Imp ms mba_projects_part1

MS & MBA course work-flow
Good projects: Part 1
By:
Anil Sharma
Phone no.: 408-663-7521
Email: sharma_anil@yahoo.com

Segway: Product Development Document Rev. 1 Date: 11/27/03
Segway™ Human Transporter (HT)
Product Development Document
The enhanced mobility
offered by Segway™
Human Transporter (HT)
creates new solutions to a
wide range of mobility
problems. Many of these
solutions will be fostered
by the imagination and
individuality of the
people who use it.
Confidential Page 2 Page 2 of 156

PIC (Product Innovation Charter)
Background: A self-balancing mobility device that enables users to climb stairs and
negotiate sand, rocks, and curbs, The IBOT™ Mobility System, is a balancing aid for
people confined to wheelchairs giving them new freedom while raising them to eye level
with the rest of the world. If self-balancing technology could provide such benefits to
people who couldn't walk, what could it do for people with full mobility?
Market and Technology Focus:
Market: For people with full mobility, using a self-balancing transportation machine has
far-reaching possibilities. Segway HT while could make businesses more profitable and
productive, it’ll make daily life more convenient and cost effective by providing a cleaner
and cheaper transportation option for short distances. It’ll thereby enhance carrying
capacity while saving time and reducing strain, making it a great transportation option.
Technology: Segway HT will use dynamic stabilization technology for self-balance. Our
body maintains dynamic stabilization using inner ears, eyes and brain, while Segway HT
will have solid-state gyroscopes, tilt sensors, high-speed microprocessors, and powerful
motors performing in concert to keep it balanced. Segway, like IBOT Mobility System,
will sense center of gravity, instantaneously assessing this information, it’ll make minute
adjustments (about hundred times per second) to keep the Human Transporter balanced.
Goals and objectives: Segway is new human transportation device which uses self-
balancing technology from IBOT Mobility System. New transportation solution is for trip
that is 'too close to drive & too far to walk”. This transportations device will benefit
businesses as well as individual users. With over 80% of the world's population soon to
be living in urban areas, belief is that the Segways HT can, over time, play a vital role as
transportation alternative in urban areas. In the past, every major advance in powered
transportation technology has involved ways of going long distances faster from the horse
and buggy to the car to the airplane. The Segway HT, on the other hand, addresses the
problem of moving people and products relatively short distances more efficiently and
cleanly, few miles rather than from town to town, using very little energy in the process.
Guidelines: The self-balancing human transportation device, Segway HT, should be safe,
intuitive, durable, and elegant in its simplicity. Strong marketing campaign will be run to
advertise enhanced mobility offering provided by Segway so people think about the
possible use of the product in their day to day life. Many of the product use will be
fostered by the imagination and individuality of the people who try it and later use it.
The Concept
Needs: Segway will satisfy people’s need of moving faster and carrying more, allowing
them to commute, shop, and run errands more efficiently while they are having fun or
doing day to day business work. It provides businesses with more productivity by
allowing workers greater versatility, mobility and carrying capacity. It does it all by
harnessing some of the most advanced and thoroughly tested technology ever created.

Technologies: Segway™ Human Transporter (HT) can self-balance using a technology
called dynamic stabilization. Dynamic Stabilization works in much the same way our
own sense of balance does. While we have an inner ear, eyes, muscles, and a brain to
keep us balanced, the Segway HT will have solid-state gyroscopes, tilt sensors, high-
speed microprocessors, and powerful electric motors performing to keep it balanced.
Working in concert, these extensively tested systems with inbuilt redundancy sense the
center of gravity, instantaneously assess the information, they make minute adjustments
one hundred times a second. Segway HT will maintain balance whether one is traveling
at 10 mph, carrying a heavy load or slowly maneuvering in tight spaces, or standing
perfectly still.
Form: Based on factors like payload capability, riding environment like terrains or stable
platform, physical ability of user and state laws etc., Segway HT will have two models.
1. Quick and Capable (Pro-Series)
2. Agile and portable (Beginner)
Each model will have an option for Cargo Capacity as add-on over standard package.
While this, two base models & optional cargo capacity, framework will give enough
options for consumer, it will ease pressure on operation’s team in terms of having to
maintain multiple models and their support team’s, spare part numbers, user-manuals etc.
Product Attributes
Table 1: Segway Product Attributes
Features Benefits Functions
1 Durable Easy to maneuver Safe electrical operation
2 Portable Cost Effective Easy Startup and Shutdown
3 Light weight Environment friendly Zero turning Radius
4 Reliable design Move faster & carry more Theft-proof keying
5 Component failure backup Small footprint Intuitive, Quiet Operation
6 Stable base Reduced Fuel Consumption Great mechanical tuning
7 Easy or no throttle and
brake controls
Simple to read, user friendly
display
Good driving Range per
refueling/recharging
8 Intelligent malfunctioning
component handling
Modular replaceable parts Rugged to temperature and
moisture changes
Product Protocol
Following sections of product protocol are being explored in depth for Segway.
Target market
Business: The Segway™ HT is a highly adaptable productivity tool for businesses, with
initial studies conducted by customers showing possible double-digit productivity gains.
It provides faster mobility to workers, enabling them to travel short distances with less
wasted time. It also increases their carrying capacity and reduces the strain of repetitive
tasks. It enables companies to cut cost by writing off the other underutilized vehicles.
Personal: Segway™ HT is a simpler, more effective local transportation solution,
allowing you to travel quicker and accomplish more in less time. You can travel over

three times faster than you can walk, so a trip that once took 30 minutes now takes fewer
than ten minutes. The Segway HT is very less expensive to own than powered vehicles,
potentially saving thousands of dollars on costs like fuel, insurance, maintenance, and
parking. When you're traveling fewer than five miles and transporting no other co-
passengers, the Segway HT is the best cost-effective alternative to cars. The Segway HT
will save people’s time and money. It will also make places we live, cleaner and quieter.
University Campuses: The benefits of the Segway™ Human Transporter (HT) are
uniquely suited to the challenges of campus transportation. The maneuverability of the
Segway HT allows riders to travel on the more direct pedestrian routes found on most
campuses, but up to three times faster. Individuals riding a Segway HT will save time,
money and frustration, too. For instance, there's no need to find parking, as one would in
a car, or change clothes and cool off, as one will on a bike. The Segway HT takes drivers
out of their cars, which reduces traffic and parking congestion. The quiet operation and
zero emissions of the Segway HT also help to reduce noise and air pollution.
Product positioning
Initial applications include large scale manufacturing plants and warehousing operations,
travel and tourism, public safety, corporate and campus transportation, airport transits,
mail, package and product delivery like pizzas. So product is positioned in both personal
users and business or corporate customer markets as well as in university campuses.
Product attributes
Segway product attributes are covered in Table 1: Segway Product Attributes (Page 3).
Competitive comparison
None as such: Segway is the first product in its product category although it will face
some challenge from other products in means of alternate transportation.
Marketing requirements
The major marketing requirement for Segway being new to the world product is that the
team has the responsibility of building new product’s identity from the ground-up. Team
will have to take a multi-faceted strategic approach to brand creation, including carrying
out an opportunity assessment, developing a marketing vision, and helping to define this
new to the world category of human transportation. Segway's marketing managers will
also have to look into strategic commercial segments and make relation with corporation
and enterprise with small distance travel requirements. Team will also need to houses
Web developers who will design a world-class e-commerce-enabled Web site. This site
should be scalable & reliable and will help accelerate product sales.
Financial requirements
There are four major financial requirements of the Segway product inception.
1. Manage investment capital to ensure that team has sufficient resources to develop,
launch, and manufacture the Segway HT. 2.
2. Constant workout with the design and engineering teams and the company's upper
management team is required to evaluate how each design decision would affect the
affordability of the product.

