Datavast Inc.: the Target Segment Decision Essay

1451 Words Feb 12th, 2016 6 Pages
1. Describe the data storage industry in China in this case. Include comments on technology and issues in accepting new technology?

“Data storage devices allow users to store digital files in a secondary location in order to prevent the loss of important information. Such devices came in many forms, depending on the needs of the users” (Hao, 2012). Prior to the introduction of the data storage industry in China, approximately 20 percent of small to medium companies were still using CDs as their form of data backup, or other outdated methods, such as external hard drives. Some Chinese companies did not use any form of data back up at all. Even the larger companies’ back up systems that they were paying millions for were outdated.
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Due to the fact that small to medium businesses were sensitive to price, Datavast would have to lower its prices to remain competitive for their business. The company estimated that it would have to sell each Data Security Box for approximately RMB7,000 to IT suppliers, who would slightly mark up the prices to make a small margin of profit. Datavast’s products, to the smaller to medium companies would have to be more standardized. The profit margins for Datavast with these smaller companies were around 50 percent, versus the 70 through 80 percent it would make with larger companies.

4. (a) What is the decision Hao has to make? The decision that Hao had to make was who was going to be his target market: SMEs or larger organizations. Hao’s desire was to retire in five years. With that in mind, he was not interested in investing more personal capital in Datavast before he retired. His goal was to generate a positive net income within that coming year with the launch of his new product. Two factors that Hao wanted to avoid were: “adopting a slow-growth strategy that would stress the company’s finite financial resources” (Hao, 2012), and he did not want to increase his overhead expenses beyond its existing level. Once Hao was done designing his new product he had to make a

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