CAMBRIDGE Case Analysis by Team 6

SOFTWARE
Anuja Chandan ZS 107
Anurag Mathur ZS 109
Deepak Meher ZS 111
Sandeep Charugulla ZS 125

CORPORATION Shivani Jakhodia ZS 126

 Cambridge Software Corporation is planning to launch Modeler and
needs to decide how many versions should they offer and at what price

Current Situation Challenges

CSC was founded in 1993 by Chuck Kennedy and Doug
Hansen and produced software solutions customized for
scientific and academic communities.
They are launching a new product called Modeler which
was a cross-operating system computer modelling
software.
The product has a huge potential in multiple segments of
customers including business, education, consulting
organizations and research laboratories
CSC never had any experience in developing multiple
versions of the same product. They only marketed one
version of every software product
CSC now has to manage the expectations of its
shareholders and stock analysts
CSC is also working a new product, that in a couple of
years can make all the products in the market obsolete

CSC changed itself from a small company to a million $

organization in less than 10 years

Key Decisions / Questions?

The number of versions to offer for the new product Modeler?

Which segment to target?
The following analysis would be pivotal to help CSC make the right
decision
 Case 1: If CSC chose student version

If CSC chose student version, below would be the cost, revenue and profits for
each of the segments:
If we price it at Variable
$350


Cost
Fixed Cost
$250,000
Demand Cost
5000 $75,000
Total
$325,000
Observations:
Revenue $1,750,000 Price of $50 across all
Profit $1,425,000

segments gives maximum
If we price it at profits (highlighted in green)
$250
Cost $350,000 7000 $105,000 $455,000
if CSC choses only
Revenue $1,750,000 student version
Profit $1,295,000
Approach:
If we price it at Total cost calculated as fixed
$100
Cost $550,000 27000 $405,000 $955,000 cost (product development
Revenue $2,700,000 cost, market development
Profit $1,745,000
cost) + variable cost
If we price it at Profit calculated as
$75
$1,380,0 (Revenue Total Cost)
Cost $750,000 42000 $630,000 00
Revenue $3,150,000
Profit $1,770,000

If we price it at
$50
$9,180,0
Cost $1,050,000 542000 $8,130,000 00
$27,100,00
Revenue 0
 Case 2: If CSC chose commercial version

If CSC chose commercial version, below would be the cost, revenue and profits
for each of the segments:
If we price it at Variable
$1200 Fixed Cost Demand Cost Total Observations:
Cost $350,000 5000 $125,000 $475,000
Revenue $6,000,000
Price of $60 across all
Profit $5,525,000 segments gives maximum

If we price it at profits (highlighted in green)
$900


Cost

$450,000

7000 $175,000

$625,000
if CSC choses only
Revenue $6,300,000 commercial version
Profit $5,675,000

Approach:
If we price it at Total cost calculated as fixed
$500
$1,325,00
cost (product development
Cost $650,000 27000 $675,000 0 cost, market development
$13,500,00
Revenue 0 cost) + variable cost
$12,175,00 Profit calculated as
Profit 0
(Revenue Total Cost)
If we price it at
$225
$1,900,00
Cost $850,000 42000 $1,050,000 0
Revenue $9,450,000
Profit $7,550,000

If we price it at
$60
$13,550,00 $14,700,0
 Case 3: If CSC chose both the versions

If CSC were to go with both the options, they could sell it in 30 ways listed in the
table below, where S is the student version and C is the commercial version:

Customer
Product combinations offered
segment
Large corp C C C C C C C C C C C C C C C S S S S S S S S S S S S S S S
University/Corp
C C C C C C C S S S S S S S S C C C C C C C C S S S S S S S
R&D
Consultants/
C C C S S S S C C C C S S S S C C C C S S S S C C C C S S S
Professional
Small Business C S S C C S S C C S S C C S S C C S S C C S S C C S S C C S

Student S C S C S S C C S C S S C C S S C S C S C S C S C S C C S C

Based on the above table and assuming CSC can shape the market per their convenience
(they can decide which segment gets which product), we calculated the profit margins for
each of the different combination.
The combination which yielded maximum profit was when CSC would sell the student
version to students and small businesses and sell the commercial version to the three other
segments.
The revenue in this case was $39,250,000 and the profit was $29,600,000
 Recommendations

Based on the pricing exercise, creating and selling 2 versions would be most
profitable for CSC rather than going with a single version

They can maximize the profit by selling the student version to students and small
businesses and commercial version to the other segments in the market.

However, there are certain cons associated with the approach and the
management will have to make sure they mitigate the challenges
The product teams inexperience with developing two versions
They may need to expand the workforce to manage additional version development
They might not have time to train additional workforce required to develop a new
version
Managing Customer expectations across different segments would be difficult for the
Marketing team
The product would have a risk of cannibalization between product versions

Attached workbook shows in detail the calculations.

Microsoft Excel
Worksheet