Marketing the $100 Laptop
I. Central Problem/Issue OLPC/Negropante needs to reach five million minimum laptop orders before starting production or else the cost of producing the laptops would be exorbitant. Although there have been six million purchase orders from various countries there are still no firm deals in place (i. e. no deposits, etc. ). The new concept of the laptop as revolutionary teaching tool that Negropante espouses, one that is child-centric, that allows children to play and build without restrictions (of Microsoft’s suite of software) must also be proven in order for the project to gain more acceptance as an educational laptop of choice.
II. SWOT analysis The organization’s internal Strengths & product’s strengths include the following: 1. The company’s founder is a successful VC who is well known for being a social entrepreneur has connections and is considered a favoured figure amongst national leaders whose motives are less likely questioned.
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2. OLPC as a non-profit organization/project, created to champion the human right of primary education, is admired and trusted by many and is seen as an entity driven to really help and not just out to make profits. . Strongly backed up and supported and even funded by various international organizations and technology companies including: UN, AMD, Google, Red Hat, Brightstar, Marvell, eBay & New Corphas strengthens its credibility and ability to innovate. 4. First-mover advantage in introducing a low-priced laptop. 5. The $ 100 laptop has the lowest price in the low-priced category of laptops and is therefore the most affordable. 6.
Technical aspects of design that provided the laptop a competitive edge, thanks to the global design contributors brought about the computer’s attractive features: light-weight, built-in Wi-fi connectivity, router/connection device, rugged/tough, low-power LCD screen & processor & LiPeFo4 batteries (less toxic). 7. On the manufacturing side, OLPC is assured by Quanta to produce a million laptops per month, this quick production is quite amazing considering that the global production of laptops totals only 5 million units per month.
While its Weaknesses are as follows: 1. In the technology industry, the first-mover advantage does not last long. OLPC needs to act fast and start producing the laptops before competition starts learning from their mistakes and can eventually overtake them. 2. The laptop has no global brand recognition unlike most of its competitors who are established & seasoned players in the industry. 3. The low-pricing strategy might send out wrong signals that the quality of the laptop is inferior and substandard. . Supplier power is very strong given that they do not have a well established supply chain, a single unit needing to source out 800 parts from multiple suppliers. 5. The $200-250 million per nation investment scheme is an exorbitant amount most especially for developing countries. An external analysis of the industry shows the below Opportunities: 1. Estimate of worldwide PC usage is 1 billion (in 2008) which will double by 2015, the bulk of growth expected in the BRIC countries. 2.
Broad worldwide consensus that education especially through technology would alleviate hardship in developing countries. and its Threats: 1. Reports of some US schools that laptops are instead becoming distractions and that they have found no evidence in increased improvements of students is an alarming and valid concern that can stop the OLPC project. 2. Prevailing perception that developing nations should first address issues of more basic necessities such as food, shelter, electricity and health; therefore, funds should be focused here instead of being funnelled to education and/or technology. . Aside from having limited funds, governments of developing countries are well known as being highly bureaucratic and have as stated in the case a fickle nature; therefore, negotiations may never finish or may take a long time to conclude. 4. Most jobs require MS Office know-how, this can become a hindrance considering the paradigm shift away from “Wintel” that Negroponte is putting forward. III. Options Based on the SWOT identified above, the following strategies or options can be undertaken: S-O Strategies Instead of just focusing on the millions of children of developing countries, OLPC can expand the project’s target market to include children from developed countries. There are after all richer countries that have disfranchised or marginalized sectors that live below the subsistence level, it may not be as significant as those present in the developing world, but they are there and they would benefit as well from OLPC’s project. The laptop’s educational benefits, its cost and energy saving features should be made available for everyone.
Aside from education being a primary right the environmental benefits, energy-saving features of the laptop is significantly noteworthy as its environmental stress is far less than those of existing laptop technology. In increasing its global scope, economies of scale needed in lessening the laptop’s production cost can be achieved. (S3, S5, S6, S7, O1) * There are a number of non-profit international organizations out there that have grassroots orientation, such as World Vision (to name a few), that can help and be a leading proponent in endorsing and verifying the benefits and/or positive effects of the XO laptop in the school room.
Developing these joint ventures or tie-ups can increase the credibility of the laptop as a much more viable educational tool, a better way akin a constructionist approach. (O2, S2, S6) S-T Strategies * Adding or stressing on a social responsibility angle can pressure governments to act post haste. Add here wide media exposure that can clearly display or heighten the urgency of the advocacy, where a huge number of participant cooperation is needed in order for the project to fly and commence production and start benefiting its end users.
By publicly announcing commitments, backing out at the last minute would be thought of twice, thrice, a thousand times, as this will be greatly frowned upon by the global community. (S1, S2, S3, S5, T3) * Continue to leverage on its image by building and strengthening partnerships in developing a comprehensive and sustainable plan that will integrate the educational and technological aspect of the OLPC project. The people at OLPC should work with other organizations and government entities and not act as a stand-alone entity in addressing the problems of poverty which is a multi-faceted issue.
Just like the ugly heads of the famous Hydra monster of the Greek mythology, killing one head will not solve the problem but can even sprout more problems. Therefore addressing the problems simultaneously and in an integrated manner will produce the dreamed results. (S1, S2, S3, T2) W-O Strategies * As mentioned earlier, being the first-mover in the IT industry can at times be more of a bane instead of a boon and that followers more often times than not benefit more by learning from the mistakes of the leaders. Therefore, the entry strategy must be geared towards building aggressively.
