Terracog Case Analysis

TerraCog Case
Analysis
BUSA 305-02 Behavior in Organizations
Austin Miller
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TERRACOG CASE ANALYSIS
TerraCog is a privately held company that produces Global Positioning

Systems (GPS) and fishing sonar equipment. TerraCog has been around since
1977 and over the years has built themselves a reputation for high-quality
products, which they specifically market to campers, hunters, hikers, and
fishers. In the past, the company has had no trouble not being the first to
market. They have been free to lag a bit behind the competition because of
the quality of their products and their customer satisfaction.
The problem began in 2006 when Posthaste, a competitor, introduced
a new GPS prototype dubbed BirdsI. BirdsI displayed satellite imagery by
using static satellite photographs and stitching them together to create one
image, much like Google Earth.
At first, TerraCog dismissed this new product because they believed it
did not offer that much of an improvement to the existing GPS technology.
While they knew it had a visual appeal, TerraCog did not believe that BirdsI
had a substantial performance improvement over their existing maps in
TerraCogs GPS system.
BirdsI launched in October 2006, successfully, earning impressive sellthrough rates nationwide. TerraCog was still confident that the popularity of
BirdsI would not last. Fast forward to the spring of 2007 and TerraCog starts
noticing customers increase in demand for a GPS with satellite imagery like
BirdsI. TerraCog realizes their mistake now and starts plans for their own
satellite imagery GPS, which they name Project Ariel. In order to cut down
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on development time and costs, they decide to redesign their existing GPS
product.
After a couple of meetings with the higher-ups of the company, they
find that the redesign is going to cost them a lot more than originally
anticipated. The pricing team states that $475 is the lowest they can sell
Aerial for and still meet the margin. The sales team thinks that price is way
too high and suggests a price of $425 to capture the market share that
TerraCog has lost as of late.
Basically, the decision has come down to Emma Richardson, the
recently promoted Executive Vice President. TerraCog needs a go or no-go
decision, and Richardson needs to push them to one side or the other.
There are a few definite problems within TerraCog that are making
things more difficult than they need to be. After reading the case, it is clear
that during their meetings there is no clear cut leader. Conversations are free
flowing and you also have people calling others out, such as when Ed Pryor,
the vice president of sales, calls out Becky Timmons, the CFO, for not
understanding how competitive the market is. At times, the conversations
have even split off into smaller groups, even though they were all at the
same meeting sitting at the same table.
Another problem was how quickly they wrote off BirdsI. They could
have done more research after BirdsI was announced showing that people
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wanted satellite imagery in their GPS. They ignored the buzz the product was
getting and waited almost an entire year to respond with their own ideas.
Another mistake was not being as innovative as they probably could
be. They decided to just redesign their existing GPS system to save time and
money. The problem is that TerraCog is known for their high-quality products.
It wouldnt be surprising if their customers did not care for Aerial, since it was
the same product, just upgraded a bit. With their resources, TerraCog could
have designed the next big thing in the GPS market.
Ed Pryor also seems to cause a minor problem because he end of the
first meeting, he says he wont even try to sell the product if the price is not
lowered. It makes it seem like he cares about his own goals more than the
companys.
The main problems going forward with Aerial is that there is a rush to
market before the holiday season and also because they have been lagging
behind their competition for almost a year now. They need to decide on a
price soon or they are just going to hurt themselves further.
One organizational behavior theory you can apply to this case is the
negotiation process. The negotiation process is a five-step theory t
negotiation tactics. First, you want to start with preparation and planning. To
do this effectively, it helps to goal set. TerraCog could have executed this
step better by laying out a plan detailing how to respond to BirdsI. When
they first heard of it, they mistakenly wrote it off as a fad and did not bother
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to come up with any ideas of how to compete with it. They were determined
that it would just go away, and that is not a successful plan to lead a
business with.
The next step of the negotiation process is to define the ground rules.
TerraCog partly did this in their first meeting, stating that they want to get
Aerial on the market quickly, making clear that the processing speed of
Aerial was not an issue and also saying that Aerial would have all the same
features of their current GPS products. Once Aerial was designed, though,
they were surprised by the cost that was required to build it. They could have
laid down ground rules about how much they can or cannot spend.
After the ground rules are laid it is important to take the next step and
make sure everyone is on the same page. Clarification and justification are
necessary, but TerraCog did not do a great job of it in their meetings. At
times, things got a little confrontational even. People kept bringing up the
same things that had already been talked about, such as the processing
speed of Aerial and telling the designers to cut back on costs again when
they had already done everything they could.
Bargaining and problem solving is the next step in the negotiation
process. In the meetings when TerraCog is trying to decide on a price for
Aerial, no one seems to have a solution to the problem. $475 is much too
high for the sales team to even consider, but its hard to push the price down
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because of the margin requirements. The negotiation is at a standstill at this

