Reference no: EM132153251

Question 1:

Read the Rich, Angry Birds case study beginning on page 262 and answer discussion questions 1 through 6.

Angry Birds is a simple and extremely popular video game that has taken the world by storm. Angry Birds is a mobile app whose franchise is also expanding to video game consoles, board games, cookbooks, and toys. In the game, the goal is to retrieve the stolen bird eggs from the enemy pigs and kill the pigs.

Players use a slingshot to launch wingless birds through the air to destroy pigs and various structures that are housing the pigs. If the players complete their mission of killing all the pigs within the allotted time and number of birds, they pass to the next level, where different pigs and structures await to be killed and destroyed.

As players progress through the stages of the game, new types of birds and features, such as explosives, become available. Numerous free updates, additional content, and holiday promotions help keep consumers hooked on this game.

The global market for applications, or "apps," is already huge and continues to grow at an exponential rate. In 2010 alone, the global app market accounted for $6.8 billion in sales. Analysts project that this market will see double-digit growth and be worth $25 billion by 2015. Currently over 2 million apps are available and North America produces the most revenue in the app market.

However, Asia has the highest number of total app downloads. Of all the apps out there, Angry Birds may be one of the most popular of all time. Angry Birds is downloaded more than 1 million times a day and played for more than 200 million minutes a day.

An executive for the company is exuberant about the app, stating, "Angry Birds is going to be bigger than Mickey Mouse and Mario." A combination of factors has helped lead to Angry Birds' success.

• Angry Birds also received a boost from celebrities giving their endorsement by telling fans that they are hooked on the game (e.g., Anja Pärson, a Swedish skier).

• The company made Angry Birds very simple to use, increasing its "addictive power."

• The unpredictability of the game also lures in consumers.

• The company engages in customer relationship management and maintains communication with its customers through social media.

However, above all, one company executive attributes Angry Birds' initial success to the Apple platform, which is where Angry Birds started.

The Angry Birds franchise continues to grow and engage consumers by partnering with other organizations and developing new innovations. Soon, they hope to allow users to get special game features as a function of their location. And the company is offering Angry Birds merchandise like speakers in the shape of the Angry Birds characters for assorted electronic devices.

In regard to cause-related marketing, the company behind Angry Birds (Rovio) has joined BirdLife International in the fight to save threatened birds from extinction. Rovio is helping to raise awareness of bird extinction issues through the in-game that directs players to visit BirdLife International's web page to learn more about their programs.

Likewise, BirdLife's web page hosts a trivia question about bird extinction that produces a secret level of Angry Birds for those players who visit its site.

Discussion Questions

1. The Angry Birds game is a type of innovation. a. Identify whether it is a continuous, dynamically continuous, or discontinuous innovation. b. Conduct an innovation analysis of Angry Birds using Table 7-2 as the basis (for the purposes of analysis, focus on consumers who already use mobile apps).

2. Rovio is engaging in cause-related marketing by teaming up with BirdLife International, a nonprofit organization. How well does this cause "fit" Angry Birds? Discuss the impact that this cause-related marketing partnership could have for Angry Birds.

3. Examine the four cause-related marketing (CRM) consumer segments in Chapter 3. Detail each segment's likely response to the CRM partnership that Angry Birds has with BirdLife International.

4. Angry Birds and many other apps are available in numerous countries. What are some factors that app designers should consider when entering into a foreign market?

5. Angry Birds is appealing to young children because of its simplicity and cartoonish quality. Clearly, children are one of the market segments that Angry Birds is targeting. It is involved in, or is planning, such initiatives as clothing, toys, and Angry Birds Happy Meals. Chapter 6 discusses marketing to children and the consumer socialization process. What ethical concerns should Rovio consider when marketing to children?

6. Angry Birds has been widely popular among Americans. What American values discussed in Chapter 3 help explain why Angry Birds is appealing to such a large audience. Defend your answer

Question 2:

You have been hired as a consultant for Pristine Urban-Tech Zither, Inc. (PUTZ), manufacturers of fine zithers. The market for zithers is growing quickly.

The company bought some land three years ago for $2.1 million in anticipation of using it as a toxic waste dump site but has recently hired another company to handle all toxic materials. Based on a recent appraisal, the company believes it could sell the land for $2.3 million on an aftertax basis.

In four years, the land could be sold for $2.4 million after taxes. The company also hired a marketing firm to analyze the zither market, at a cost of $125,000. An excerpt of the marketing report is as follows:

The zither industry will have a rapid expansion in the next four years. With the brand name recognition that PUTZ brings to bear, we feel that the company will be able to sell 3,600, 4,300, 5,200, and 3,900 units each year for the next four years, respectively.

Again, capitalizing on the name recognition of PUTZ, we feel that a premium price of $750 can be charged for each zither.

Because zithers appear to be a fad, we feel at the end of the four-year period, sales should be discontinued. PUTZ believes that fixed costs for the project will be $415,000 per year, and variable costs are 15 percent of sales.

The equipment necessary for production will cost $3.5 million and will be depreciated according to a three-year MACRS schedule. At the end of the project, the equipment can be scrapped for $350,000. Net working capital of $125,000 will be required immediately. PUTZ has a 38 percent tax rate, and the required return on the project is 13 percent. What is the NPV of the project?