3. Team has to create a separate corporate identity for Segway in the financial
community, reflecting the company's financially independent status.
4. Last but not the least team has to work with IT to choose and implement a corporate
financial system which is both flexible and highly scalable to meet future needs.
Production requirements
Production team will need to involve early on in Segway HT's design and development
process. Whenever there is a design change, manufacturing team needs to test
"manufacturability" of the change on a prototype production line. Production team also
need to keep contributing ideas to the final product design thereby helping to keep costs
down and to ensure that the manufacturing process would be efficient and reliable.
Regulatory Requirements
Segway's success depends upon cities approving its use on sidewalks. When a machine
that reaches speeds up to 12.5 miles per hour meets pedestrians, it won't be long before a
flood of personal injury lawsuits are filed unless the rules of product use are well written.
Potholes
The operating range is an unimpressive 15 miles. That doesn't give much flexibility in
terms of frequency of recharging after product use. In addition, once 15 miles battery life
is used up, there are two batteries to recharge, not just one. As per preliminary product
drawings, there's very little storage space. While it's possible to attach another saddle bag
to the handle bar, going shopping on a Segway can be disappointing for some. There is no
foul weather protection. Segway is only useful during periods of mild weather. During
winter or rainy season, it doesn't seem like a practical transportation. Current models
aren't meant to be used by anyone with a physical disability. In fact Segway’s best
performance is in good weather and under normal operating conditions.
Product Use Testing
By identifying the possible problems and complications that customers would experience
with the product, Product usability testing allows teams to correct the issues, improve
customer satisfaction and there by lower overall service costs, thus enhancing bottom
line. Usability testing involve setting-up, and operating product exactly like a customer
would do and will provide a complete and intensive evaluation of product including
• Human Factors analysis and people recommendations
• Set-up procedure accuracy and efficiency, including quick start guide ease of use
• Packaging effectiveness and first impressions
• Operating system/interface setup and compatibility
• Thorough check-out and operation of all user accessible functions including
hardware, software, mechanical and electrical functional testing.
• Exception testing (how else could a customer use your product?)
• Documentation completeness and accuracy
For Segway, usability testing will be done in good weather and normal operating
conditions as well as abnormal weather conditions. Looking at the Segway cost, one
could buy a serviceable used car and get much more benefit out of it. So, it is very

important for success of Segway project to solicit customer feedback at every milestone
in the development process and use this feedback to fine tune the product including
customer reaction on price. Finding out early that a product isn't viable is much better
than discovering the same lesson millions of dollars too late.
Pros: Here are some of the benefits of product use testing which will help Segway.
• Improve customer satisfaction & lower return rates and technical support costs
• Uncover potential problems in a secure test environment, rather than with users or
a magazine review and identify advantages over competitors
• Independent verification of product will improve brand image of product
Cons: Segway is a transportation device. Customer needs are complex when it comes to
transportation. Filtering out genuine end user needs from subjective behavior is even
more complex. Early announcement will get a reaction from other human transportation
vehicle vendors and give them time to analyze and prepare their competitive strategy.
Looking at the pros and cons, it is a good idea for this new to the world product, Segway
to go for Product use testing.
A-T-A-R model
A-T-A-R is the tool which is extensively used for forecasting sales and profit on a new
item. The basic formula is as follows
Profit = Units Sold x Profit per Unit
Unit Sold = No. of buying Unit
x Percentage Awareness
x Percentage Trials
x Percentage Availability
x Percentage Repetition
x No. of Repetition per Year
Profit per Unit = Revenue per unit – Cost per Unit
Analysis:
About 17 million personal or business transportation vehicles are sold per year in US.
About 50% of these vehicles are second vehicle in a family or alternate business vehicle
as per consumer reports on alternate transport vehicle sale. Based on the car sales figures
from http://www.ott.doe.gov/facts/archives/fotw153.shtml, it can be said that Segway
could be an optional buying choice for about 8 million buyers. Here is bar chart showing
growth in US car sales from 1999 to 2000.

Here are the survey results from http://travel.howstuffworks.com/survey401.htm about
Segway HT product
The Question: What do you think of the Segway?
The Results:
Answer %age Graph
Looks cool. Whatever. 10.8%
It's awesome -- I'm getting one! 6.5%
It's a good idea, but it's too expensive. 32.1%
It's cool, but I'd rather drive my car or walk. 12.7%
Don't see what the big deal is -- it's a scooter. 30.0%
What are you talking about? 7.8%
There were 1,907 responses on 12/04/2001. Base on these result we will take upper and
lower bound on factors.
Percentage of People doesn’t know or care about Segway = ~20%
Looks cool. Whatever. 10.8%
What are you talking about? 7.8%
Percentage of People know about Segway and its use = ~80%
It's awesome -- I'm getting one! 6.5%
It's a good idea, but it's too expensive. 32.1%
Percentage of people who did not like the idea = ~ 42%

Percentage of people who will buy the product = 6.5 %
Percentage of people who might buy the product = 32.1 %
Percentage of people who like the idea as such = 80 % - 42% ~ 40%
Based on survey date some assumption about upper and lower bounds on Segway sales
are as follows.
Upper Bound: Strong marketing & sales channel establishment = 60 % penetration rate
Number of buyers of Alternate Transport Vehicles (Business
and Personal) in a year: (Buying units)
8,000,000
Percentage of target owners who will become aware of Segway
in the first year on the market (%Aware)
80%
(100% - 20%)
Percentage of aware owners who will decide to try Segway
during the first year and set out to find it (%Trial)
15%
(6.5% + ¼ *32% approx.)
Percentage of retailers & vendors who can be convinced to
stock Segway during introduction period (%Availability)
60%
Percentage of actual try-ers who will like Segway and buy one
for a second car (%Repeat)
40%
(people’s liking rate)
Number of devices a typical user will buy in the first year of
ownership (annual units bought)
1
8,000,000×.8 ×.15 ×.6 ×.4 ×1= 230400
Let’s Assume
Cost of component of a Segway + manufacturing and support cost = $1000
Profit Margin on Technology products (R&D cost involved) = 70%
Price Tag on Segway = $3334
Introductory promotional Sales Prize (20% discount) = $2667
Profit per Unit = Revenue per unit – Cost per Unit = $2667 - $1000 = $1667
Profit = Units Sold x Profit per Unit = 230400 x $1667 = $384, 076, 800
Lower Bound: Based on average customer response (20%) and 40% penetration rate
Number of buyers of Alternate Transport Vehicles (Business and Personal) in
a year: (Buying units)
8,000,000
Percentage of target owners who will become aware of Segway in the first
year on the market (%Aware)
80%
Percentage of aware owners who will decide to try Segway during the first
year and set out to find it (%Trial)
7%
Percentage of retailers and vendors who can be convinced to stock Segway
during the market introduction period (%Availability)
40%
Percentage of actual try-ers who will like Segway and buy one for (%Repeat) 20%

Number of devices a typical user will buy in the first year of ownership
(annual units bought)
1
8,000,000×.8 ×.07 ×.4 ×.2 ×1= 35840
Let’s assume
Cost of component of a Segway + manufacturing and support cost = $1000
Profit Margin on Technology products (R&D cost involved) = 70%
Price Tag on Segway = $3334
Introductory promotional Sales Prize (20% discount) = $2667
Profit per Unit = Revenue per unit – Cost per Unit = $2667 - $1000 = $1667
Profit = Units Sold x Profit per Unit = 35840 x $1667 = $59, 745, 280
EMGT 276
NEW PRODUCT DEVELOPMENT MANAGEMENT – II
NEW PALM COMPUTER FOR HP
Extend Palm Computer Product Line

Listed in the table (Page 3) are 9 palm computers from three different companies. Each
company seems to have a low, medium and high-end palm. Sony is coming out with the
TJ27 and TJ37 and day now. PalmOne came out with the Tungsten E about three months
ago and sales are very strong. Recently, consumers seem to have a strong preference for
WiFi instead of Blue Tooth technology. There is also considerable excitement about the
prospects of giving Microsoft PowerPoint presentation using a palm computer. A
company called “Margi Systems Inc.” sells a kit that will adapt some palm computers so
they can connect directly to an analog or digital video display and give presentation.
This product is called “Presenter-to-Go”. Being able to record brief audio messages is
also popular. Consumers now expect more features in lower end (lower cost) products.
Suppose you work for Hewlett Packard (HP) palm computer product development. Given
recent developments from your competitors and the above expressed preferences, think
about what you might need to do in terms of product development for a new palm
computer. Begin by:

