Zenith: Marketing Research for High Definition Television CASE WRITE UP FOR SESSION 3

PONNURU KARTEEK 9/24/15 MARKETING MANAGEMENT AND

CONSUMER BEHAVIOR

PONNURU KARTEEK 15MBABRS006 MBA 1st YEAR

1

About Zenith Electronics Corporation:

Zenith is a television manufacturing company located in Glenview, Illinois. It mainly manufactures

consumer electronic products, color picture tubes, color computer monitors, cable products and high tech

electronic components. It employs over 32,000 people worldwide and is regarded as number 2 in the

American television market. The case is about CEO Jerry Pearlmen who wants to know the forecasts of

HDTV demand from 1992 to 2000 under a pessimistic, most likely and optimistic scenarios and he appoints

Mr. Huber to attend the task.

1. How much of existing information on TV buyers can be used to access the HDTV market?

A: To address this question we can look at the data provided in Exhibit 2 and 3. The information

provided here can be used to understand the trends in the markets and can infer from these to know

the HDTV market

In Exhibit 2 we can see that from 1950 to 1990 there has been an increase in the number of

households owning a TV and from the other analysis we can see that there has been a very good

positive response in accepting various innovations by the Americans. From this we can say that the

probability of accepting HDTV’s in the market is quite high.

From the information given in Exhibit 3 we can draw the following graph to represent the annual sales

which can co-relate to the TV buyers:

From the above graph we can infer that the annual factory sales of TV’s in the US between 1971-1989 has

increased from 11,197 units to 24,669 units. This shows that there has been an increase in the number

of people who are buying television.

We can thus, infer that the market for HDTV is good and the company should go about investing in to

capture the market.

0

5000

10000

15000

20000

25000

30000

1971 1975 1980 1985 1989

Annual Factory Sales

Series 1

PONNURU KARTEEK 15MBABRS006 MBA 1st YEAR

2

2. What are the forecasts of HDTV demand from 1992-2000 under a pessimistic, most likely, and optimistic scenarios? How to define these scenarios?

A: According to the case in October 1988, Bruce Huber had been involved in making rough projections

of the HDTV U.S. market. Traditionally, 11% of the 25” and larger sets had been selling for over $1,000.

Since it was assumed that HDTV would have larger sets and would be priced in this range, he had looked

at industry projections of this set size and price range. Then he made an arbitrary assumption about the

percentage of sets that would be HDTV in each year and the forecasts he made are shown in Exhibit 15 in

the case. Exhibit 15 can be used to forecast sales for the optimistic scenario.

A pessimistic situation can be defined as a situation where broadcast standards are readily adopted,

producers and studios did not make investment in programs, TV stations did not invest in new

broadcasting equipment while manufacturers did have HDTV sets available and are for sale, and once

people start buying it this would actually lead to a problem in the takeoff of the HD programs on the sets

and this would actually create a bad image in the minds of the people that this new technology isn’t worth

or is still in the process of developing. The forecast under a pessimistic scenario is as follows:

Sales of the HDTV sets would suffer a setback in this situation and HDTV would only be able to penetrate

into a small portion of the total American market. This could be in line with the original response to the

color TV market in the US in the early 90’s.

A most likely situation would be one in which sales would be initially slow as there would be relatively less

number of programs featuring high definition content and once when producers and studios start

investing in HD content the sales there would be momentum to the sales trend and everything would be

according to the plan. The forecast under of HDTV’s under this case can be summarized that the initial

sales would be low but once programs start featuring in HD people would buy more of the HDTV’s and

sales would eventually increase.

An optimistic situation would be the one in which where broadcast standards are readily adopted,

producers and studios make investment in programs, TV stations do invest in new broadcasting

equipment while manufacturers did have HDTV sets available and are sold. This is the most ‘best’ thing

that could ever happen. An addon to this would be positive consumer feedback which would add to the

investment done on HDTV’s. Sales under this scenario would be the most optimum one and are likely to

be like the below graph:

0

500

1000

1500

2000

2500

3000

1992 1993 1994 1995 1996 1997 1998 1999 2000

Zenith Forecast For The Optimistic Sena

Series 1