Assignment
In this assignment, you’ll be writing a business case in which you will recommend to DBVac which of the three vacuums to bring to market, give them a sense of what to expect from its release in terms of sales and profit, and recommend which of four available product managers is best suited for leading the new product’s development. Your submission should be formatted as a business document (e.g., label your responses, don’t number them; don’t include content from this assignment document in your submission). Include your name at the top of the document.
Your submission should include the following:
1. Executive Summary (write this last!) — 5 points
a. Write a half-page summary providing highlights of your business case such that the company’s CEO can, at a glance, understand what the recommendation is, why it’s a valid recommendation, and what to expect if the company goes forward with the recommendation.
b. As part of your summary, summarize the company’s opportunity (in a sentence, what is it that the company hopes to accomplish?), your recommendation (which product should they bring to market and at what price?), how you came to make this recommendation (i.e., why is that what you’re recommending? What did you do to evaluate the options and make this recommendation?), and what the company should expect from releasing the recommended product (in terms of sales and profit).
c. Use relevant data points to support the points made in the executive summary.
d. If your summary is less than a half page of meaningful content, it doesn’t have enough detail. If it’s more than a half page of content, it has too much detail.
2. Background — 5 points
a. Describe the problem and opportunity that the company is facing. You should be re-stating the problem in your own words so that the company knows that you understand their situation.
b. In doing so, indicate what the choice to be made is (i.e., what are you advising the company on?) as well as the basis to be used in making the choice (i.e., what will the recommendation be based on?).
3. Analysis
a. Calculate the expected initial cost of development for all three options using weighted values. (15 points)
i. Include your calculations (i.e., a screenshot of the part of the Excel spreadsheet that shows your work) in your submission.
ii. Explain (for DBVac) what these values are and how they should be useful to the company in terms of evaluating the three options.
b. Calculate the NPV for all three options using the data provided in the background section and using the expected initial cost of development (as calculated in 3a) for each of the three options. (15 points). Use a discount rate of 10% and calculate the NPV inclusive of the investment year (Year 0) and the five years that follow — a five-year time-horizon.
i. Include the calculations (i.e., a screenshot of the part of the Excel spreadsheet showing your work) in your submission.
ii. Explain for DBVac what these values tell us and how they might be useful in comparing the three possible choices.
c. Conduct a sensitivity analysis showing what the NPV for each of the three products would be. In the sensitivity analysis, provide four different calculations of NPV: (1) based on the expectations noted in 3b above (i.e., reiterate the calculation from 3b), (2) based on sales growth that is half as great as that predicted by the company and used in 3b above, (3) based on sales growth that is 75% less than that predicted by the company and used in 3b above, and (4) based on -5% annual sales growth after the first year.
i. Include the calculations (e.g., from Excel) in your submission.
ii. Explain for DBVac what the difference is between (1), (2), (3), and (4) and why it’s useful to consider all four possible outcomes.
4. Determine which of the company’s four product managers should lead the project. (30 points)
a. The scorecard should compare the four possible options across six criteria: the “Dust Factor”, (positive) experience with new product development, dollar amount of bonus to be paid should the project exceed sales expectations in year 1, how well liked the candidate is within the company, and familiarity with the product’s sub-niche (i.e., how familiar they are with the specific kind of product you’re recommending the company pursue). Additionally, include a sixth meaningful, reasonable criterion of your choice.
b. Explain what the sixth criterion is and why it makes sense to include that as one of the criteria.
c. For each of the six criteria, assign a weight from 1-10 based on the relative importance of that factor to the company as determined from content provided in the background section. No two criteria should have the same weight. Explain how you decided to weight each criterion relative to the other criteria (you should have a good, well thought-out explanation; your explanation should be 10-25 words for each criterion).
d. For each of the four product manager candidates, for each criterion, enter a raw score (don’t worry, you’ll get to normalize it soon). Where available, this raw score should be given in measurable units (e.g., cost in $).
e. Create a second version of your table in which you instead use the normalized score for each value entered in 4d. Use z-transformation normalization to calculate the normalized value.
f. Calculate the total balanced scorecard score for each product management candidate using the normalized values and your assigned weights.
g. Include (screenshots of) the spreadsheets you used as part of this balanced scorecard analysis in your document. Make sure it’s clear to the reader what each of the screenshots represents.
5. Recommendation (10 points)
a. Use an appropriate visual to communicate to the executives the possible NPV outcomes for the recommended new product based on the different assumptions you used in the sensitivity analysis.
b. Discuss which of the three product options should be pursued by the company (based on the NPV analysis).
c. Make clear what the value to the company is expected to be from pursuing this option. Express this in terms of NPV and profit over the next five years.
d. Explain (to the DBVac executives to whom you’re writing the report) the results of the balanced scorecard and what these results indicate about which of the four options should be preferred. In doing so, make a clear recommendation regarding which candidate should lead the product’s development.
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