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Computervision-
Japan (A)
Current Situation
TEL had exclusive distribution rights and it was buying systems from CV at ~
$275,000 and selling in japan at ~$500,000
CV used direct sales in US and Europe and was considering it as an
alternative to increase sales in japan
TEL has good market coverage and customer relationship in japan
TEL established many joint ventures with US companies so it was unable to
focus on sales of CV
Sales of CV systems was increasing but the rate of growth decreased to 64%
in 1982 from 68% in 1981
Their target was to increase market share upto 30% till 1986
Marketing is becoming unstable because of rapidly developing competition
ALTERNATIVES
Building Direct Sales Force
PROS CONS ADDITIONAL COST
Effective and cost
efficient way of combating
newly emerging Japanese
competition
Extra margin of approx $
148750 per system
(35% of U.S. list price,
$425000)
End of 10 year
relationship with TEL,
TEL had long established
relationship with
CAD/CAM customers
Difficulty in hiring
Japanese nationals
Apart from sales , field
service and applications
support;
Additional responsibility-
customer credit,
shipping, tariffs ,
insurance, extended
warranty,
pre-installation cost,
product modification cost
Higher implementation
time
Administrative expense
>$ 8.4 million
Customer credit
~$ 4.2 million
Shipping, tariffs ,
insurance
~$ 6.3 million
Extended warranty
~ $ 5.04 million
Pre-installation cost
~ $ 0.42 million
Product modification cost
~ 0.7 million
Total additional cost =
25.06 million (approx.)
(Based on sales forecast of
1983)
EVALUATING TEL AS A
PARTNER FOR JV
Current performance
Current Problems
JV: Pros & Cons

1978 1979 1980 1981 1982
TEL System
Sales 5.76 6.96 11.47 19.13 31.54
%
increase/decrea
se 20.83 64.80 66.78 64.87
CV sales 48432 103004 191086 270706 325185
Tel proportion
of CV's total
sales 4 4.9 8.2 13.5 17.1
Percentage 0.0083% 0.0048% 0.0043% 0.0050% 0.0053%
%
increase/decrea
se -42.40% -9.79% 16.21% 5.45%
TEL revenue
from CV systems
Sale 5.85 7.21 11.9 19.96 32.77
CV sales for TEL
as a percentage
of total sales 69.44% 70.40% 71.49% 70.57% 54.22%
Current Performance
Japan : Gross Margin Analysis Comments
Cost Price for TEL 275000
US List Price 425,000
Mark up for shipping,
tarrifs & insurance
15%
Selling Price in Japan 488750 500,000
Discount Range 0% -30% Impulsive & whimsical
Final SP Range 350,000 500,000
Gross Margins 75000 225000
% Gross Margins 27.2727273 81.8181818
Crude average 54.5454545

*all prices in US Dollars
INCENTIVES
PROBLEMS
Distrust and conflict resulting from a lack of shared priorities or differing
perceptions of the same challenge
No clearly articulation of responsibilities for each participant
Under-investment and managerial inattention
suppliers are hesitant to invest in marketing or training on behalf of
company due to absence of commitment
Distributor Autonomy
Company and distributor lack strategic alignment, thus making it
difficult to achieve efficient, innovation-driven collaboration
No proper sales or discount model in place
PROS CONS
Pros
Utilize long-established relation with
CAD/CAM customers can be utilized

Higher risk as CV has no prior
experience in JV
TEL can provide the JV with trained people,
local hiring capability, bank credit and
Japanese know-how

Risk of Japanese partner dominating in JV

TEL will be able to make investments in
training and development and make any
further moves. The 30 day termination policy
does not give it a very flexible position

Internal conflict as top management not in
favour

TEL in a stronger position to compete for
manpower

Risk of Japanese firms driving the partner out
of markets

TEL a fast growing company with a
reputation

PROS AND CONS OF ENTERING
INTO A JV
Pros cons Cost
TEL would be able to
focus fully on sales
Customer insight will
increase
Sales coverage will
become better
Additional cost for
CV will increase
TEL will not transfer
its resources to CV
Service quality may
degrade because this
is the first time when
CV step into servicing
Customer Credit
~$4.2 million
Shipping, Tarrifs,
insurance
~$6.3 million
Extended warranty
~$5.04 million
Preinstallation
product/ system
~$5.04 million
Product modification
~$0.7million

Take over servicing and support
activities
Multiple Distribution Arrangements with Toyota & Sony
PROS CONS COST
Credible trading channels Lack of experience in
CAD/ CAM selling
7 % Commission on all
sales
Toyota- part of Sacho-
Kai, inroads into acquiring
new customers in these
industrial giants.
Motivated only by volume
& profit ; lack of interest in
providing critical ancillary
& support services
(demonstrations, pre sales
support, analysis)
Costs associated with
technical training, services
& support to be borne by
Computer Vision
Penetrate Osaka &
Nagoya regions where TEL
was relatively weak- exploit
CAD /CAM potential
present
Will cause long standing
relationship with TEL to
deteriorate
High Risk :-Sacho-Kai
tradition of purchasing only
the best, no obligation on
buying from a group
member
CV TEL CUSTOMER
INFORMATION
INFORMATION
SUGGESTIONS :IMPLEMENT A JV WITH TEL
1)An up-to-date databases on market potential, channel structure, and
customer landscape ;data broken down by category, price segment in a
particular city
This would solve the problem of lack of information on the size and potential
of Japanese CAD/CAM market
Build up a database for CRM
2)Reducing the load of TEL, Deciding roles of both the partners in a formal and
concrete manner

3)Build up a Process and a Model
The sales and discount given are haphazard and as not standard, the discount
range is huge from 0-30%, which eats into profits


4)Assist TEL increase its sales coverage