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Texas Instruments (1998)

Founded in the 1930's , Texas Instruments (TI) employees 75,000 people worldwide,

with major manufacturing sites in North America, South America, Europe, Asia and

Australia. TI serves a wide range of electronics markets and is divided into six major

groups of specific applications.Semiconductors are TI's principal business and the company is striving to become one of the world's leaders in semiconductor innovations and applications. TI is successful in defense electronics, as well, and serves both U. S. and international defense groups of specific applications.Semiconductors are TI's principal business and the company is striving to become one of the world's leaders in semiconductor innovations and applications. The materials and controls portion of TI's business is a world leader in electro-mechanical controls technology. Through its research and development division, TI strives to convert research and development activities into useful products and services. TI earns adequate returns on investments through intellectual property, as recognized through patents and inventions. Finally, information technology combines TI's capabilities in both computing hardware and software. The information Technology Group is comprised of Computer Systems, Industrial Automation and Peripheral Products. The Peripheral Products Division (PPD) located in Temple Texas, products printers and portable computers and terminals. Because all phases of a new product introduction - including engineering, manufacturing and marketing - are located together, the communication and coordination for a successful product launch exists.

The Laser Printer Market

The popularity of personal computers has prompted the growth of printers as a complementary product. Throughout the 1990's, laser printers were the fastest growing segment of the entire printer industry. Laser technology has become popular because it offers excellent print quality , fast printing , quiet operation and flexibility with graphics and styles of letters. Laser printers are designed for environments where data/word processing, specialty publishing and business communications are considered integral to daily operations. Laser printers require minimal user training and are considered a commodity in some markets. For this reason, the price of laser printers has decreased dramatically over the past several years.

The Introduction of the Microlaser Printer

In late 1989, TI introduced the microLaser printer. TI hoped that the microLaser would become the laser printer of choice in the world. When compared to the leading competitors, the microLaser offered greater functionality in a smaller package. It was designed to fit easily on a desktop and perform numerous applications.

By virtue of its size, ease of use, and affordability, the microLaser had been

positioned as a personal laser printer. It was small and relatively inexpensive. TI

Marketers hoped these attributes would encourage companies to purchase one microLaser for every personal computer they owned.

TI Explores New Distribution Channels

As with any new product introduction, careful attention was given to a distribution

strategy. In the past, TI had relied on distributors, original equipment manufacturers

(OEMs) and value added resellers (VARs) to market its laser printers. OEMs would

specify a high level of customization and remarket the printer under their brand name, usually as a part of a computer system. The OEM might even request functional modifications to meet its customer needs. The printer was usually integrated with a computer and software to form a system that the OEM would sell as its own. A VAR was more likely to purchase the printer with the TI name on it and then integrate it with other brands of computers to form a system. Texas Instruments' authorized distributors , VARS, and OEMS usually sold to large volume accounts , such as governmental agencies, financial institutions, and Fortune 500 companies.

At first little attention was given to retailer and less sophisticated end-users,

although the Texas Instruments name was recognized by man consumers, market

research show that little was known about TI laser printers. Most people either associated

TI with its educational products , semiconductors or for being forced out of the personal

computer market. Perhaps these associations explain in part why retail distribution was not pursued by the Peripheral Products Division . Additionally, from 1986 to 1989,

Peripheral Products had no products suitable for the retail market.

The development of the Microlaser prompted PPD Marketing to explore new channels of distribution. Research revealed that 48 percent of laser printers purchases were made through retailers. Distributors and wholesalers accounted for and additional 20 percent of laser printer sales. Texas instruments had mainly sold through the reseller market. However, data such as these proved that the market demanded new distribution channels. Retailers did sell to individual users and small business owners, but now larger corporations with decentralized buying were going to retail outlets for their purchases.

After much thought and analysis, TI executives decided to re-enter the retail

market. The nature of the printer market and the increased popularity of laser printers demanded new distribution channels. However, the move into retail would be gradual. Support for retailers, including promotional campaigns had to be designed, tested and implemented. This channel demanded more support than the others and required that TI use a "pull" strategy to get customers into stores. PPD marketing had to build brand name recognition, establish TI as a producer of high quality printers and reach end users and purchasers.

Texas Instruments Enters the Retail Market

Although nearly half of all laser printers purchase are made through retailers, the

microLaser printer presented several challenges to TI. There are many laser printers from

which to choose, and there is little difference among products, so buyers will often use price as a means of choosing between competing products. This elastic price situation means that new entrants into the laser printer market should have a very low price to encourage sales. The TI microLaser printer has a price lower than two-thirds of its competitors in the laser printer industry.

Although the printer had a reasonable price, TI did not provide the promotional

support necessary to "pull" consumers and end users into retail stores. TI advertised in trade journals but did little else to establish itself as a viable competitor in the laser printer market. Co-op advertising and sales for incentives might have worked as successful strategies for building recognition among retailers if they had been utilized.

The microLaser was too similar to other competing products and there were few

end users specifically requesting the printer. Further, entrenched competitors , such as Hewlett Packard (HP) and IBM , made it difficult for TI to persuade retailers to add another laser printer to their product mix. Finally, TI had much more experience in dealing with large accounts and industrial merchandising, which may have put them at a

disadvantage in dealing with t he competitive retail market. TI only enjoyed moderate to limited success with its microLaser printer. Never-the- less, they expanded on the microLaser product line. In the 1990's the microLaser PS17 and PS 35, the microLaser XL, the microLaser Turbo and Microlaser Plus printers and others were introduced by TI. Each of the new printers offered either improved print engine speed ( the number of sheets per paper printed per minute) or greater font capability at an affordable price. Despite these improvements, TI's presence and movement in retail markets remained relatively slow.

What Decision to Make ?

TI's marketing management team had a decision to make. One possibility was to sign agreements with an OEM such as Compaq computers that would allow Compaq to put its brand name on TI's microLaser and use Compaq's channel of distribution. TI in the past

had some success in dealing with OEM's. Another possibility would be to spend more money on advertising and promotion to have a pull effort that would pull customers into retail stores such as Office Depot, Office Max, Best Buy or CompUSA. This might involve advertising in personal computer magazines or advertising online. A third possibility would be to withdraw from the microLaser market. This could be done by scaling down production or trying to sell that division of the company. TI had been approached in 1996 by GENICOM Corporation about the purchase of its microLaser products.

State The Problem.

Relate concepts in the text above to the case at hand. Please do not summarize the case.

List alternatives that will solve the case. Please be specific, not vague.

List criteria to evaluate alternative. Is it acceptable to employees? Is it acceptable to shareholders? Is it acceptable to customers? Is it acceptable to top management?

What would be the cost to implement? (Expensive or not?) What would be the time frame? (How long?)

Will this alternative affect stock price? Feasibility of implementation?

Take each alternative generated to solve the problem and talk about in terms of your criteria.

How expensive to implement? Is it a long term solution or short term solution? Would shareholder's be happy?