Voltamp Electrical Corporation
Letter of Transmittal
To,
The Vice President,
Voltamp Electrical Corporation.

Subject- To access the situation and come up with a proposition in order to exploit the commercial possibilities of the new magnetic material, TGW.
The report consists of the analysis of both the aspects of both the departments of Voltamp- Magnetic Material Section and Audio Product Section respectively and to find out which department is best suited for the production of the new magnetic material- TGW. The sales for both the departments are being taken into consideration.

Yours Sincerely,
John Carter
(Manager, Audio Products Section)

Situational Analysis
The Advanced Development Laboratory, who was responsible for the development and research, discovered the new magnetic material which was later on offered to the Audio Product Section. The new material-TGW had the capacity to have a higher stability and the cost was cheaper as compared to the existing product and it also had various new features which could easily replace the current product.
The feature of this new product was that it had a greater commercial application than those originally envisioned. TGW also had the capacity to gain reputation along with the market leadership. The product also had the ability to improve its marketing competitive position. It could benefit the current existing product as well as the new range of products with the help of the new material product.
The Magnetic Material System (MMS) was engaged in manufacture of magnets and magnets materials. There were certainties that Advanced Development Laboratory would go for MMS but there were questions raised whether it could even develop into magnetic material let alone produced commercially. It was declined initially by the Advanced Development Laboratory but then this section offered the opportunity to do a development research on the new material concept after it had turned down the offer.

The concern of protection period could be reduced if most of the operating sections use the new product and this could also lead to competitors from buying the new material. If the protection period is longer then it can be very beneficial in order to maintain maximum leadership in the company. If the manufacturing of new product is licensed to competing companies against royalty payment which can recover the cost incurred by APS then it would also benefit MMS due to cost differential factor.

Problem Statement
The problem states that how to produce TGW keeping in mind the benefits of Magnetic Material System along with its ability to maintain maximum leadership in the company.

Criteria for Evaluation
1. One of the main criteria is gaining leadership in the product line
2. The profitability is also taken into consideration.
3. The long run is also being evaluated.
4. Beneficial for the entire section of the company

Options Available
• As far as Internal is concerned, the option available is Audio Product System
• As far as External is concerned, the option available is Magnetic Material System
• Both Audio Product System and Magnetic Material is also available

Evaluation of Options
APS had taken a reasonable risk in accepting the responsibility for developing and researching the concept which might not prove commercially useful, the same risk which Magnetic Material System did not take. It was assumed that taking the following risk, APS would be given the benefit from protecting its competitors for a relative period of 5 years. The 5 year period could also prove to be product leadership in the field. APS might lose certain amount of sale to MMS and might not be able to recover the incurred the development cost incurred.
Magnetic Material System is considered to be best for selling the material in the long run to the customers outside the company because MMS has the trained personnel and its major business enables it to achieve efficient and economical production in the long run. APS might lose the leadership and corresponding profits to competition and hence there will be a trade off for APS in the long run.
If TGW is being sold to the sections within the company for an estimated period of 18months then the techniques is offered to MMS. Then only few sections could make progress in the short run and will be beneficial against its rivals. Therefore this will not see any advantage in the leadership of the company. There would be a loss of profit in the profitable situation of APS if it continues for 5 years. There might not be sufficient profit earned in the company and there will be not be any place to maximize its leadership in the market.
If there arises a situation of earning royalties by licensing the competitors and have cost factor, then there will be a situation where the product might create competition if licensing the competitors on the basis of differential cost factor becomes insignificant for magnetic parts. There won’t be any protection available for APS it had desired due to providing the license to manufactures for producing the product. There will be reimbursing of development cost due to royalty payment.

Recommendation
It would be recommended that the company should go for Magnetic Material System as it would give them a head start on their competitors in developing the new product and would accomplish them in 18months. MMS is beneficial as it would maximize its leadership in the company and can also earn higher profits in the future.

Action Plan

• There are several actions that has to be taken into consideration is that the company should be able to recover the cost of $500,000 that was being spent on development and research process.
• APS should be given loyalty regarding the development of the product and then later it can be transferred to MMS.
• The company should also appreciate TGW because of its superior physical properties and could be sold at an equal price to that of the traditional magnet.