1. Fill in the data table for each palm computer.
2. Rank-order each palm computer in terms of each parameter.
Answer:
The table showing the answers for the above two questions is as follows (The support
material for data is in backup appendix at the end of assignment).
Table 2: Palm Computer Comparison
Model Palm
T* E
Palm
T*T3
Palm
T* C
HP
iPAQ
1940
HP
iPAQ
2212e
HP
iPAQ
5550
Sony
UX50
CLIE
Sony
TJ37
CLIE
Sony
TJ27
CLIE
Display Size
(n pixels x m
pixels)
320 x
320
320 x
480
320 x
320
240 x
320
240 x
320
240 x
320
320 x
480
320 x
320
320 x
320
Rank 2 1 2 3 3 3 1 2 2
RAM Memory
Size
(Mbytes)
32M 64M 64M 64M 64M 128M 104M 32M 32M
Rank 4 3 3 3 3 1 2 4 4
Built-In WiFi
(y/n)
No No Yes No No Yes Yes Yes No
Rank 2 2 1 2 2 1 1 1 2
Voice Recorder
(y/n)
No Yes Yes Yes Yes Yes Yes No No
Rank 2 1 1 1 1 1 1 2 2
Weight (oz.) 4.6 5.5 6.3 4.3 5.1 7.3 6.2 5 5
Rank 2 5 7 1 4 8 6 3 3
Width (in.) 3.1 3.0 3.1 2.75 3.00 3.3 3.5 3 3
Rank 3 2 3 1 2 4 5 2 2
Length (in.) 4.5 4.3 4.8 4.46 4.54 5.43 4.13 4.5 4.5
Rank 4 2 6 3 5 7 1 4 4
Area (Wid x
Len) sq. inch
13.95 12.9 14.88 12.27 13.62 17.91 14.46 13.5 13.5
Rank 5 2 7 1 4 8 6 3 3
Built-In Camera
(y/n)
No No No No No No Yes Yes Yes
Rank 2 2 2 2 2 2 1 1 1
Can Do
PowerPoint
Presentations
with presenter-
to-go (y/n)
Yes Yes Yes No Yes Yes No Yes Yes
Rank 1 1 1 2 1 1 2 1 1
Price ($) 200 400 500 300 400 650 600 300 200
Rank 1 3 4 2 3 6 5 2 1

3. How Competitive is your (HP’s) current palm product line? Justify your
answer.
Answer:
HP’s palm product line has traditionally been very competitive. The HP iPAQ5550 has
been a great choice with the highest RAM memory available for user applications
among its competitors and it also has built-in WiFi support which provides a great
flexibility in terms of anywhere-anytime internet access. Voice Recorder has been a
unique feature in HP’s product line. However new product entries by PalmOne and
Sony has made the market quite jittery especially on the price vs. value add
functionality point of view. HP iPAQ5550 is the costliest product among its peers. On
the lower end market side, HP does not have a sub/around $200 model as well but that
market does not provide the profit to cost ratio, HP’s corporate management ask for in a
product. HP palm’s also have disadvantage in terms of display size because none of the
HP models come with a bigger display size i.e. 320x480 (m x n) pixels. Also HP does
not have a choice of Built-In digital camera in any of its Palm offering. Bottom-line of
this is that, to get feature and price parity in HP’s palm offering with respect to its
competitor’s, product line revamp is necessary at this point. Looking at the current
market trend where people are going for an all in one device, integration of the digital
camera is a must in one of the HP palm product. And additional functionality like IP
soft-phone support so that using WiFi wireless IP access, the palm can associate itself
to IP telephony network and can be used as wireless IP phone, will be a great add-on at
a very cheap low cost software development. A new model with the above mentioned
functionality will put HP on the top of competition once again.
4. Generate a bubble diagram that has price on one axis and functionality on the
other. You will need to come up with your own definition of functionality by
using some sort of scoring model.
Answer:
Palm Functionality requirements can be broken down into mainly four major categories
Usability: Display, Voice recorder, WiFi,
keyboard,
Core competence: Processing Power,
DRAM and pricing
Value-adds: Presenter-to-go, Digital Camera Ease of carrying: Size, Weight
Size and display area are related. Main criterion for a customer is the packaging factor
i.e. in a give size what is the best display one can get. So the size and display ranking
combined should be a factor in determining the overall usability ranking although one
can argue that size does also affect the ease of carrying the palm.
Model Palm
T* E
Palm
T*T3
Palm
T* C
HP
iPAQ
1940
HP
iPAQ
2212e
HP
iPAQ
5550
Sony
UX50
CLIE
Sony
TJ37
CLIE
Sony
TJ27
CLIE
Display Rank 2 1 2 3 3 3 1 2 2
Size Rank 5 2 7 1 4 8 6 3 3
Voice Recorder
Rank
2 1 1 1 1 1 1 2 2
WiFi Rank 2 2 1 2 2 1 1 1 2

Mean Size/display
Rank (average)
3.5 1.5 4.5 2 3.5 5.5 3.5 2.5 2.5
Weight Rank 2 5 7 1 4 8 6 3 3
Presenter-to-go
Rank
1 1 1 2 1 1 2 1 1
Digital-Camera
Rank
2 2 2 2 2 2 1 1 1
DRAM Rank 4 3 3 3 3 1 2 4 4
Pricing Rank 1 3 4 2 3 6 5 2 1
Based on above mentioned factors, each Palm will be ranked in above four categories
by taking mean of the factors affecting the category. Overall average rang is then mean
of all the four ranks i.e. sum of ranks / four. This gives fair rank number to each palm.
We could have taken the average rank from the above table it self this table is made to
just show that how each palm ranks in each category.
Model Palm
T* E
Palm
T*T3
Palm
T* C
HP
iPAQ
1940
HP
iPAQ
2212e
HP
iPAQ
5550
Sony
UX50
CLIE
Sony
TJ37
CLIE
Sony
TJ27
CLIE
Usability 2 1.5 1 1.5 1.5 1 1 1.5 2
Ease of carrying 2.75 3.25 5.75 1.5 3.75 6.75 4.75 2.75 2.75
Value add features 1.5 1.5 1.5 2 1.5 1.5 1.5 1 1
Core competence 2.5 3 3.5 2.5 3 3.5 3.5 3 2.5
Overall Ave. Rank 2.2 2.3 2.9 1.9 2.3 3.2 2.7 2.1 2
Here is bubble diagram plotting HP palms on Functionality rank vs. Price.
HP iPAQ1940
HP iPAQ 2212e
HP MyNewMod
HP iPAQ 5550HP
F
U
N
C
T
I
O
N
A
L
I
T
Y
4
3
2
1
100 200 300 400 500 600 700 800
Price

Here is bubble diagram plotting PalmOne palms on Functionality rank vs. Price.
(See gap between Tungsten E and Tungsten T3, PalmOne has in the product line)
Here is bubble diagram plotting Sony palms on Functionality rank vs. Price. (See
the large gap between UX50 and TJ37, Sony has in the product line)
Tungsten C
Tungsten T3
Tungsten E
UX50 CLIE
TJ37 CLIE
TJ27 CLIE
4
3
2
1
F
U
N
C
T
I
O
N
A
L
I
T
Y
PalmOne
100 200 300 400 500 600 700 800
Price
F
U
N
C
T
I
O
N
A
L
I
T
Y
4
3
2
1
Sony
100 200 300 400 500 600 700 800
Price

