What factors determine demand for CNS? How will demand vary by market?
What will be an ideal response?
Demand for CNS will be greater under the following circumstances:
Environmental Conditions
• Complicated road systems not organized in grid systems
• Poor road signs, and not all streets with names and numbers
• Congested roads, frequent traffic jams (requiring use of alternative routes)
• Government investment in electronic traffic information systems (like the Japanese VICS)
• Low auto theft (and break-ins to steal accessories)
Consumer Behavior
• Infrequent use of cars, resulting in lower familiarity with road systems. Daily use of public transportation for commuting
• High involvement with cars, interest in high tech auto gadgetry, lower price sensitivity on such products
• Frequency with which consumers purchase new cars
Marketing
• Availability and accuracy of electronic maps covering large geographic areas in detail
• User-friendly equipment offering added value over paper maps (See Exhibit 10 for details)
• Hardware and software pricing, expectations of price reductions
• Opportunity for test driving the product since performance often exceeds expectations (see Exhibits 11 and 12)
• Level of advertising and positive word-of-mouth
• Credibility of branded manufacturers offering the equipment
• Intensity of distribution, convenience of installation, and availability of after-sales service
Considering the above criteria, it is not surprising that the CNS market has taken off first in Japan. In the United States, daily car use for commuting means many consumers are familiar with local routes. In addition, road signage is good, auto theft is high, and government is lagging in the provision of electronic traffic information systems. For all these reasons, American consumers are unlikely to be willing to pay as much as Japanese consumers for the same functionality; they will simply not see the benefits of doing so (see Exhibit 10). Demand in Europe is likely to fall somewhere between that of Japan and the United States, at least initially. A further complication in Europe is the need for software integration and language adaptation across national boundaries. Longer-term, some students expect demand for CNS to be proportionately lower in Europe than in the United States because of lower average per capita disposable incomes.
It is useful to get the following chart on the blackboard to capture students’ assumptions regarding likely diffusion patterns for CNS in each of the three major markets.
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