast growing.