In order to build the model, the coefficient of innovation p, the coefficient of imitation q and the total market size m, need to be estimated. In cases like e-books where past data is not available, these parameters can be estimated through the analysis of existing analogous products.
Estimation of p and q
Appropriateness of the analogous products, given in Table-1, was considered and weighted average of their p and q values were computed to arrive at the estimated value of p and q for e-books. Typically factors like environmental, market structure, consumer behavior, marketing-mix, and product characteristics are used in determining the aptness of the analogs. For this exercise on e-books, market structure and consumer behaviors were taken as dominant factors for computing the weights. None of the analogs provided in the table truly depict the product characteristics of e-books in a strict sense. They may be good analogs for the product characteristics of e-book readers though.
Some of the facts considered in determining the analogs and their weights are as follows: In order to utilize e-books, a consumer must have some form of compatible hardware and an internet connection. It is important to recognize the utilization of compatible hardware, like in case of household PC, penetration was at 40% and was growing during the same time period as the adoption of E-books. Handheld devices like PDA, with compatible screens for reading E-books, were a...
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...s likely to have high q, since people in collectivistic cultures tend to care about others ' opinions and imitate group behavior. Economic differences explain national variations in speed of diffusion better than cultural differences. In countries with higher purchasing power per capita, p is higher, since having a higher purchasing budget makes it easier to adopt new products faster. Emerging markets including Brazil, India and China are likely to be driven by local factors including successful penetration of technology infrastructure like internet accessibility.
Bass model works better for consumer durables whereas e-books are consumables that are complimentary information goods. Some analogies in Exhibit-C of the case are based on global data while some are based on US data. Data in Exhibit-A of the case is over different time periods and are not standardized.
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