The top management team of Altur-nate Innovation Company is preparing to meet and review its market...

 

  

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The top management team of Altur-nate Innovation Company is preparing to meet and review its market situation. The team is a combination of students, board advisors, and faculty from the Engineering School. They are excited about the Sunshine Stove product they have developed- and passionate about the opportunity that it provides to improve the quality of life for some of the world's poorest people. They know they have a great technology, but they need a marketing plan to bring this product to market. Every day, more than 2.4 billion people more than one-third of the world's population burn solid biomass fuel (wood, charcoal, dung, and coal) for cooking and heating. These fuel sources are usually burned indoors in open pits or traditional cook stoves. About two-thirds of the people using biomass fuel also have no electricity, so the open fires often burn into the night to provide light. These fires create indoor air pollution, which is a leading contributor to respiratory diseases. Former UN Secretary General Kofi Annan had called for greater energy efficiency and noted that "indoor air pollution has become one of the top 10 causes of mortality and premature death." It is estimated that this source of pollution contributes each year to the deaths of 1 million children younger than the age of 5, and it is a leading cause of miscarriage and women's health problems. Hoping to address these consumers' needs for safe cooking and electricity, the Engineering School's Innovation Lab developed the Sunshine Stove. The Sunshine Stove's improved technology requires 50 to 70 percent less biomass fuel than traditional stoves. It also has a thermoelectric generator that converts heat from the stove into electricity that can power a small lightbulb or be stored in a rechargeable battery for later use. The technology has been refined, and the team believes they now have the MVP (Minimum Viable Product). There are other competing enclosed cookstoves, but none produce electricity. Solar panels can provide electricity, but they are expensive costing $160 each. Micro-hydropower allows households to convert the power from streams and rivers into electricity, but homes must be close to a river, and water flow in many areas of the country is seasonal. These technologies- solar panels and hydropower-are understood by many consumers and are already in use in some areas. The Sunshine Stove, on the other hand, offers a new technology, and that may slow its diffusion and adoption. The management team decided on Nepal as the initial target market for the Sunshine Stove. Several factors made this market particularly attractive. The climate is relatively cold, and only 11 percent of the households have access to electricity, so the heat and electricity production of the stove are particularly beneficial. Eighty-eight percent of the population uses firewood as their main source of energy. In addition, deforestation creates environmental problems in Nepal because it contributes to crosion and flooding. So the social benefits of the Sunshine Stove will be particularly appealing to the Nepalese government and aid organizations. There are approximately 9.2 million households in Nepal, but the gross national income per capita is only about $400, with most adults making between $1 and $3 per day. Nepal is largely rural, with only 17 percent of the population living in urban areas. The country is divided into 75 districts. Each district is further divided into about 60 village development committees (a sort of local government) consisting of about 450 households. The similar characteristics of northern India immediately south of Nepal-make it a logical follow-up market. The Sunshine Stove offers several benefits to this population. For example, the longer hours with light thanks to the electricity and less time required to collect wood or other fuel could allow families to earn money by weaving, farming, or producing other crafts. Family productivity could increase 20 percent or more per day. Or the added hours with light might allow children to gain an education, even study when its dark. If the product were manufactured locally, it could provide jobs for the population and help them learn the benefits of technology. With obvious benefits for such a large number of people, the team could look to donations to subsidize the Sunshine Stove for the Nepalese people. But the team has concerns about this traditional form of aid. Financing in the form of grants, government relief, or donations is unreliable. If it is not renewed, projects wallow or die. Further, grants often fail to teach disadvantaged people skills and responsibility. So the team wants to create a sustainable venture that provides benefits for all-and has set up Altur-nate Innovation Company as a for-profit business. The management team has to make a number of marketing decisions. For example, it has to decide how to price the Sunshine Stove. It estimates that the stove will cost about $60 to manufacture after setting up a plant in Nepal and expects that microfinancing organizations will provide loans for families. If units are sold for $80, the loan can be financed at 20 percent interest for three years with payments of $0.68 per week (microfinancing institutions typically collect on a weekly, or sometimes daily, basis). However, some team members, such as Professor Silas Marner and Nepalese student Ashma Chetty believe that the price is much too high, given the average per-capita income of the target market. "The mean wage in all of Nepal is $1-3 a day, but the average wage in our target market, which includes some of the poorest parts of Nepal, is even lower" said Dr. Marner. While these arguments were rejected by a team vote, the team is still unsure about whether, even at the $80 price, it would provide adequate margins for distributors. Furthermore, while most team members think that it will be easy to find a microfinancing institution to provide these loans, others are skeptical, suggesting instead a crowdfunding campaign. The team also has to decide how to promote the stove to a population where less than half the adults can read. However, the team does have contacts with some business leaders, government officials, and nongovernmental organizations that may be able to provide advice and help. Further, the team has some friendly disagreements regarding branding. "The word 'Sunshine' makes no sense since the stove doesn't use solar energy," said Laurence, one of the advisors. "Call it whatever you like Laurence. Branding is a western luxury," replied Dr. Marner, "the only thing the people care about is whether they will save money. These people have suffered greatly due to the recent earthquake, lets bring some sunshine in their lives; can we all agree on that?" "Lets do it" said everyone in unison. Read the case and answer the following questions: Problems: List the apparent problems (or, in some instances, potential problems). Causes: List out the causes to the problems. Problems are just the symptoms (e.g., low profits), while causes aim at identifying the underlying reason that the problem exists (e.g., pricing too high). Recommendations: List out two or three recommendations that you consider to be the most appropriate in solving, or reducing the severity of, the existing problems. provide the most detail and justify your choice of recommendations. The top management