Element of Strategy Strategic Choice Rationale Target market Software in home educational its what the public Marketing segment of microcomp. industry. wants (edu. software), atari/commodore 64; Branding growing industry, little competition in edu. software

Distribution direct sales force, sell directly to one of biggest assets, cheaper large retailers than offering 5% commission

Manufacturing 13 ppl. full time; 140 ppl over very small cost, does Christmas season, $75K cost overrun only $75k

Financial line of credit of 6mil at prime rate; in 1986 the home comp. indust- limit 80% recievables, potential ry will take off?, incredible relaxing pt, want 3-5 mil by july, growth, venture capital potential not public, best chance sell small percentage of co. to corporation

Risk

Target Market/Marketing: computer industry will take off, but is a constantly changing trend, technology keeps improving. Education and entertainment will not achieve more than a 30-35% penetration in U.S homes

Distribution: technology keeps changing, therefore these large retailers/Spinnaker could be left with lots of unsold inventory

Manufacturing: could face hiring issues because most are Portuguese immigrants, do not speak english, could cause conflicts in understanding objectives/cultural issues affecting manufacturing

Financial: unpredictability if the proposals or third party development business will take off, where they will get the resources

Has Spinnaker’s strategy been successful?
Spinnaker’s strategy has been successful so far in the company’s life. they have managed to

What issues must be addressed? * costs of launching a third party development business, where they will get the resources. * whether or not to take on these proposals from Commodore and Atari * the likelihood of success with these different proposals

How long before cash runs out? they are expected to be needing money and borrowing from a bank in July 1985

What is the Bank’s likely position? Why? The bank could possibly be uncertain of lending the money to Spinnaker because, of the uncertainty this third party development business will bring success wise. However, it does prove great potential with growing technology.

PART 2

What are Bowman’s alternatives? Are they mutually exclusive or can some be done in parallel? * atari had asked Spinnaker to handle its whole software busioness, including program development, packaging design, advertising, ans store display * atari would just manufacture it would do it offshore at a low cost and take care of sales and dist. * proposal from Commodore to develop four programs for foreign languages for 350,000 and 12 educational products at 1 mil and pay royalty * proposal from atari to develop 47 products for 8.3 mil * sell part of company to large corporation

For each option you should be prepared to speak to:
What it will take resource-wise to execute on each option 1. go with atari: will need ability to produce 47 products with limited resources 2. commodore: ability to 4 programs 3. sell part of company: big loss of equity
What is the time-frame required to make it happen 1. around a year, because will be releasing new system 2. around a year, becasue will be releasing new system
What is the likelihood of success 1. uncertain, could take off with introduction of new system but trends and tech are always changing 2. uncertain, educational trends will only grow so much… 3. because of how successful Spinnaker has been, it would be likely that they could sell part of the company to get monetary resources to start the development business.

Which option(s) do you recommend to the Board and why? I would recommend that selling a portion of the company would be the best solution. Although there is a loss of equity involved, this could give them the money they need to start his developmental business, then proceed to take the proposals from atari and commodore after that to further grow their business.