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Dividend Decisions Essay

577 words - 3 pages

Techsol Software Company

Case is intended to be a part of instruction material developed for teaching at a Marketing class in Business Schools. Techsol is not a real company – any resemblance to a real corporation is co-incidental. Case facts are for discussion only and are not intended to be a demonstrator of correct or incorrect handling of management situation.

Techsol Software is a relatively successful software company providing custom solutions development to clients in the Middle East. They have successfully delivered projects for various departments of the Telecom Ministries in Bahrain, Qatar and Oman.

As project leader for Techsol you have visited Bahrain a few times in the last year. You have noticed that most people use prepaid cards for their Internet access and users ...view middle of the document...

The local ISP realizes the need in the market and is also aware that they will be unable to provide a solution in the near future. However, they would like a share of the pie and wish to be the distributor for the software. They are willing to distribute the product if they can earn USD 1.5 per unit sold.

You have done some quick marketing research and you believe that the Market size is likely to be normally distributed with a mean of 60,000 units and a standard deviation of 6000 units. You also realize that it is unreasonable to expect to be the monopoly player because other people will replicate your product as soon as they see your success. You are expecting to garner a market share of between 20% and 30% - uniformly distributed.

On the cost side – there are a couple of uncertainties. Your application will need to interface with the database of the Internet Service Provider and the technical people there have not been too thrilled with the prospect of another application touching their database. If you manage to get the senior management of the client to back this project – they will agree and then you can develop the application at a cost of USD 10,000. However – there appears to be only a 50-50% chance that their top management will give this project their backing. In case they don’t back this project, you will have to invest more in building secure middleware layers that will satisfy the techs at the client. The development cost for these security measures can be either USD 20,000 or USD 40,000 in addition to the USD 10,000 for the basic application. You believe there is a 60% chance that you can do it in USD20,000 and a 40% chance that it will need USD 40,000.

You wish to present this project to your top management for their approval. You have bounced it off your Vice President and he has requested you to assess the profitability and the risks in the project.

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