Running Head: Task 2 Supply Chain 1

JCT2 Supply Chain Task 2

Ammar Zainuddin
Western Governors University
Running Head: Task 2 Supply Chain 2




Sage Computer looked at the market research to determine what the customer needs and
wants were. It was determined that customers were looking for computers made for engineers
that are fast and powerful, and that have engineering applications. Customers were also looking
for after sales support and wanted the computer to be able to connect with other computers. One
of the key feature that customers were looking for in this type of computer is that must it must be
easy on the eyes. The research also showed that customers that were looking for a laptop and
wanted the following features on it. The number one feature customers were looking for was that
the laptop should be portable. After portability customers were looking for laptop that can easy
connect to the internet. The laptop must also have office applications and should be affordable.
From the market research Sage Computer created two initial brands called the
EPowerhouse and EGO Lap. The EPowerhouse was designed to compete with the Desktop for
Engineers while the EGO Lap was design to compete with the laptop for travelers. The
EPowerhouse contained office application, base component, and scientific applications. The
EPowerhouse was designed with a standard desktop design with a 17 inch monitor. It was also
designed to be a high performance desktop that can connect to the internet or other computers.
The EGO Lap on the other hand was designed for the business traveler in mind. Some of the
features that EGO Lap offered are the following office applications, games, multimedia
accessories for travel, and a 10 inch portable monitor. The EGO Lap also has internet
connectivity and a standard keyboard.
Running Head: Task 2 Supply Chain 3

Sage Computers while designing its brands, tried to match customer needs and wants.
There were a few errors that were made which effected the optimization of the brand in order
reach the maximum amount of customers. During the design of the EGO Lap standard desktop
design was used which was not needed. Since customer preference indicated that they wanted a
laptop that is portable. Sage Computer believes that by designing the EPowerhouse and the EGO
Lap with a powerful CPU it lost many customers as now the price of the desktop and laptop
increased and affordability decreased. Customers were price sensitive which could have affected
sales.
Market research helped Sage Computers uncover where the potential demand for the
engineering computers and laptops are. Sage Computers wanted to target markets that had
greatest demand for its products. From the research it was determined the EPowerhouse demand
was the greatest in NY-North America and then followed by Tokyo-Asia and Paris-Europe.
Initially two sales offices were opened one in NY-America and the second one in Tokyo-Asia.
If the simulation was repeated Sage Computers would have focused on the Workhorse
market instead of Mercedes. The reason is that the Workhorse has a much larger market size
compared to Mercedes. The total demand for the Workhorse computer was 25,471 compared to
Mercedes demand of 14,877. This was determined from the market size data provided from the
simulation. The size of the market would have given Sage Computers a better chance of turning
a profit sooner than it currently did. If the market was changed to Workhorse it would have been
wise to open a sales office in Paris-Europe instead of opening the initial office in Tokyo-Asia.
Sage Computers could have also avoided opening a third office in the second quarter which
could have saved the company extra money. Sage Computer believes that the demand that
would have been generated from the Workhorse computer, it would probably have been prudent
Running Head: Task 2 Supply Chain 4