5. Develop a description, feature list, and price for a proposed new palm
computer that you think HP needs to develop. Include the features given in the
table. Your description should include a justification for each parameter in the
table.
Answer:
Here is the brief description of new HP MyNewMod Palm computer:
The HP iPAQ MyNewMod is the one Palm Computer model you want to have when
expandability, great new display, mobile wireless connectivity along with IP Telephony
support and digital video top your list of must-have features at a price no one can beat.
The main features are shown in the following table.
Model HP myNewMod
Display Size
(n pixels x m pixels)
320x480
RAM Memory Size
(Mbytes)
64M*
USB/Socket attachable
external Compact flash
RAM Memory Size
(Mbytes)
512M*
Built-In WiFi (y/n) Yes
Voice Recorder (y/n) Yes
Weight (oz.) 5.5
Width (in.) 3.5
Length (in.) 5.0
Area (Wid x Len) 17.5
Built-In Camera (y/n) Yes
IP Telephony ready
(Palm soft-phone
Software)
Yes*
Can Do PowerPoint
Presentations with
presenter-to-go (y/n)
Yes
Price ($) $500
Palm Tungsten C and Sony UX50 are direct competitor to the product but the additional
value add functionality and price point will distinguish this new palm from its
competition. By reducing the size of expensive DRAM to 64M from 128M on HP
iPAQ5550 and saving cogs value their, the cost of palm can be marked less. Usually
people don’t need a very high DRAM size on Palm. A few user having higher DRAM
usage requirement can use a fast accessible, expendable external compact flash card
(up to 512M at $150 and less) attached via USB/Socket interface as there main DRAM.
HP MyNewMod also has the same display size (320x480 m x n pixels) as Sony UX50
and its more than Tungsten C. The size of the palm is also made small by reducing the
length which makes is easy to carry. Value-add features like Presenter-to-go, IP

telephony-ready and digital camera are must have features today to align well with
competition in Palm products.
6. What Sony and PalmOne models are direct competitors to your new HP palm
computer?
Answer:
On the features and price point here are the main competitor’s for new palm.
Sony UX50
Tungsten C
7. How durable is the competitive advantage of your new palm?
Answer:
The main features which distinguish HP MyNewMod from its competitors are
Presenter to go with Sony UX50
Digital Camera with Tungsten C
USB/Socket attachable external Compact flash RAM Memory (Up to 1 G)
IP Telephony ready (Palm soft-phone Software)
By reducing the DRAM size on MyNewMod from 128M on iPAQ 5550 DRAM to
64M from 128M on HP iPAQ5550 and saving cogs value their, the cost of palm can be
marked less. Although a new technique will serve the purpose for consumers who need
high DRAM sizes. This will be achieved by adding in a fast accessible, expendable
external compact flash card (up to 1 G) attached via USB/Socket interface as there
main DRAM IP Telephony feature is another break-away feature where HP Palm will
clearly prove itself a leader in the market in sub/around $500 palm market range.
This new model clearly differentiate itself from its PalmOne competitor, Tungsten
C, by providing additional value add functionality at same price point. Sony has a
product gap at this price point and will play catch up game.
8. After your new HP palm becomes available, the PalmOne will have the oldest
models. Suggest a feature list and price point for PalmOne’s next palm
computer.
Answer:
PalmOne has a very competitive product portfolio but they have a gap on $300
product range. A new Palm computer which is essentially a remodel of PalmOne
Tungsten T3 with low cogs value and minimal engineering and manufacturing
incremental cost price at $300 will be a great addition to PalmOne product line. Any
new palm from PalmOne should also include digital camera and WiFi access since they
are most sought after features. The additional cost of chipset required by Built-In
Camera and WiFi can be off-set using low density high power chip-set for the complete
palm but this will add on to the area of Palm. This might prove to be a benefit to palm
product line since Palm does not have any model around 17.5 squere inches. Some
people do like a palm which is good enough size although a smaller model is often
preferred by may. If scoring models prove that in-fact small size is very important, the
team can look into providing a fold-able model where keypad can be fold back on

display to give it small size while real state remains high. Here is an assumed feature
list, specification and price point for PalmOne’s next palm computer
Model PalmOne MyNewMod
Display Size
(n pixels x m pixels)
320x480
RAM Memory Size
(Mbytes)
64M
Built-In WiFi (y/n) Yes
Voice Recorder (y/n) Yes
Weight (oz.) 5.5
Width (in.) 3.5
Length (in.) 5.0
Area (Wid x Len) 17.5
Built-In Camera (y/n) Yes
Can Do PowerPoint
Presentations with
presenter-to-go (y/n)
Yes
Price ($) $300
This product will make PalmOne’s product line competitive with HP and others.
Back-up Appendix

A Study of Wireless Network Security in
Mobile Computing

Security in Mobile Computing
1.0 Introduction
Wireless Networks are increasing in popularity. They are being installed by businesses of
all types, educational institutions, governments and the military. The ease, simplicity and
convenience of deployment coupled with the flexibility and usability of wireless
networks is triggering a fast growth in wireless infrastructure installation and usage.
The freedom and mobility that Wireless Networks promise also present some serious
security challenges. Wireless Networks are not limited by network jacks nor are they
limited by geography. Wireless Networks provide unprecedented flexibility in that an
area not originally intended as a collaborative workspace can accommodate a large
number of wireless clients. Auditoriums now accommodate hundreds of networked
computers just by plugging a Wireless Access Points (AP) into the network.
Anyone with a radio receiver can eavesdrop on a wireless local area network. Anyone
with a transmitter can write messages to a WLAN. Leaving access controls meaningless.
Because forgeries are easy to create a WLAN needs mechanisms to counter this threat.
2.0 Project’s Objective, Goal and Scope
The objective of our study is to review the wireless security protocols that emerged to
counter these threats:
1. IEEE 802.11 Standard or Wired Equivalent Privacy (WEP)
2. Wi-Fi Protected Access (WPA)
3. Temporal Key Integrity Protocol (TKIP)
4. Message Integrity Code (MIC)
5. IEEE 802.11i- Robust Security Network (RSN)
6. Advanced Encryption Standard (AES)
7. Extensible Authentication Protocol (EAP)
8. Extensible Authentication Protocol - Transport Layer Security (EAP-TLS)
9. EAP-TTLS
10. Lightweight EAP (LEAP)
11. –Protected EAP (PEAP)
The goals of our study are to identify the improvements provided by various wireless
network security protocols. Define the advantages and disadvantages of using a chosen
security protocol and uncover the flaws and pitfalls inherent in the above-mentioned
approaches. Finally, to compare the set of post WEP wireless security protocols
The scope of our study is focused on our discussion along these security goals:
1. Confidentiality – Use of encryption to ensure privacy of data, both data and control information can be
encrypted
2. Authentication - Prevent unauthorized network access and identify authorized users.

3. Integrity – Protect against modification or destruction of data
3.0 Wireless Network Security Threats
Systems should protect against confidentiality, integrity, and authentication attacks.
In order to highlight the importance of the above-mentioned security goals, let’s look at some of the most common
types of security attacks or breaches that fall within each area.
Attacks targeted against the confidentiality of the communication in the network.
Four attack techniques violate just the confidentiality or privacy of the session:
1. Traffic analysis
2. Passive eavesdropping
3. Active eavesdropping with partial known plaintext
4. Active eavesdropping with known plaintext.
Attacks against the integrity of the information on the network that actually alters the
network traffic and destroy the integrity.
Three attack techniques violate the integrity of the network traffic:
1. Unauthorized access
2. Session high-jacking
3. The replay attack.
Attack targeted against authentication of a user of the session on the network.
Three attack techniques violate authentication of a user on the network:
1. The man-the-middle
2. Session high-jacking
3. Replay unauthorized access.
The integrity attack techniques generally require successful use of one or more of the
confidentiality attack techniques in order to meet the necessary preconditions of these
attacks.
4.0 Wired Equivalent Privacy (WEP)
The 802.11 standard describe the methods of communication that occurs in wireless local
area networks (WLANs). The IEEE 802.11 standard defines a data confidentiality
mechanism known as WEP Wired Equivalent Privacy. The security goal of WEP is data
confidentiality equivalent to that of a wired LAN.
4.1 WEP’s Protocol Setup
The mobile station shares its key with the access point. Many key distribution strategies
can be used but one shared key per installation is common.
An integrity check (CRC) is computed over the packet and the packet + CRC are encrypted with the shared key
together with an Initialization Vector (IV).

