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The differentiation plan
Differentiating Attributes Sporty Coup Family Sedan/Station Wagon Importance to Customer
Curvature of window glass More curvature Straight, vertical ***
Styling of instrument panel Evocation of English roadster Highly functional. ***
Relationship between driver Driver sits low to ground, Driver sits higher, closer, more ***and instrument panel distant from steering wheel, upright
with seat reclined.
Front-end styling Shorter nose; vehicle appears to Longer nose, more substantial ***attack road look.
Colors and textures Darker colors and mix of Practical surfaces and colors. **leather and textiles
Suspension stiffness Stiff, for improved handling. Softer, for improved comfort. **
Interior noise Some engine noise desirable, Noise minimized, 60dB. *70dB.
The initial commonality plan
Sporty Coupe Family Sedan/Station Wagon
Instrument Panel Chunks
no. of unique parts
Devel. Cost ($ millions)
Tooling cost ($ millions)
Mfg. Cost ($)
no. of unique parts
Devel. Cost ($ millions)
Tooling cost ($ millions)
Mfg. Cost ($) Comments
HVAC system 45 4 9 202 35 3.8 7.5 200 Duct work and support structure different: Share motors and other components.
Dash cover and structure
52 4 7 123 48 3.8 6.5 120 Share some brackets and components.
Electrical equipment
115 4 2.2 420 65 2 2.1 430 Share switches, wiring, and central module
Cross car beam 12 2 2 35 12 2 2 35 Cross-car beam entirely different
Steering system and airbags
26 2 0.1 200 26 2 0.1 195 All components different
Instruments and gauges
16 1 0.2 22 13 0.8 0.2 20 Can share some instruments.
Molding and Trim 10 0.4 0.2 11 10 0.4 0.2 10 All molding and trim different.
Insulation 3 0.2 0.2 8 1 0.1 0 10 Change insulation in coupe to let in more engine noise.
Audio and radio 8 0.2 0 300 0 0 0 300 Same radio option in all vehicles.
TOTAL 287 17.8 20.9 1321 210 14.9 18.6 1320
The revised commonality planSporty Coupe Family Sedan/Station Wagon
Instrument Panel Chunks
no. of unique parts
Devel. Cost ($ millions)
Tooling cost ($ millions)
Mfg. Cost ($)
no. of unique parts
Devel. Cost ($ millions)
Tooling cost ($ millions)
Mfg. Cost ($) Comments
HVAC system 45 4 9 196 8 0.4 0.5 195 Share all but ends of ducts.
Dash cover and structure
52 4 7 123 48 3.8 6.5 120 All new shape and structure fore coupe.
Electrical equipment
115 4 2.2 412 30 0.5 9 415 Share wiring, control module, and combination switch.
Cross car beam 12 2 2 33 1 0.2 0 33 Change horizontal beam length.
Steering system and airbags
26 2 0.1 196 21 1 0 192 Change only steering wheel and cover.
Instruments and gauges
16 1 0.2 22 13 0.8 0.2 20 Share gauge mechanisms.
Molding and Trim 10 0.4 0.2 11 10 0.4 0.2 10 All molding and trim different.
Insulation 3 0.2 0.1 8 1 0.1 0 10 Change insulation in coupe to let in more engine noise.
Audio and radio 8 0.2 0 300 0 0 0 300 Same radio option in all vehicles.
TOTAL 287 17.8 20.8 1301 132 7.2 16.4 1295Initial Plan 287 17.8 20.9 1321 210 14.9 18.6 1320Savings 0 0 0.1 20 78 7.7 2.2 25 133% Change 0% 0% 0% -2% -37% -52% -12% -2%
Drill Platform Exercise
Objective is to maximize profits:
Please complete the following steps:
1. What are the Differentiating Attributes for a drill?Complete the differentiation plan for the threemarket segments.
2. Make the following decisions and enter the resultson the response form:
Which markets will you enter?
With which brands?
Which chunks will you use for whichproducts?
3. How might you “break the rules”?
Alternative architectures/design scenarios
Intensely-Rational Drill Company Assumptions
Product line includes only drills.
Single power level (0.5 hp).
Ignore speed differences.
Market size and market price are fixed andgiven. The only response toincreased/decreased quality is a changein market share.
Modular architecture: all chunks will fitphysically with all other chunks.
Total potential market (units and factoryprice):
Economy Standard Precision
Pistol 100,000 units$42 ea.
60,000$90
40,000$180
Straight 30,000$45
25,000$105
20,000$200
Angle 20,000$60
15,000$110
10,000$240
Market Share Calculations
IR has a nominal share of 30%.
BrandingIR only: no changeARO w/label or cosmetic differences only: +5 % ptsARO w/substantial differences (e.g., different housing): (+8 % pts for pistol, +6 % pts for straight and angle)
Outsourced economy product: -10 % pts of share in economy market
Downward substitution (e.g., precision housing on standard product):+Y % pts for lower segment from increased perceived quality (0% motor, 1% anglehead, 3% housing, 3% chuck)- X % pts for upper segment from cannibalization(0% motor, 0% anglehead, -5% housing, -3% chuck)
Upward Substitution (e.g., economy motor on standard product)-Z % pts for upper segment from decreased perceived quality (-10% motor, -5% anglehead, -5% housing, -10% for chuck)
Cost Calculations
Each chunk has a “fixed cost” for design,testing, tooling, etc.
Each chunk has a component cost basedon a nominal volume of 10,000 units/year.
Achieve economies of scale of 85%-90%for each doubling of volume (e.g., 20,000units/year results in 85% of nominalcomponent cost)
Indirect costs:
$20k/year for each part #
$25k/year for each SKU/end-item
Fixed costs amortized over 5 years.
S&A of 25% of revenues.