point for TerraCog.
Lastly, the final step in the negotiation process is closure and
implementation. TerraCog needs to come up with a solution, and it seems
like that has landed on Emma Richardsons shoulders. She needs to push one
way or the other so that the company can come to a decision.
The way I see it, there are a few options Richardson can pursue. The
first option is to go ahead and market Aerial as planned with a $425 starting
price. This would put them in the market again before the holiday season
and stop them from continuing to lag behind their competition. They could
continue to look for new ways to improve the design in order to cut more
costs since they would be very close to their margin requirements if they sell
Aerial for $425. The main problems with this are the decreased profit from
the reduced price and it would also put more pressure on the design team to
reduce costs even further.
Another option Richardson could look into is to scrap Aerial all together
and look into underserved markets. The case mentions that in early 2007
TerraCog started looking into sub-markets such as fitness and cycling. They
could scrap Aerial altogether since they are lagging behind their competitors
already and focus on a new market. They wouldnt have to decide on a price
point anymore, which is putting a lot of pressure on all the team leaders. This
option could take a lot of stress of everybody in the business and potentially
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make them a lot of money tapping into an underserved market. TerraCog

would have an early mover advantage if they went with this option. Yet, this
would also hurt their brand image by not focusing on the products that the
company was founded on.
One last option is to scrap the Aerial launch for now and go back to the
drawing board. This would disappoint the design team but would be ideal for
the rest of the company. The design team would have to put other projects
on hold but if given more time, they could potentially design the next big
thing in the world of GPS. The problem with this option is that it would cause
them to lag behind their competitors even further, along with missing the
holiday season. Its a high risk/high reward kind of move. Either they
successfully design the next big thing in GPS or they try to and they fail,
which would cause massive problems for TerraCog.
Taking all things into account, my recommendation would be to go with
the last option, to push the launch date back in hopes of launching the next
big industry-changing product, just as the BirdsI was. As I said before this is
high risk, but in the end it seems like a good idea. TerraCog is known for their
high-quality products and has built a name for themselves in the GPS
industry. Companies known for premium products can usually lag behind the
competition for a bit as TerraCog has in the past. They would lose some
money waiting for the new launch but if they do design something amazing,
they would surely gain back their market share. Their design team is one of
the best in the business, and they also have a very motivated leader in Allen
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Roth. TerraCogs reputation is too much to risk if they chose another option.
With this decision, TerraCog would maintain their status as high-quality
producers.
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References
Robbins, S. P., & Judge, T. A. (2015). Organizational Behavior (16th ed.). N.p.:
Pearson.
Beer, M., & Yong, S. (2008, April 11). TerraCog Global Positioning Systems:
Conflict and Communication on Project Aerial. In harvard.edu.

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TerraCog Case

TerraCog is a privately held company that produces Global Positioning

because of the margin requirements. The negotiation is at a standstill at this

make them a lot of money tapping into an underserved market. TerraCog

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