The receiver decrypts and verifies CRC and the packet accepted if the verification
succeeds.
The figure bellow defines the WEP packet format.
Figure 1: WEP’s packet Format
4.2 Encryption Algorithm
WEP’s uses the well-known RC4 encryption algorithm. RC4 is a stream cipher that
expands a key into an infinite pseudorandom key-stream.
To encrypt a message, the key-stream is XOR with the plaintext.
Encryption is the same as decryption and the key-stream cancels out.
4.3WEP’s Initialization Vectors
Encrypting two messages with the same part of RC4 key-stream is disastrous:
• C1 = P1 XOR RC4(key)
• C2 = P2 XOR RC4(key)
• C1 XOR C2 = P1 XOR P2
• Key-stream cancels out!
WEP uses an initialization vector to augment the key.
• Key = base-key || IV
• Different IVs produce different key-streams
Then the IV (unencrypted) is included in the packet header.
4.4 WEP’s Security Flaws
The WEP designer’s worst fear is a security attack that uncovered new flaws in the
encryption algorithm. The attack was the “Fluhrer et al” Attack on the RC4 algorithm
How the attack works:
• Monitor encrypted traffic
• Look for special Initialization value (IV) values that reveal information about key
state
• Recover key after several million packets (many technical details omitted)
RC4
Encrypted
IV Payload CRC-32
Key ID Byte

4.5 WEP’s Practical Considerations
The Software to do Fluhrer et al attack is now readily available. WEP, the original
security standard, is widely considered broken WEP failed to meet its fundamental goal
of wired-equivalent confidentiality and it also failed to meet the expected goals for
integrity and authentication
4.6 WEP’s Inherent Security Problems
WEP has two generic limitations:
1. WEP’s use is optional
2. By default, WEP uses a single shared key common to all users of a WLAN
Additionally, WEP has no key management protocol and once the WEP key is
discovered, all security is lost:
• The attacker can forge new encrypted packets and read encrypted traffic,
defeating WEP confidentiality goals
• The attacker can forge new encrypted packets that will be accepted by the access
point, and join the wireless network defeating the WEP integrity and
authentication goals.
4.7 Process to Replace WEP
Many discoveries of WEP Protocol’s shortcomings lead to a process to replace WEP by
more robust solutions. In order to address WEP security issues, the 802.11 working group
adopted the 802.1x standard for authentication, authorization and key management. At
the same time, IEEE formed a Task Group “i” to develop 802.11i standard.
More robust security protocols were developed to address the known security flaws of the
802.11 standard (WEP).
New protocol development came from the following two groups:
Industry Solutions 802.11 Task Group
•Short term WEP fixes (WPA, TKIP, MIC)
•Long term RSN fixes (802.1x, AES)
Vendor Solutions
•Standards based (EAP, EAP-MD5, EAP-TLS, EAP-TTLS)
•Pre-standards based (PEAP)
•Proprietary (LEAP)
5.0 Industry Solutions to WEP
The Institute of Electrical and Electronics Engineers Task Group I (TGi) has been
working on to develop a security standard known as the 802.11i which will address all
known security issues. However, to address the needs of the existing wireless devices and
current wireless products, the Wi-Fi Alliance along with TGi used subset of this standard

to launch a security initiative called Wi-Fi Protected Access (WPA). The significant
features of WPA consist of 802.1X authentication and a new protocol to replace WEP. In
this section, I’ll cover both WPA and 802.11i.
5.1 Idea
As previous section already mentioned, failure to use WEP is the primary security
weakness. However, WEP has inherent security holes making it vulnerable to attacks
even for casual hackers. In early 2000, the IEEE started task group to develop an
enhanced security standard to replace WEP. The Task Group “I” is finalizing a standard
for improved security on 802.11 based WLANs called the Robust Security Network. The
solution provides significant improvements in the authentication and privacy and
addresses all of the issues associated with WEP. It provides solution for existing (802.11)
hardware as well as it also provides future Wi-Fi equipment. Its ratification is expected
sometime in early 2004. In late 2002, the Wi-Fi Alliance, an industry organization that
certifies the interoperability of devices based on the 802.11 standard, announced a
security initiative called Wi-Fi Protected Access (WPA). WPA uses much of what is in the
full 802.11i draft, but takes specifically those elements of 802.11i that are designed for
legacy hardware that can be easily upgradeable through software.
5.2 The 802.11i Robust Security Network Overview
The standard being created by the IEEE 802.11 Task Group “I” is called the Robust
Security Network (RSN). Currently, the 802.11i standard is still in draft form and is likely
several months from completion and ratification by the members of the 802.11 body.
Upon its completion, the 802.11i draft will address all the weaknesses identified with
WEP and address all known attacks. It is comprised of a number of components that are
used to provide significantly improved security for legacy equipment as well as latest
encryption for future 802.11 products.
For encryption, RSN has improved encryption algorithms in the form of the Temporal
Key Integrity Protocol (TKIP) and the Counter Mode with CBC-MAC Protocol (CCMP).
Both of these encryption protocols provide enhanced data integrity over WEP, with TKIP
targeted at legacy hardware and CCMP targeted at future wireless hardware. For
authentication, RSN adapted 802.1X, a standard for port based access control developed
by a different body within the IEEE 802 organization. 802.1X provides a framework for
robust user authentication and encryption key distribution, both features originally
missing from the original 802.11 standard. It’s important to understand that each pieces of
the standard work together to form an overall security system. Although these features
will typically be used in an infrastructure setting, where one or more access points are
present in the network, RSN has an additional mechanism to provide support for secure
peer-to peer communications.
5.3 WPA Overview

Wi-Fi Protected Access was designed to satisfy the immediate need of the industry for a
strong interoperable security solution to replace WEP. It was based on the 802.11i draft
standard, targeted for legacy equipment deployment, and could be software upgradeable.
In the context of the RSN description given previously, it uses 802.1X along with TKIP.
WPA provides strong, interoperable, link layer security that is suitable for use in both the
home and enterprise environments and provides support for 802.1X based authentication
that is also suited to each environment. Simply put, WPA can be described as follows.
WPA = 802.1X + EAP + TKIP + MIC
WPA supports two methods of authentication key management. 802.1X and EAP
(Extensible Authentication Protocol) authentication is generally used in enterprise
environments through centralized authentication server. Pre-Shared Key authentication
(PSK) is generally used in home or small office environment where no centralized
authentication server is available. Home users can easily configure PSK using passwords
or pass phrases. Confidentiality is provided through TKIP, and integrity is provided
through MIC. Each of the major components of WPA is described in more detail.
5.4 802.1X
IEEE 802.1X is a standard for port-based network access control. The standard can be
applied to both wired and wireless networks and provides a framework for user
authentication and encryption key distribution. User must be authenticated before the
access to a network is allowed. It is used to perform verification of credentials and
generation of encryption keys.
There are three elements under 802.1X. The authenticator (typically an access point
(AP)) is the port that enforces the authentication process and routes the traffic to the
appropriate entities on the network. The supplicant (typically the client device) is the port
requesting access to the network. The authentication server (AS) performs the actual
authentication of the credentials supplied by the supplicant. The Authentication Server is
usually a separate entity on the network, but could also reside directly in the
authenticator. The most common type of authentication server in use today to authorize
remote users is RADIUS although other authentication services could be used.
802.1X operation requires dynamic authentication. Prior to authentication by the
authentication server the client communicates with authenticator (AP). The authenticator
then sends request to the Authentication Server to authenticate the client. After successful
authentication by the AS, the AP will also allow the client to access other services
available on the network.
The actual authentication data exchanged is a function of the upper layer authentication
protocol used. 802.1X controls the message protocol and routing of these messages. Note
that a mutual authentication process is used and all three parties (authenticator,
authentication server, and supplicant) authenticate to each other.