to increase the sales force at the NY-America office instead of opening an office in Tokyo-Asia.
The increase in sales force at the NY-America office would have allowed Sage Computer to
cater to the demand of the workhorse computer more efficiently. From the market research it was
determined that most competitors had two sales offices where they paid employees a great salary
and benefits. If Sage computers followed its competitors and only opened two location it might
have been decrease the cost associated with opening a third location. Another factor to look at
was the quarterly cost of training staff to sell the Mercedes was 4,000 while the quarterly cost of
training staff to sell the workhorse computer was only 2000. By focusing on Workhorse it would
have reduced the training budget by half.
Sage Computer decided to purchase Market Research each quarter in order to have a
better understanding of the market. If the simulation was done again, Sage Computers believes
that it would have not changed anything. The reason is that the Market Research provided a
wealth of information that helped Sage Computer make sound business decisions. Sage
Computer spent at total of $45,000 for the year purchasing the market research. In the second
quarter the market research showed how customers were judging our computer brands and what
prices were customers willing to pay for the computer brands. In the remaining quarters the
market research showed what features competitors were offering that were comparable to Sage
Computers brands. The research indicated that for the ePowerhouse brand, Creative Power and
Trooper VX were its competitors. While for the EGO laptop all the competitors fell below
minimum standards including EGO Lap. This indicated that changes were needed in features to
meet the standards. The price judgment showed how pricing was viewed for the brands offered
by Sage Computers and it Competitors. This confirmed that Sage Computers products were
pricey compared to its competitors but due to the rebates offered it was still competitive. There
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were some competitors who were able to offers products much lower than Sage Computer could
offer. This was most likely due to a larger production capacity that helped them keep prices so
low. The Market Research also provided information on Competitors Compensation of Sales
People. It showed that Sage Computer employees were only 63% productive to potential. The
competitions productive to potential were much higher than Sage Computers. Sage Computer
could have made changes to salary structure to stay competitive. The Market research also
provided Sage Computer with information on the competitors brand. The research also provided
a detail report on the competitors in each city Sage Computer was operating in. Sage Computer
learned that it was competing in the North American market with Creative Computers and Power
House Technologies and in Tokyo without any strong competitors. The detailed market demand
report gave Sage Computers actual sales data. From the report we learned Powerhouse
Computers was still dominating the market with 443 sales of their Mercedes PC with a 48% of
the market share. Sage Computer was able to capture 83% of the market share for it laptop
computers. From the Competitive Capacities report Sage Computer was able to know the
location, fixed capacity and operating capacity of its competitors. This information provided
Sage Computer the opportunity to adjust its own factory decisions and business strategy.
Analyze the factors you considered during the simulation in deciding whether to establish a
presence in international markets.
Sage Computers decided to expand in international markets by looking at the following
factors. The first is market research; Sage computer looked at where the demands for its products
are and then look at the options it had for establishing a sales channel. Sage Computers
ultimately decided to open Sales offices as its distribution channels in NY-America and Tokyo-
Asia.
Running Head: Task 2 Supply Chain 6

In the best case scenario it would be wise to source parts locally for the computers and
have a manufacturing plant in the local market. In the simulation the manufacturing plant was
located in Tokyo-Asia. The presence of manufacturing plant in the local market would allow
Sage Computers to manufacture computer at a lower cost since labor wages are lower in Asia
compared to North America and Europe. This would have kept prices competitive in Asia. Sage
Computers was at a disadvantage since the market research did not show the average price that
customers were willing to pay in each market. Sage Computer decided to open a third sales
office in Paris-Europe in the second quarter the justification was that Paris was one of the top
cities for the Mercedes and Traveler computers with a market potential of 3459 computers for
Mercedes and 2648 computers for Traveler.
Sage Computers opened three sales offices in total one in NY-America and second one in
Tokyo-Asia and the third one Paris-Europe. While considering opening the sales offices in NY-
America and Tokyo-Asia in the first quarter Sage Computers didnt realize that, if it had focused
on the workhorse computer which had a much larger market size compared to Mercedes
computer, and targeted the Paris-Europe market it could have avoided opening the second sales
office in Tokyo. The cost of opening these two offices was $470,000. While deciding to open the
sales offices the market research was looked at to determine the size of the market and where the
greatest revenue can be generated. One of the factors that Sage Computer looked at was the cost
of opening sales offices in various markets. The cost of opening a third sales office was high and
therefore was avoided until the third quarter. The cost of opening a third sales office was not
high in the third quarter since the initial cost was already paid for the NY and Paris offices. The
total cost for having a third sales office was $370,000 for Sage computers.
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Some of the other factors Sage Computers should have looked while considering
establishing presence internationally is currency fluctuations. If the manufacturing plant is
located in the home country while sales office is located in another region. Currency fluctuations
can greatly impact the revenue generated each quarter. Another factor to consider while
expanding internationally is localization. It is better to have websites designed in the local
language so that it is user friendly to the potential customer. Also it best to hire to local talent as
they would know local market and be able communicate with the customers in their language. It
is also important to look at labor productivity. Sometimes what happens is that due poor training,
poor education and lack of motivation it might not be a good buy to have the manufacturing
plant located in the local market.
It is important to understand that it might be tempting to open a sales office in a foreign
country but there is risk associated to proposition. The political risk associated with national,
state, and local government and economic stability of the country needs to be looked at. It is also
possible worker values may differ from country to country which can affect absenteeism,
turnover and union membership.
Some of the other factors to consider before expanding internationally is proximity to the
market it is vital to have sales offices near customers. Also important is proximity to competitor
this will allow the offices to tap talent that is already present in the market.


Donald F. Wood (2002). International Logistics. New York: Amacom Inc.