case study for Ms Daveluy Louis Le Picard GU Mengdie group 306

1. Case Study Analysis
Comtec Corporation
Mengdie GU
Louis LE PICARD
306

2. Overview of the situation
• Comtec Corporation : small manufacturer of industrial
microcomputers and specific software
• January 1984
• Head office : Massachusetts, USA
• European office : Amsterdam

3. Overview of the situation
• Strategy : Industry-specific hardware and software production
• Sales difficulties in domestic and international markets
• No profits : serious financial crisis
 Hired a consultant in high-tech marketing in order to advise on
new marketing and strategic directions

4. Participants :
•Dr. Daniel Needham, President, Comtec Corporation
•Mr. Harry Otto, Vice-President, Comtec Corporation
•Ms. Roberta Malcom, Computer Consultant
Mentionned (exhibit 5) :
• Mr. Max Mendel, Manager of Comtec in Amsterdam
Names and positions

5. Documents
• Dialogue between Dr. Needham, President, Mr. Otto, Vice-
President, and Ms. Malcom, Consultant
• Exhibit 1: Ad for the Comtec 100 Microcomputers
• Exhibit 2 : Sales of the Comtec 100, 3rd and 4th Quarter, 1983
• Exhibit 3 : Comtec’s balance sheet of December 1983
• Exhibit 4 : Memo from H. Otto to D. Needham
• Exhibit 5 : Letter from Manchester Metals, Ltd., to Comtec’s
Amsterdam Office

6. Analysis
• Dialogue
Malcolm: Let me just say at the beginning that I realize my recommendations may seem very bold,
but given the present financial situation at Comtec I think bold measures are needed.
Otto: Right on both counts. The question is, are these the right measures? My feeling is
simply that we haven't been aggressive enough in our marketing. Also, the new
targeted fields—materials-testing automation and chromatography automation—are
not quick sells; it takes some time to build up orders. We launched our new
campaign in the early fall; it's just January now. I think you're premature in your
assessment that this is not the right market.
Needham: Harry's right to some extent. But the truth is the orders just aren't coming in fast
enough. We can't play a long-term waiting game. We don't have the capital to last.
Otto: All right. Orders aren't coming in the necessary quantity, but we're getting more and
more inquiries, and with proper action we should be able to turn them into orders.
Malcolm: Mr. Otto, I understand your position, but I don't feel that you've received enough
inquiries to warrant optimism.

7. • Dialogue
Analysis
Otto: I'm not that optimistic at all about it, but I feel we have to give this market, this
product, some chance.
Needham: Harry, what are you basing your sales projections on?
Otto: First, our sales manager in Amsterdam, Max Mendel, is right now working on an
order for ten Comtecs, plus software. That amounts to $200,000.
Malcolm: But an order isn't an order until you get a P.O.* number. (*purchase order)
Otto: Right. But Max feels confident he'll get it.
Needham: That brings up the whole matter of the European sales office.
Malcolm: Yes, it does. And I can't see that it's worth keeping. It doesn't even pay for itself.
Needham: Well, I don't think that's true. But it barely pays for itself.
Otto: Ms. Malcolm's correct, Dan. It hasn't paid for itself in four months. I still don't feel
that means we should shut it down. The potential is there. Max is a good sales rep,
and things are beginning to turn.

8. • Dialogue
Analysis
Malcolm: Gentlemen, let me make a couple of things clear. I was hired by you to do a study
and make some recommendations. I did that. It's your choice whether to accept the
recommendations or not. I happen to think my recommendations are sound, but it's
up to you to decide. The reasons I think they are sound are detailed in the report, but
let me just reiterate a few facts here. First, in three months of active effort you have
only six orders. Second, the competition, particularly in chromatography, is keen.
Third, the European sales office is costing more than it's producing. Fourth, your
microcomputer is too expensive, given the fact that an IBM PC costs one-fourth as
much as the Comtec and is an industry standard. Granted, it may not do as much, but
it is basically all most researchers need, given the right software. If you convert your
software so that it will run on the IBM PC, you'll be in a position to do just that. And
if you are more horizontal than vertical in your approach to the market, you'll have a
larger target. Fifth, your advertising and sales promotion measures are not getting to
the right people. Buy some lists and then do a direct-mail shot. Go to every trade
show you can and demonstrate your product. The audience you're trying to reach
doesn't take journal advertising seriously. They want more information than they can
get in an ad. Direct mail can give that to them; a demo can do even more.

9. Analysis
• Exhibit 1: Ad for the Comtec 100 Microcomputers
Automate Your Lab NOW
When is laboratory automation more than just laboratory automation? When you
automate with a Comtec 100, you have the most powerful R & D micro on the market.
The Comtec 100 features multitasking, multiprocessing, ultra-high-speed analog
input, and a real-time operating system. These features make the Comtec 100
capable of being a central computer for all your automation needs. Special
application-specific programs for Materials Testing and Chromatography, as well as
general-purpose R & D software, make Comtec a leader in laboratory automation.
Call, Write, or Circle Inquiry No. for Action
Comtec Corporation 333 Roadway Cambridge, MA 1-800-262-8400
Circle Reader Service Card No. 363

10. Analysis
• Exhibit 2 :Sales of the Comtec 100, Third and Fourth
Quarter, 1983 (US$)
July August September October November December Total
Domestic 38 900 38 600 60 642 41 282 42 623 43 624 265 671
International 21 090 21 438 37 583 21 438 21 438 -------- 122 987
388 658