802.1X enhances the security by providing these improvements over WEP protocol:
1. It provides support for a centralized security management.
2. The encryption keys are unique to each station where no same keys are used for
encryption.
3. The encryption keys are generated dynamically, and it doesn’t require a network
administrator for configuration.
In cases where authentication server is not available for authentication, the 802.11i
standard uses 802.1X in a pre-shared key configuration. However, most of the concepts
and the operation are similar to that of an authentication server model. When using an
authentication server, a master key, called the Pair-wise Master Key (PMK), is generated
via the exchange between the client and the authentication server. The PMK is used to
generate encryption keys. When no authentication server is present, the Pre-Shared Key
(PSK) is manually entered into each device as a password or pass phrase and serves as a
key for authentication and used to create encryption keys. The PSK scheme is similar to
the WEP in this case since it requires manual distribution and configuration of a shared
secret key. However it should be adequate for small deployments since session keys are
still provided and the improved encryption methods are fully supported. Nonetheless, it’s
important to note the security of the network is in jeopardy if the shared key is ever
compromised. These tradeoffs are likely acceptable for small deployments in exchange
for ease of deployment and configuration of the network systems.
5.5 Temporal Key Integrity Protocol (TKIP)
The temporal key integrity protocol was designed to address all the known attacks and
deficiencies in the WEP while maintaining backward compatibility with legacy hardware.
It was designed to be made available as a firmware or software upgrade to existing
hardware so that users would be able to upgrade their level of security without replacing
existing equipment or purchasing new hardware. TKIP accomplishes this by providing an
additional protocol around WEP. It is comprised of the following elements:
1. A message integrity code (MIC) provides a cryptographic checksum using the source
and destination MAC addresses and the message. This protects against forgery
attacks.
2. Countermeasures against forgery and to reduce the amount of information that an
attacker can learn about a particular key.
3. A 48-bit initialization vector (IV) and an IV sequence counter to address replay
attacks. The receiver drops packets received out of order using sequence counter.
4. Per packet key mixing of the IV is used against weak key attacks.

The use of a 48-bit TKIP sequence counter (TSC) extends the usage of the temporal key
and eliminates the need to re-key the temporal key during a single link or an association.
The TSC is constructed from the 4 bytes provided in the extended IV and from the first
and last bytes from the original WEP IV. TKIP extends the length of a WEP encrypted
MPDU by 12 bytes; 4 bytes for the extended IV information and 8 bytes for the MIC.
The structure of a TKIP encrypted MAC Protocol Data Unit (MPDU) is shown in Figure
1 below.
Figure 1 – MPDU format after TKIP encryption
The TKIP encapsulation process is shown below in Figure 2. When the station tries to
transmit an MSDU, temporal and MIC keys are used which are derived from the PMK
generated as part of the 802.1X authentication. The temporal key, transmitter address, and
TSC are combined in a two-phase key mixing function to generate a per packet key to be
used to seed the WEP engine for encryption. The per-packet key is 128 bits long and is
split into a 104-bit RC4 key and a 24-bit IV for presentation to the WEP engine.
The MIC is calculated over the source and destination MAC addresses and the MAC
Service Data Unit (MSDU) plaintext after being seeded by the MIC key and the TSC. By
computing the MIC over the source and destination addresses, the packet data is
prevented from attacks based on packet forgery or redirected to unauthorized
destinations.
The MIC function is a one-way cryptographic hash function, not a simple CRC-32 as is
used in computing the WEP ICV. This makes it much more difficult for an attacker to
successfully intercept and alter packets in a forgery attack. If necessary, the MSDU is
sliced into several MPDU fragments where the TSC is incremented for each fragment,
before encryption by the WEP RC4 engine. Note that since TKIP uses a single key pair to
compute the MIC and to encrypt each of the fragments, it is necessary for the sender to be
able to predict the number of fragments that each MSDU will generate. In particular, if
the number of remaining sequence numbers cannot cover all the fragments, then the
sender must select a new set of temporal keys prior to encapsulation. Without this step the

receiver can select the wrong key at the receiver, causing the MIC verification to fail.
Figure 2 – The TKIP encapsulation process
The de-capsulation process is essentially the reverse of that shown above with the following exceptions.
After recovery of the TSC from the received packet, the TSC is examined to ensure that the packet just
received has a TSC value greater than the previously received packet. If it does not, the packet is discarded
in order to prevent potential replay attacks. Also, after the MIC value has been calculated based on the
received and decrypted MSDU, the calculated MIC value is compared to the received MIC value. If the
MIC values do not match, the MSDU is discarded and countermeasures are then invoked. These
countermeasures consist primarily of re-keying the temporal key while controlling the rate at which this
happens. Otherwise the packet is delivered upward.
5.6 Message Integrity Check (MIC)
MIC is used as TKIP message integrity code to detect forgeries. MIC has three
components.
One is a secret authentication key that is shared only between the sender and receiver.
Second is a tagging function that takes the key and a message to be sent as inputs, and
generate the message integrity code.
Third is a verification predicate from the receiver checks the authenticity of the data.
A message is protected from forgery by having the sender compute the message integrity
code and send it with the message. To check for a forgery, the receiver uses the secret
authentication key, and the received message and message integrity code into the
verification predicate. It computes its own message integrity code using the tagging
algorithm and compares to the received message integrity code. If comparison showed
any difference, the message is regarded as forgery. If the verification function showed no
difference, the message is assumed authentic. To complement MIC, some counter
measures were in placed. The goal is to deter any forgery attempts and limit the
knowledge the attacker gains about the MIC key. If the counter measure in place detects
two failed forgeries in a second, then it assumes it’s under attack. In such case, the station
deletes its keys, disconnects, and then reconnects after a while. Although, it disrupts
communications and incurs some overheads, it provides additional protection against
active attacks.
5.7 Initialization Vector Sequence
One forgery a MIC cannot detect is a replayed packet. A replayed attack occurs when a
hacker records a valid packet in transition and later retransmits it. To defeat replay attack,
TKIP reuses the WEP IV field as a packet sequence number. Both sender and receiver
initialize the packet sequence number to zero whenever new TKIP keys are set. The
sender increments the sequence number with each packet it sends. The receiver enforces
proper IV sequencing of arriving packets. If the IV sequence is the same or smaller than a
previously received proper packet’s IV sequence under the same encryption key, then the
packet is considered out of order. If a packet arrives out of order, then it is considered to
be a replay, and the receiver discards it and increments a replay counter.

It is important that a packet sequence number tied with a key, so that whenever that key is
refreshed, the sequence number also gets reinitialized. It requires that the sender refrain
from sending data protected by the key once it exhausts the sequence number space. For
TKIP, it associates the sequence number with the TKIP encryption key. This was done in
order to reuse the existing WEP hardware and the packet formats.
5.8 Key Mixing
Recall that WEP constructs a per-packet RC4 key by concatenating a base key and the
packet IV. To address WEP’s misuse of RC4 as described in previous section, TKIP has a
feature to construct per-packet key known as key mixing function. The key mixing
function substitutes a temporal key for the WEB base key and constructs the WEP per-
packet key. Temporal keys are keys that have a fixed lifetime and are replaced frequently.
The key mixing function transforms a temporal key and packet sequence counter into a
per-packet key and IV. The mixing function operates in two parts, with each part
compensating for a specific WEP design flaw. The first part eliminates the same key from
use by all links, while second part disassociates the public IV from the per-packet key.
The first part combines the MAC address of the wireless interface and the temporal key
by iteratively doing XOR on each of their bytes to index into a table, to produce an
intermediate key. Mixing the MAC address into the temporal key in this way causes
different stations and access point to generate different intermediate keys, even if they
begin from the same temporal key. It forces the stream of generated per-packet
encryption keys to differ at every station, so no two stations have the same encryption
keys as in WEP. Most implementations cache intermediate key as a performance
optimization since it’s computed only when the temporal key is updated.
The second part uses a tiny cipher to encrypt the packet sequence number under the
intermediate key, producing a 128-bit per-packet key. The first 3 bytes of the second part
corresponds exactly to the WEP IV, and the last 13 bytes to the WEP base key, as existing
WEP hardware expects to concatenate a base key to an IV to form the per-packet key.
This makes it difficult for an attacker to associate IVs and per-packet keys.
5.9 802.11i (RSN) – The future wireless security solution
802.11i, also known as Robust Security Network (RSN), specifies user authentication
through 802.1X and data encryption through TKIP and Counter Mode with CBC-MAC
Protocol (CCMP) which is based on Advanced Encryption Standard (AES) protocol.
TKIP is targeted at legacy 802.11 hardware where as CCMP is targeted at future 802.11
hardware. RSN supports simultaneous use of TKIP and CCMP where clients use highest
level of security both can mutually support
The 802.11i standard provides two encryption algorithms to replace WEP. It allows both
TKIP and CCMP for encryption method and supports the addition of new encryption