team of Altur-nate Innovation Company is preparing to meet and review its market situation. The team is a combination of students, board advisors, and faculty from the Engineering School. They are excited about the Sunshine Stove product they have developed- and passionate about the opportunity that it provides to improve the quality of life for some of the world's poorest people. They know they have a great technology, but they need a marketing plan to bring this product to market. Every day, more than 2.4 billion people more than one-third of the world's population burn solid biomass fuel (wood, charcoal, dung, and coal) for cooking and heating. These fuel sources are usually burned indoors in open pits or traditional cook stoves. About two-thirds of the people using biomass fuel also have no electricity, so the open fires often burn into the night to provide light. These fires create indoor air pollution, which is a leading contributor to respiratory diseases. Former UN Secretary General Kofi Annan had called for greater energy efficiency and noted that "indoor air pollution has become one of the top 10 causes of mortality and premature death." It is estimated that this source of pollution contributes each year to the deaths of 1 million children younger than the age of 5, and it is a leading cause of miscarriage and women's health problems. Hoping to address these consumers' needs for safe cooking and electricity, the Engineering School's Innovation Lab developed the Sunshine Stove. The Sunshine Stove's improved technology requires 50 to 70 percent less biomass fuel than traditional stoves. It also has a thermoelectric generator that converts heat from the stove into electricity that can power a small lightbulb or be stored in a rechargeable battery for later use. The technology has been refined, and the team believes they now have the MVP (Minimum Viable Product). There are other competing enclosed cookstoves, but none produce electricity. Solar panels can provide electricity, but they are expensive costing $160 each. Micro-hydropower allows households to convert the power from streams and rivers into electricity, but homes must be close to a river, and water flow in many areas of the country is seasonal. These technologies- solar panels and hydropower-are understood by many consumers and are already in use in some areas. The Sunshine Stove, on the other hand, offers a new technology, and that may slow its diffusion and adoption. The management team decided on Nepal as the initial target market for the Sunshine Stove. Several factors made this market particularly attractive. The climate is relatively cold, and only 11 percent of the households have access to electricity, so the heat and electricity production of the stove are particularly beneficial. Eighty-eight percent of the population uses firewood as their main source of energy. In addition, deforestation creates environmental problems in Nepal because it contributes to crosion and flooding. So the social benefits of the Sunshine Stove will be particularly appealing to the Nepalese government and aid organizations. There are approximately 9.2 million households in Nepal, but the gross national income per capita is only about $400, with most adults making between $1 and $3 per day. Nepal is largely rural, with only 17 percent of the population living in urban areas. The country is divided into 75 districts. Each district is further divided into about 60 village development committees (a sort of local government) consisting of about 450 households. The similar characteristics of northern India immediately south of Nepal-make it a logical follow-up market. The Sunshine Stove offers several benefits to this population. For example, the longer hours with light thanks to the electricity and less time required to collect wood or other fuel could allow families to earn money by weaving, farming, or producing other crafts. Family productivity could increase 20 percent or more per day. Or the added hours with light might allow children to gain an education, even study when its dark. If the product were manufactured locally, it could provide jobs for the population and help them learn the benefits of technology. With obvious benefits for such a large number of people, the team could look to donations to subsidize the Sunshine Stove for the Nepalese people. But the team has concerns about this traditional form of aid. Financing in the form of grants, government relief, or donations is unreliable. If it is not renewed, projects wallow or die. Further, grants often fail to teach disadvantaged people skills and responsibility. So the team wants to create a sustainable venture that provides benefits for all-and has set up Altur-nate Innovation Company as a for-profit business. The management team has to make a number of marketing decisions. For example, it has to decide how to price the Sunshine Stove. It estimates that the stove will cost about $60 to manufacture after setting up a plant in Nepal and expects that microfinancing organizations will provide loans for families. If units are sold for $80, the loan can be financed at 20 percent interest for three years with payments of $0.68 per week (microfinancing institutions typically collect on a weekly, or sometimes daily, basis). However, some team members, such as Professor Silas Marner and Nepalese student Ashma Chetty believe that the price is much too high, given the average per-capita income of the target market. "The mean wage in all of Nepal is $1-3 a day, but the average wage in our target market, which includes some of the poorest parts of Nepal, is even lower" said Dr. Marner. While these arguments were rejected by a team vote, the team is still unsure about whether, even at the $80 price, it would provide adequate margins for distributors. Furthermore, while most team members think that it will be easy to find a microfinancing institution to provide these loans, others are skeptical, suggesting instead a crowdfunding campaign. The team also has to decide how to promote the stove to a population where less than half the adults can read. However, the team does have contacts with some business leaders, government officials, and nongovernmental organizations that may be able to provide advice and help. Further, the team has some friendly disagreements regarding branding. "The word 'Sunshine' makes no sense since the stove doesn't use solar energy," said Laurence, one of the advisors. "Call it whatever you like Laurence. Branding is a western luxury," replied Dr. Marner, "the only thing the people care about is whether they will save money. These people have suffered greatly due to the recent earthquake, lets bring some sunshine in their lives; can we all agree on that?" "Lets do it" said everyone in unison. Read the case and answer the following questions: Problems: List the apparent problems (or, in some instances, potential problems). Causes: List out the causes to the problems. Problems are just the symptoms (e.g., low profits), while causes aim at identifying the underlying reason that the problem exists (e.g., pricing too high). Recommendations: List out two or three recommendations that you consider to be the most appropriate in solving, or reducing the severity of, the existing problems. provide the most detail and justify your choice of recommendations.

Answer rating: 100% (QA)

Problems 1 High Pricing Concerns There is a disagreement within the team regarding the pricing of the Sunshine Stove with some members expressing conc... View the full answer