11. Analysis
• Exhibit 3 Comtec's Balance Sheet of December 1983
(Actual US$) Assets
Cash 44 190
Accounts Receivable Trade 209 540
Other 41 800
Inventories Raw Materials 98 070
Packaging 24 504
Work in Progress 3 230
Finished Goods 107 440
Prepaid Expenses 10 756
Total Current Assets 539 530
Fixed Assets 12 462
(less depreciation) (4 790)
Net Fixed Assets 7 672
Other Noncurrent 190
Total Assets 547 392
Liabilities
Notes Payable 54 182
Accounts Payable Trade 269 904
Current Intercompany 82 591
Accrued Expenses 23 693
Accrued Taxes 97 330
Total Current Liabilities 527 700
Reserves 1 561
Share Capital (private) 18 131
Total Liabilities 547 392

12. Analysis
• Exhibit 4 :Memo from H. Otto to D. Needham
Interoffice Memorandum
To: D. Needham
Fr: H.A.0.
Re: Direct Mail
Date: Jan. 23, 1984
I contacted the people at Industrial Collaborative today in an effort to purchase
direct mail lists. They claim to have very vertical lists of primary purchasers
both in the U.S. and abroad for materials-testing automation and
chromatography automation. They will sell one list for $1,200 or two for $2,100
(over 1,000 names in each). The lists include names and titles. I strongly
suggest we purchase the lists, as recommended by Ms. Malcolm, and create a
direct mail piece to accompany existing product literature. David, at
International Communications, says he can have design and copy in a matter of
days for a four-page brochure describing our automation packages. He will
check back later today to confirm. Let's talk this afternoon.

13. Analysis
• Exhibit 5 :Letter from Manchester Metals, Ltd., to
Comtec's Amsterdam Office
Dear Mr. Mendel:
I enjoyed talking with you last week when you were in Manchester and am pleased to
report that I was quite impressed with the Comtec 100 Microcomputer. I have
recommended to the purchasing section that one Comtec 100 be purchased as soon as
possible. The order should be sent to you within ten days. As I informed you last week,
our long-term needs could conceivably call for additional purchases of eight to twelve
Comtecs. This initial purchase, therefore, should be viewed as a trial. I have few doubts,
however, that the Comtec 100 will perform to our complete satisfaction.

14. Existing Situation
MARKETING
ECONOMIC
Strenghts Weaknesses
Focus on the qualities of products Have wrong target (specific products)
Not enough ads
Strenghts Weaknesses
Succeed in domestic market Have no good results in international
market

15. Existing Situation
PRODUCTS
STRATEGY
Strenghts Weaknesses
Powerful microcomputers
New software
High prices and high costs
Strenghts Weaknesses
Specific hardware production
Specific software production
 diversification
Competitors (IBM…)
Financial crisis
 Too much diversification : lack of
competitiveness

16. Statement of problem
Comtec Corporation is facing a serious financial crisis :
lack of competitiveness and no profits.
The choice for the company, is to take a new
direction or stay with the present strategy (specific
hardware and software products on two markets)

17. Option 1 :
Status quo : Keep Comtec’s initial strategy
Strenghts Weaknesses
- No extra cost
- Give enough chance to products’
potential
- Keep the brand image
- not efficient and no profit
- Difficult to find funds
- In case of no funds founded, the
company goes bankrupt
- Still produce hardware and software
- Waiting for orders from 2 markets
- Try to find some funds

18. Option 2 :
Marketing change : Shift from journal advertising
to direct mail and trade show exhibits
Strenghts Weaknesses
- Attract clients very quickly and save
the company from financial problems
-Give more chances to products’
potential
-No R&D cost and risk
-Keep the brand image
-High cost (name list, stand in trade
show exhibits…), lead company to a
more critical situation
-Take time
-Not enough to solve the financial
crisis
-Still on 2 markets
-Still produce hardware and software

19. Option 3 :
Close down the European office in Amsterdam
and concentrate on the U.S. market
Strenghts Weaknesses
- Help relieve financial problems
- Abandon sunk cost
- Offer more ressources for U.S.
market
- Ignore the potential of European
market
- Lose all European customers
-Still produce hardware and software
-Still make journal advertising

20. Option 4 :
New direction : Option 2 + Shift from hardware to
a software emphasis
Strenghts Weaknesses
- Relieve financial problems
- Work with IBM is a good
opportunity and strategy
- Have quick result and save money
- Have high R&D cost and risk
- Change the main activity in a
difficult situation may lead
company to more critical
situation(management…)
-Stop all hardware production
-2 markets: domestic and international
-Make software running on IBM computers

21. Option 5 :
Radical change :
Focus on Software and US market and Marketing change
Strenghts Weaknesses
- Relieve financial problems
- Work with IBM may be a good
opportunity : powerful
- Offer more ressources for U.S.
market
- Ignore the potential of European
market
- Lose all European customers
- Have high R&D cost and risk
- Change the main activities in a
critical situation may lead company
to more difficult
situation(management…)
- Close down the sales office in Amsterdam
- Stop all hardware production
- -Make software running on IBM computers
- Shift from journal advertising to direct mail and trade show exhibits

22. Questions
• In this case, Comtec has a new strategy but the
result is not good after 4 months. So do they have to
change direction or invest more time and money to
succeed ?
• In 2004, IBM sold their PC business to Lenovo and it
was a success , do you think Comtec Corperation
should do the same as IBM?
• Is there a good idea for Cometec to rely on IBM?

23. Recommendation
• Option 4 Shift from hardware to a software emphasis
+
Shift from journal advertising to direct mail
and trade show exhibits