Introducing the Satellite Dish Business at Sun Dish, Inc.
All business decisions depend upon forecasts, and although the forecasting of business conditions is a fairly recent phenomenon in the history of business, at Sun Dish, Inc. we understand that both good and bad estimates have major consequences (Nersesian, 1990; Kress and Snyder, 1994). We want our company to succeed in all of its ventures, be they old or new. Our company has performed brilliantly in its HD receivers and Digital receivers business thus far. And, of course, we not only wish for Sun Dish, Inc. to continue its growth in these businesses, but also for our company to excel in any new businesses that it plans.
Sun Dish, Inc. is now planning to enter the satellite dish business. This memo outlines the business decisions that the company must face before it embarks on its journey to an even brighter future with a new project. Before we analyze these decisions, however, we must remind ourselves of the golden rules of forecasting, as have been touched on by Frank D. Newbury in Business Forecasting: Principles and Practice (1952): Unorganized business forecasting is usually the product of personal judgment or intuition or, sometimes, only a subconscious feeling for the course of future events. It is more art than science, and it will remain in this unsatisfactory state until its methods can be brought into the realm of the rational and can be based on logical relationships that govern business behavior and can be stated in measurable terms (p. 1).
INTRODUCING THE SATELLITE DISH BUSINESS AT SUN DISH, INC.
The Media Selection Decision One of the most important decisions that Sun Dish, Inc. has to make before it starts out with its new business venture, namely the satellite dish business, concerns media selection.
How shall we most effectively and cost-efficiently advertise our new services to the public at large? The marketing department at Sun Dish, Inc. has set aside a reasonable amount of $100,000 for the advertisement campaign of the new business venture. Our company’s experience with HD receivers and Digital receivers has revealed that roadside signs, newspaper inserts, weekend flyers, personal mailings, and daily television advertisements are all viable means of attracting customers to new services. In measurable terms, Sun Dish, Inc.
hopes to get ten additional customers to sign up for its new service for every sign that is placed by the roadside; thirty additional customers for every newspaper insert; ten new customers for each hundred weekend flyers handed out in a local supermarket; forty new customers for every hundred personal mailings to those identified as potential customers; and approximately four hundred and ninety additional customers for every television advertisement placed daily in the month previous to that of the launch of the new service.
In addition to the above, we are aware that each roadside sign costs $25, and in the month preceding the launch of the satellite dish business, Sun Dish, Inc. may put up a minimum of 100 and a maximum of 500 such signs to advertise its new service. Each newspaper insert costs $60, and the minimum and maximum units to be used in the same month are 50 and 300 respectively. Similarly, one hundred weekend flyers cost $30, and Sun Dish, Inc. may choose between 4000
INTRODUCING THE SATELLITE DISH BUSINESS AT SUN DISH, INC. : and 10,000 flyers for the month preceding the launch of the satellite dish business. One hundred personal mailings would cost us $82. For this media, we may choose between 50,000 and 80,000 units. Lastly, each daily television advertisement would cost Sun Dish, Inc. $1000. The company must choose between three daily advertisements and twelve, given its budget constraints. As part of its business decision, Sun Dish, Inc. has to select a combination of media outlets that would maximize the number of customers that it would reach.
We are aware of the outreach of each media outlet, as well as the relevant costs and the minimum and maximum numbers of units of each media outlet that we may utilize. Given its past experience, Sun Dish, Inc. should choose to select all of the media outlets. In addition, the company should concentrate more heavily on that media outlet which truly maximizes the number of potential customers that it would reach on our behalf. From the information above, it is clear that daily television advertisements must be concentrated upon. At the same time, we cannot ignore the importance of the remaining media outlets.
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