The attractiveness of the untapped market can be clearly seen as competitors make a mad dash to grab market share and within a year have Intel launching its Classmate PC, in India Enocre-Mobilis & ASUS with its EeePC. Tying this up with the initial strategies above and the one just mentioned (i. e. widening target market, tie-ups & joint ventures) a tweak in the business model can also be done. By applying price discrimination, the cost of units for developing countries can be subsidized by the higher priced units sold to developed countries.
This in turn will have a domino effect and can help lessen the minimum investment requirement of 1M computers per country which as mentioned in the case can reach as much as a $200-250 million investment. (O1, O2, W1, W4, W5) W-T Strategies * Proof of concept – that paradigm shift into a more constructionist approach in teaching or child-centric approach is much more effective than a teacher-centric one must be investigated and proven. Quantifiable and qualitative assessment can be done in areas of pilot testing such Villa Cardal, which then should be shared to the global community. W2, W3, T1, T4) SWOT Analysis INTERNAL EXTERNAL | Strengths 1. Social entrepreneur 2. OLPC non-profit organization/project, 3. Backed up and supported by international bodies & IT companies – credibility and ability to innovate. 4. First-mover advantage 5. Lowest price 6. Technical aspects 7. Assured quick production by Quanta| Weaknesses 1. Technology industry – first-mover 2. No global brand recognition 3. Pricing signals 4. Supplier power is very strong 5. 1 million units ($200-250 million) per nation investment scheme | Opportunities 1.
Estimate of worldwide PC usage is 1 billion (in 2008) which will double by 2015, the bulk of growth expected in the BRIC countries. 2. worldwide consensus that education would alleviate hardship in developing countries. | S-O Strategies * expand target market to achieve economies of scale (S3, S5, S6, S7, O1) * joint venture & tie-ups with like-minded international orgs that have grassroots orientation i. e. World Vision (O2, S2, S6)| W-O Strategies * build aggressively & price discrimination for subsidy which can then lessen the minimum investment on 1M computers(O1, O2, W1, W4, W5) | Threats 1.
Laptops are distractions 2. address issues of more basic necessities first 3. governments – bureaucratic and fickle 4. MS office as a requirement for many jobs| S-T Strategies * Leverage on social responsibility (S1, S2, S5, T3) * partnership & tie-ups for a more comprehensive and sustainable plan (S1, S2, S3, T2) * high media exposure (S1, S2, S3, T3)| W-T Strategies * proof of concept – proposed paradigm shift where a more constructionist approach in teaching or child-centric approach is much more effective than a teacher-centric one (W2, W3, T1, T4)| IV. Recommendation
OLPC and Nicholas Negroponte’s social venture is two-fold in nature. Hinge in a dream which that they want to make reality: (1) education through laptops made very affordable and accessible to a greater number of people in the bottom of the pyramid and (2) to allow the incoming generations to break free from the “Wintel” monopoly which he deems dampens and restricts creativity of the learning process. It may have been unintentional but because of their existence, laptop prices have taken a dive as new models have been created and have been made more affordable by a number of technology companies.
In the first goal they have somewhat succeeded. But hitting the target $100 price tag is still unreachable unless economies of scale can be employed. In order to achieve this, targeting a wider diverse market is needed. The use of price discrimination can also help in that higher priced units sold in developed countries can subsidize laptop units to be distributed in developing countries. Since OLPC directly and firstly have to deal with governments they must find means and ways to manoeuvre in their bureaucratic and fickle nature.
Bringing in wide media exposure can help hasten and stress the urgency of the project plus influence and pressure governments to commit fully. Alternatives must also be proposed in terms of investment plans. Given the limited financial resources of developing countries, investment of one million laptops at a time per country must be made more flexible and should not be set in stone; i. e. allowances for lesser amounts of investment to fit respective government’s budgets. On the other hand, the 2nd goal is still far from ever being reached unless the strategies stated in the options part above are undertaken.
A repositioning or refocus of the value proposition from price to and educational tool of choice must obviously be carried out. This differentiation will obviously be attacked by competitors. Therefore, in order to counter this and have a wider acceptance, proof of concept, tie-ups, etc must be embarked upon. V. Plan of action (tactical) Given the 1M at a time investment, a minimum of 5 countries must fully commit in order to surpass the five million units minimum order requirement.
Applying the above recommendation of flexibility, say 50% of 1M units or 500,000 laptops can be a much acceptable size of investment, and can be the difference that can make developing countries commit. If the above proposed change in strategy is still not enough to reach the 5 million units investment, expanding the target market or enlarging the scope of the laptop’s benefits can be carried out. Including even children of developed countries will bring about supplying a larger market base that will lead to the much needed economies of scale to start production.
Opening up the technology to others aside from the developing countries and pricing the units at a higher price can also help finance fully or even partially those to be released in developing ones. For example, a laptop unit purchased in the U. S can be priced at a range of $300-400; the profit of $100-200 can then be subtracted to one unit sold in a developing country. In order to achieve the full aim of the program, that is to decrease and fight poverty n developing areas, a focus on a much more comprehensive and sustainable programs must be created in tandem with other organizations focused on other aspects of addressing poverty. To gain wider acceptance and credibility of the method of teaching with which the technology embedded in the laptop promotes, a proof of concept as suggested above must be done. Effects of improvements in academic performance must therefore be measured. This at the same time will serve as a shield or protection against attacks of competitors on the strength of the pursued advocacy.