protocols if needed in the future. However, since AES will require a hardware upgrade in
most cases, only the TKIP protocol is currently used in WPA.
5.10 AES
In addition to the TKIP solution, the 802.11i draft standard defines the use of Advanced Encryption
Standard (AES) protocol. AES offers much stronger encryption. Per Walker, “AES has been chosen to
replace DES by the U.S. Commerce Department's National Institutes of Standards and Technology, and is
now a Federal Information Processing Standard, that defines a cryptographic algorithm for use by U.S.
Government organizations to protect sensitive, unclassified information. The Secretary of Commerce
approved the adoption of AES as an official Government standard in May 2002.”
AES was selected for use in 802.11 applications in CCMP (Counter-Mode/CBC-MAC protocol). However,
due to the complexity of calculation involved in AES encryption, it will require new hardware to operate
than that running WEP or TKIP in current Wi-Fi devices. Also, AES uses fixed 128-bit encryption key
length and uses same key for encryption and decryption.
5.11 CCMP
Counter Mode is used for data privacy, and CBC-MAC (Cipher Block Chaining Message
Authentication Code) is used for data integrity and authentication. Message
Authentication Code (MAC) has same functionality as Message Integrity Check (MIC)
used for TKIP. The CCMP protocol requires two state variables according to Walker.
First, it takes a single AES key. The CCMP protocol uses this key for both encryption and
for computing a MIC. The second state variable is a 48-bit packet sequence counter. The
CCMP protocol uses the packet sequence counter to construct both the Counter mode
encryption counter and the CBC-MAC IV. The protocol constructs both the Counter
mode counter and the CBC-MAC IV as the concatenation of the source address, the
packet sequence counter, per-packet block counter, and other data. It essentially provides
the key separation needed to use the same key for both encryption and the MIC.
The CCMP protocol encapsulates packet fragments in following steps.
1. Construct the Counter mode counter and CBC-MAC IV from the packet sequence
counter and then increment the counter.
2. Use the AES key and the CMC-MAC IV to compute a MIC over the source and
destination addresses, the quality of service traffic class, the data length, and the
MPDU data. Truncate the MIC value to 64-bits, and append the result to the MPDU
data.
3. Use the AES key and the Counter mode counter to encrypt the MPDU data using AES
Counter mode, including the appended MIC.
4. Complete the protected MPDU by inserting the packet sequence counter value
between the header and the encrypted data.
The CCMP protocol de-encapsulates a received MPDU using these steps:
1. Extract the packet sequence counter from the received MPDU. If it was received
already or is less than last correct packet received for the current AES key, discard the
packet as a replay.
2. Construct the Counter mode counter and CBC-MAC IV from the packet sequence
counter.

3. Decrypt the encrypted payload using the AES key and the constructed Counter-mode
counter value.
4. Compute the MIC using the AES key and the CBC-MAC IV, truncate it to 64-bits,
and compare the result against the decrypted MIC value in the received MPDU. If the
two differ, discard the received packet as a forgery.
5. Accept the received MPDU as authentic.
When used with a key management scheme, it is easy to see that this scheme meets the
security requirements. The MIC check makes forgeries extremely difficult, and the packet
sequence check prevents replays unless an attacker can create forgeries. The scheme
never reuses a counter value or IV with the same key. The MIC protects the source and
destination addresses against forgeries.
6.0 Results
Wi-Fi Protected Access is industry’s solution to existing problems in WEP security protocol in Wi-Fi
network. Its interoperability greatly enhanced security for the enterprise as well as home users with their
current system. Its elegant use of existing standard such as 802.1X has improved authentication without
incurring too many overheads to the existing hardware. Also, with new protocol such as TKIP, it has
improved encryption and data integrity. WPA has effectively provided overall security solution to address
all of the issues found in WEP. It provides improved security for both legacy and current Wi-Fi hardware
and will be able to maintain forward compatibility with the 802.11i standard when it is approved. With
upcoming 802.11i standard, the security of wireless network will move into new era. State-of-the-art
encryption using AES, the CCMP provides data integrity, confidentiality and authentication. Since WPA is
a subset of 802.11i standard, the new standard will work with existing devices as well as new hardware. It
also addresses ad-hoc networks for security requirements.
7.0 Vendor Solutions
EAP
EAP is a standard that allows developers to pass security authentication data between
RADIUS and client machine through the access point (AP) when client starts accessing
the network, there by providing a higher level of credential checking mechanism. EAP
has a number of variants, including EAP MD5, EAP-TLS EAP-Tunneled TLS (EAP-
TTLS), Lightweight EAP (LEAP), and Protected EAP (PEAP).
IEEE 802.1x
IEEE 802.1x (http://www.ieee802.org/1/pages/802.1X.html) is a standard for port based
network access control. The standard can be applied to both wired and wireless networks
and provides a framework for user authentication and encryption key distribution. It can
be used to restrict access to a network until the user has been authenticated by the
network. In addition, 802.1x is used in conjunction with one of a number of upper layer
authentication protocols (discussed later) to perform verification of credentials and
generation of encryption keys. There are three primary roles played by enterprise
equipment in an 802.1x system. The authenticator (typically the AP in 802.11) is the port
that enforces the authentication process and routes the traffic to the appropriate entities on
the network. The supplicant (typically the client device in 802.11) is the port requesting

access to the network. The authentication server (AS) is the third entity that performs
the actual authentication of the credentials supplied by the supplicant. The AS is typically
a separate entity on the wired side of the network, but could also reside directly in the
authenticator. The most common type of authentication server in use today to authorize
remote users is Radius although other authentication services could be used. The
particular authentication server to be used is not specified in the 802.1x standard. The
following diagram gives an overview of network infrastructure and device rolls when
new client try to access network services and 802.1x authentication takes place.
Here is a protocol timing diagram which explains the 802.1x message flow.
Various EAP methods used in 802.1x network authentication are as follows
MD5
based
EAP - MD5 (Developed by Microsoft)
--Authentication using passwd (CHAP)
TLS
based
EAP – TLS
Authentication using X.509 certs.
Server and client uses certificates
EAP – TTLS
Server authentication - X.509 certs.
Client authentication - non-EAP/EAP
Prop. EAP – PEAP EAP – LEAP (Developed by Cisco)
802.1X Message Flow802.1X Message Flow
Authenticator
Supplicant
Authentication ServerNetwork Association Request
Access Blocked
EAPOL-Start
EAP-Request/Identity
EAP-Response/Identity RADIUS-access-request
RADIUS-access-challenge
RADIUS-access-accept
RADIUS-access-request
EAP-Request/Credentials
EAPOL-Response/Credentials
EAP-Success
EAPOL-Key
Network Access allowed
Network Association Response
Authenticator
Supplicant

Server authentication using X.509 certs.
Client authenticates using EAP forms
Password authentication
EAP-MD5
EAP-MD5 is the least secure version of EAP because it uses usernames and passwords
for authentication and is vulnerable to dictionary attacks. In addition, EAP-MD5 does not
support Dynamic WEP keys, which is a critical liability.This protocol is similar to CHAP
except for that it is encapsulated in EAP packets transmitted by authenticator between
supplicant (client) and RADIUS server. First, RADIUS server receives EAP/Identity
response from a peer. Then RADIUS server issues a challenge in EAP/MD5 Challenge
request. Client generates a response from the challenge and his password and replies with
EAP/MD5 Response. RADIUS server generates a MD5 hash using its copy of user
password and the challenge. If its hash and user response are identical, server issues
EAP/Success packet, EAP/Failure otherwise. RADIUS Server must be able to perform
the digest operation in order to support EAP MD5. Therefore, it must have access to its
own copy of the user's password.
TLS Overview
EAP-TLS
Extensible Authentication Protocol-Transport Layer Security (EAP-TLS) is a Point-to-
Point Protocol (PPP) extension supporting additional authentication methods within PPP.
Transport Layer Security (TLS) provides for mutual authentication, integrity-protected
cipher suite negotiation, and key exchange between two endpoints. In this approach,

