Capital Case

Sung Han Lee
Sección 2

Capital Case

Problem ID:

In the wake of an economic crisis, the magazines and advertisement business have dropped dramatically during 1991. The Prisma Presse grouphave invested and developed a business magazine called “Capital” and they are ready to launch. The question is whether to postpone the launch until the economic situation improves or to go ahead withthe initial planning and launch it no matter what the external situation is. If it chooses to launch, the team has two strategies: “subscription” and “newsstand” strategies.

Alternatives:

1)Launch using the “subscription” strategy
+ Lower cost for media advertisement per copy.
+ Larger subscription share through higher discounts.
+ Subscription discount is price competitive with therest of the industry.
+ Subscription strategy appeals mainly for the “executive” readers thus increasing more advertisement.
- Depends too much on subscription clients to achieve financialequilibrium (70% of the total circulation must be subscribers).
- Additional investment is required (for massive direct mail advertisement).
- Holding large amounts of subscriber increases costs (Exhibit 15).2) Launch using the “newsstand” strategy
+ Price is lower than other business magazine competitors (at F15) and could attract customers during the harsh economic situation.
+ This strategywould also allow getting some customer share of the weekly news magazines industry thus increasing the initial target group.
- Higher media advertisement per copy.
- The lower price might confusecustomers whether if “Capital” is a news magazine or a business magazine.
- Newsstand unit sales % of the total domestic circulation is low at this industry.
- Attract less of the “executive” readers3) Postpone the launching until the economy recovers
+ Overall paid domestic circulation and advertisement in business magazine have grown negative throughout the years (Exhibit 6 and 7).
+...