Chiyeyeye: Hold the phone Chiyeyeye had created thriving business selling software for personal digital assistants and...

  

  

  

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Chiyeyeye: Hold the phone Chiyeyeye had created thriving business selling software for personal digital assistants and had captured 50 per cent of market share in its industry. Most Vice Presidents of sales would be thrilled at that accomplishment, Kabeshi was not. Fewer people were buying PDAS, and for Chiyeyeye, the trend became a harsh reality with a single call. chiyeyeye's biggest retail partner. The best buy executive was calling to warn Kabeshi that over the next few months Best Buy was planning to radically decrease orders for both PDs and associated software titles. "I got a sinking feeling in my Kabeshi was talking to a senior buyer for Best Buy, stomach" Kabeshi says. As difficult as it was to hear, the news was not completely unexpected. Research firms had been reporting on the "maturity" PDA market for some time, saying that the devices soon would be obsolete, replaced by so-called small cell phones capable of both data and voice services. Revenue at Chiyeyeye had grown to ZMW 20 million as their popular titles enabled PDA users to play scrabble or consult the Oxford American dictionary. With only 20 employees in three offices, the company had become the dominant player in the market for PDA applications and enjoyed high- profile shelf space in retail chains such as Shoprite and Picknbuy. That dominant market share would be meaningless if PDAS wound up in the technology junk heap, and there were indications they may be there soon. In just one year, the world-wide PDA market had dipped 4.6 %, according to the Garner Group, compared with an 18 % jump for mobile voice-and-data handsets. If Chiyeyeye was to survive, the company would have to quickly break into market for mobile phone application. With that in mind, the CEO Komfwe Mumba convened a series of emergency "wireless summits" to address the issue. The company's executive gathered every month in the executive lounge at the airport, a point roughly equidistant from Chiyeyeye office and attempted to map a strategy for breaking into cell phone market. The barriers to entry were high, and Chiyeyeye had not established business relationships with mobile network operators. These entitled acted as the guardians of the menus or "decks" from which most mobile phone applications such as ring tones and games, are downloaded and purchased. Chiyeyeye did have longstanding ties with some of the country's largest retailers, but relatively few customers were publishing phone applications at these brick-and-mortar stores. The challenge was to convince customers to alter their purchasing behaviour. Q1. a) What steps did Chiyeyeye take to scan the market and the threats that were present to avoid becoming obsolete? (6 mars) b) How can a technology-based company like Chiyeyeye keep up with rapidly changing markets, products, and competitors? (6 marks) c) Which is more important to Chiyeyeye to success: strategy or resources? (4 marks) d) How does the mission statement entrepreneurs like Komfwe Mumba create influence their view of an industry and their companies' place in it? (4 marks) Q2 a) Looking ahead to the financial year ending 31 December 2020, Komfwe and the directors of Chiyeyeye enterprises faced with a budgeted units of 10 000 orders, based on the following data ZMW (000) Sales revenue 100 Variable costs 60 Fixed costs 20 Contribution 20 Budgeted profit 20 The directors would like to aim for profit of ZMW 20 000 for the financial year. Various proposals have been put forward, none of which require a change in the budgeted levels of the fixed costs. These proposals are as follows: i) Reduce the selling price for each unit of PDA by 10 per cent ii) Increase the selling price of each PDA unit by 10 per cent ii) Stimulate sales by improving the quality of the product, which would increase the variable cost of the unit by ZMW 1.50 per unit For each proposal calculate the break-even point? (6 marks) For each proposal calculate the number of PDAS to be sold in order to meet the profit target (6 marks) State which proposal you think should be adopted by Chiyeyeye enteriprise limited (2 marks) Chiyeyeye: Hold the phone Chiyeyeye had created thriving business selling software for personal digital assistants and had captured 50 per cent of market share in its industry. Most Vice Presidents of sales would be thrilled at that accomplishment, Kabeshi was not. Fewer people were buying PDAS, and for Chiyeyeye, the trend became a harsh reality with a single call. chiyeyeye's biggest retail partner. The best buy executive was calling to warn Kabeshi that over the next few months Best Buy was planning to radically decrease orders for both PDs and associated software titles. "I got a sinking feeling in my Kabeshi was talking to a senior buyer for Best Buy, stomach" Kabeshi says. As difficult as it was to hear, the news was not completely unexpected. Research firms had been reporting on the "maturity" PDA market for some time, saying that the devices soon would be obsolete, replaced by so-called small cell phones capable of both data and voice services. Revenue at Chiyeyeye had grown to ZMW 20 million as their popular titles enabled PDA users to play scrabble or consult the Oxford American dictionary. With only 20 employees in three offices, the company had become the dominant player in the market for PDA applications and enjoyed high- profile shelf space in retail chains such as Shoprite and Picknbuy. That dominant market share would be meaningless if PDAS wound up in the technology junk heap, and there were indications they may be there soon. In just one year, the world-wide PDA market had dipped 4.6 %, according to the Garner Group, compared with an 18 % jump for mobile voice-and-data handsets. If Chiyeyeye was to survive, the company would have to quickly break into market for mobile phone application. With that in mind, the CEO Komfwe Mumba convened a series of emergency "wireless summits" to address the issue. The company's executive gathered every month in the executive lounge at the airport, a point roughly equidistant from Chiyeyeye office and attempted to map a strategy for breaking into cell phone market. The barriers to entry were high, and Chiyeyeye had not established business relationships with mobile network operators. These entitled acted as the guardians of the menus or "decks" from which most mobile phone applications such as ring tones and games, are downloaded and purchased. Chiyeyeye did have longstanding ties with some of the country's largest retailers, but relatively few customers were publishing phone applications at these brick-and-mortar stores. The challenge was to convince customers to alter their purchasing behaviour. Q1. a) What steps did Chiyeyeye take to scan the market and the threats that were present to avoid becoming obsolete? (6 mars) b) How can a technology-based company like Chiyeyeye keep up with rapidly changing markets, products, and competitors? (6 marks) c) Which is more important to Chiyeyeye to success: strategy or resources? (4 marks) d) How does the mission statement entrepreneurs like Komfwe Mumba create influence their view of an industry and their companies' place in it? (4 marks) Q2 a) Looking ahead to the financial year ending 31 December 2020, Komfwe and the directors of Chiyeyeye enterprises faced with a budgeted units of 10 000 orders, based on the following data ZMW (000) Sales revenue 100 Variable costs 60 Fixed costs 20 Contribution 20 Budgeted profit 20 The directors would like to aim for profit of ZMW 20 000 for the financial year. Various proposals have been put forward, none of which require a change in the budgeted levels of the fixed costs. These proposals are as follows: i) Reduce the selling price for each unit of PDA by 10 per cent ii) Increase the selling price of each PDA unit by 10 per cent ii) Stimulate sales by improving the quality of the product, which would increase the variable cost of the unit by ZMW 1.50 per unit For each proposal calculate the break-even point? (6 marks) For each proposal calculate the number of PDAS to be sold in order to meet the profit target (6 marks) State which proposal you think should be adopted by Chiyeyeye enteriprise limited (2 marks)