 Your company is developing a new video game console and would like to know the number of units to produce. What is your recommendation?

 To determine the production number the potential demand for the product must be estimated.  Limits on supply capacity or minimum production requirements can also be an issue  Require knowledge of competitive landscape

 Demand Data ◦ Potential customer demographics ◦ Current video game console owners ◦ Potential new video game console owners  Supply Data ◦ Production Limits (labor, equipment capacity, minimum commitment levels) ◦ Raw material capacity  Competitive Landscape ◦ Number of competitors ◦ Competition sales ◦ Product lifecycles

(start small, can expand later)  Demand Assumptions ◦ New customer target demographic  Male,  U.S. market ◦ Product penetration percentage of new console customers ◦ Existing console owners  Supply Assumptions ◦ Unconstrained supply  Competition Assumptions ◦ Fixed percentage of current console market

 New customer demographic information source ◦ U.S. Census data  Current console owners/competitive landscape data source ◦ Current market share – Hoover’s, Yahoo Finance, etc. ◦ Estimate product differentiation and impact on market share (subjective)

 Using found/estimated data determine ◦ Potential market size from new console customers ◦ Potential market size from current console owners

 Sanity check  Sensitivity analysis on assumptions and inputs  Compare estimated market with first year sales or competitors console products.