Case 1 Performance Indicators Memo V2
Discussion Questions for the Performance Indicator Case Synopsis
The case of Performance Indicator (PI) provides a nice application of the basic economics underpinning strategy decisions facing firms, as summarized by the Value Creation & Capture Framework. The central question to think about is the following seemingly inconsistent set of facts: (1) From the description in Osinski and Winskowicz’s (Robb and Bob) sales pitch and the supporting calculations presented in the case (especially Exhibit 5), PI seems like an obvious source of profits for golf-ball manufacturers.
(2) Not a single golf-ball manufacturer has adopted and implemented Performance Indicator’s technology.
Assignment:
1. What is PI selling, exactly?
PI is selling the right to use a patented process (i.e. technology) to golf ball manufacturers whereby golf balls which have been subject to water damage would change to a shade of grey. The grey would discourage end users from utilizing as many used balls which would in turn increase the quantity of new balls sold by the golf ball manufacturers.
Specifically, from the case material, total golf balls acquired by golfers for use in play equate to 20% new balls and 80% used balls (67% of used balls were found directly by golfers and 33% were refurbished and sold as used balls). With this new technology, PI estimates that 50% of the used balls would show signs of damage and would not be utilized for play as they would be discarded and replaced with new balls.
2. Who are the potential customers?
PI’s potential customers are all new golf ball manufacturers (i.e. Acushnet, Bridgestone, Nike, etc.). The majority of manufacturers manufacture both premium and value golf balls and the process could be implemented for both types.
In considering who buys used balls or plays balls found in water hazards, the new “value” golf ball sales would be expected to benefit the most as the players utilizing the former balls are less concerned with performance
The case of Performance Indicator (PI) provides a nice application of the basic economics underpinning strategy decisions facing firms, as summarized by the Value Creation & Capture Framework. The central question to think about is the following seemingly inconsistent set of facts: (1) From the description in Osinski and Winskowicz’s (Robb and Bob) sales pitch and the supporting calculations presented in the case (especially Exhibit 5), PI seems like an obvious source of profits for golf-ball manufacturers.
(2) Not a single golf-ball manufacturer has adopted and implemented Performance Indicator’s technology.
Assignment:
1. What is PI selling, exactly?
PI is selling the right to use a patented process (i.e. technology) to golf ball manufacturers whereby golf balls which have been subject to water damage would change to a shade of grey. The grey would discourage end users from utilizing as many used balls which would in turn increase the quantity of new balls sold by the golf ball manufacturers.
Specifically, from the case material, total golf balls acquired by golfers for use in play equate to 20% new balls and 80% used balls (67% of used balls were found directly by golfers and 33% were refurbished and sold as used balls). With this new technology, PI estimates that 50% of the used balls would show signs of damage and would not be utilized for play as they would be discarded and replaced with new balls.
2. Who are the potential customers?
PI’s potential customers are all new golf ball manufacturers (i.e. Acushnet, Bridgestone, Nike, etc.). The majority of manufacturers manufacture both premium and value golf balls and the process could be implemented for both types.
In considering who buys used balls or plays balls found in water hazards, the new “value” golf ball sales would be expected to benefit the most as the players utilizing the former balls are less concerned with performance