Ttools case study
The goal of this analysis is to understand the opportunity and challenges ttools faces and advise them on the best approach to go forward. Ttools has created a unique all –in-one stylus for PDAs which also functions as regular ink pen. They have a successful utility patent and are facing a few challenges in patent infringement, marketing & distribution. Ttools has to decide whether they should compete, negotiate or litigate against Palm/IDEO for their product.
To choose the best option going forward, we will look at the each of the options in depth and analyse the potential impact on the outcome.
Competing against Palm
Currently ttools uses Palm’s distribution channels (InSync online) to target potential customers. Competing against them would require ttools to aggressively spend resources on marketing and distribution channels that currently don’t exist. As the case mentions, the total cost of manufacturing a single unit costs approximately $2 with a mark-up of $9.95, the extra resources would drive the profit margins much lower. With a lower profit margin and lack of resources to scale the market, Palm would certainly out size ttools in pricing and marketing/distribution with an abundance of resources and large market share.
Negotiate with Palm
To continue using Palm as their primary distribution platform, ttools would effectively nullify their patent to reach an agreement. InSync platform reaches 50,000 of Palm’s customers, total potential revenue for ttools at $9.95 would be $400,000. Additionally, Palm would need to publish ttools’ product line on the catalogue to capture additional market. From Palm’s perspective, it does not seem likely that they would agree to such an agreement without biting in for a piece of the pie. If a deal is reached, it may come in the form of a profit sharing agreement which would significantly lower margins