digital certificates exchanges during TLS handshake protocol, provides means of mutual
credential authentication.
The basic handshaking process using EAP-TLS, which also supports mutual
authentication, is nearly identical to that of Cisco LEAP. However, EAP-TLS uses digital
certificates instead of usernames and passwords to fulfill the mutual challenge. When a
client requests access, the response from the authentication server is a server certificate.
The client has a certificate, signed by an in-house or third-party certificate authority that
has been preconfigured by the network administrator.
The client will reply to the authentication server's challenge with its own certificate,
rather than with a password. Using its digital certificate, the client also validates the
server certificate. Based off the certificate values, the EAP-TLS algorithm can derive
dynamic WEP keys, and the authentication server will send the client the WEP key for
use during that session.
Certificate-based algorithms like EAP-TLS are highly secure, as it is nearly impossible to
forge a certificate digitally signed by a certificate authority. On the other hand, the
management of certificates can be more complex and expensive than
username/password-based authentication.
EAP-TTLS
EAP-TTLS (Tunneled Transport Layer Security) is version of EAP that uses TLS and
PKI support on RADIUS server. Distinguishing point is that PKI certificates are required
only on the authentication server but not on the clients. In general, this is considered
almost as secure as EAP-TLS while making deployment simpler.
During EAP-TTLS tunnel establishment phase authentication server authenticates to
client using digital certificates. During the Tunnel establishment session key is exchanged
and a secure channel for another round of authentication is made. In this second phase
EAP-TTLS client authentication can use
EAP authentication methods
Older authentication methods
PAP, CHAP, MS-CHAP, MS-CHAPv2
PEAP
The Protected EAP proposal calls for EAP to be used in combination with the Transport
Layer Security (TLS) protocol. The combination of these two popular protocols results in
client and server authentication that protects the wireless LAN network against passive
eavesdroppers. Protected EAP works in two phases. There is a TLS phase that
authenticates access points, using an encrypted tunnel to protect authentication
information being exchanged -- even when users are roaming between different access
points. Next, there is an EAP phase that authenticates the users of wireless clients. Both
EAP and TLS are popularly used IETF standards on the Internet.

In PEAP, the conversation between the EAP peer and the backend server is encrypted,
and integrity is protected within a TLS channel. Mutual authentication is required
between the EAP peer and the backend server.
The client uses EAP-TLS to validate the server and create a TLS-encrypted channel
between client and server. The client uses some other EAP mechanism-such as Microsoft
Challenge Authentication Protocol (MSCHAP) Version 2, for example-over this
encrypted channel to enable server validation. Because the challenge/response packets
are sent over a TLS encrypted channel, the password and the key are not exposed to
offline dictionary attacks.
LEAP
Here is a protocol message flow diagram for LEAP.
LEAP: Protocol
Start
challeng
e
response
username
challenge
response
AP sends broadcast key (Key #1)
encrypted with session key
AP blocks all requests
until LEAP completes
username
RADIUS
server
authenticates
client
Request
identity
success success
challenge challenge
response response, key
Client authentic-
cates RADIUS
server
broadcast key
key length
client Cisco ACS
RADIUS server
ke
y
ke
y
LEAP
authenticate
s User and
ACS
AP
AP defined to
ACS and Secret
Key distributed
out of band
Cisco LEAP (Lightweight Extensible Authentication Protocol), also known as Cisco-
Wireless EAP, provides username/password-based authentication between a wireless
client and a RADIUS server like Cisco ACS or Interlink AAA.
LEAP is one of the several protocols used with the IEEE 802.1x standard for LAN port
access control. In the 802.1x network access authentication framework, a LAN station
cannot pass traffic through an Ethernet hub or WLAN access point until it successfully
authenticates itself. Only the EAP protocol specific data is transmitted between client and
access point until credential check is successful. The station must identify itself and prove

that it is an authorized user before it is actually allowed to use the LAN. LEAP also
delivers a session key to the authenticated station, so that future frames can be encrypted
with a key that is different than keys used by others sessions. Dynamic key delivery
eliminates big vulnerability over static encryption keys that are shared by all stations in
the WLAN. Once an attacker cracks a static shared key, he can eavesdrop on all traffic in
the WLAN until that key gets updated on every station. With dynamic session keys, the
attacker has less traffic to analyze.
The Cisco derivative of EAP is based on mutual authentication, which means that both
the user and the AP to which the user is attempting to connect must be authenticated
before access onto the corporate network is allowed. Mutual authentication protects
enterprises from unauthorized (or "rogue") AP’s serving as potential launching pads for
entry into the network.
Cisco LEAP is based on a username/password scheme and uses the following basic
authentication process:
1. A client connects to the wireless medium.
2. The client sends a start message to an AP.
3. The AP sends an access request on behalf of the client to the authentication server.
4. The client sends its username to the AP, which forwards it to the authentication
server.
5. The authentication server sends a challenge back.
6. The AP forwards the challenge to the client as an EAP message over 802.1X.
7. The client runs the challenge through the Cisco LEAP algorithm, mixes challenge
and user password together, and responds with a value, which the AP forwards to
the authentication server.
8. The authentication server runs the user password through the Cisco LEAP
algorithm, which processes the challenge and client response, then compares its
derived value with the value it received from the client. If the two values match,
the authentication server sends a success message to the AP, which passes it to
the client.
9. Now, the client sends a challenge to the authentication server to authenticate the
AP (the network), and proceeds through the reverse Cisco LEAP process.
10. If the network is successfully authenticated, the client passes a success message
through the AP to the authentication server, which opens a port. The user is live
on the network.
11. Cisco’s LEAP RADIUS server derives a WEP key for that session and stores it in
the AP.
12. The Cisco LEAP client locally derives the WEP key.
Summary

8.0 Conclusion
Security is not absolute. There is no “secure” or “non-secure” technical solution. Security
includes the entire environment. Security technology is only one component, albeit a
very critical component. Another attribute of security to keep in mind is that security is
not a state, but a process of risk management. To develop, run, and maintain a secure
network, the administrators and responsible leaders must know the value of the
information assets and the threats against them. They must then consider the functionality
their organizations need for mission accomplishment and the resources they have at their
disposal. Understanding these threats is a critical task in the security process. It was
necessary for our own analysis to fully understand the threat before we could examine
security technologies. We believe that WLAN security architecture must have the
following attributes: mutual authentication; a strongly encrypted layer-2 tunnel and
strong cryptographic integrity verification. Without these features, not only is a WLAN
vulnerable, but the entire information infrastructure of which it is a part is at risk. Mutual
authentication requires that the client authenticate itself to the network and that the
network also authenticate itself to the wireless client. Man-in-the-middle, session high-
jacking, and replay attacks are enabled by only requiring the wireless client to

authenticate itself to the network. The authentication scheme used for each authentication
must be strong enough to resist the current state of practical attacks. This is not currently
the case with WEP since there are many published attacks against it. EAP-TLS is the
strongest authentication scheme that we analyzed and we highly recommend it. 802.1x is
vulnerable to a number of published attacks and because of its loose coupling with the
802.11 wireless state machine appears to have a fatally flawed design for wireless
network implementations that will be difficult to fix.. Either the vendor must provide
secure configurations or the administrator must configure the system properly to provide
a secure configuration. It is possible, but requires a lot of training and education on the
system administrator’s part. Client authentication should have two parts: the client and
the user. In this way, a lost or stolen wireless client gives only partial access to the
network. This partial access may be enough for an attacker if the link between client
authentication and user authentication is not strong. Blocking access for an authenticated
wireless client but unauthenticated user, in any part of the network (other then the
authentication server) is a mandatory step to combat ARP cache attacks. Another aspect
of authentication is packet authentication. Once an authenticated session is established
and the keys are exchanged, most schemes reply on the privacy of an encrypted tunnel
and integrity checking on the payload to imply the identity of the sender. This is an
effective scheme; however, the addition of packet authentication adds an additional layer
of security that an attacker must defeat. We do not believe replay, session high-jacking
and man-in-the middle attacks are possible when packet authentication is added to strong
session authentication. In most organizations the privacy of the message is important.
Even organizations that do not care about the privacy of the message should strongly
consider encrypted tunnels for integrity protection. Knowing the content of a message is
very helpful to an attacker in carrying out a number of attacks on the integrity of the
message. The tunnel must be encrypted using a modern block-cipher like AES or 3DES.
Stream ciphers such as RC4 that is used in WEP are susceptible to many attacks in a
wireless environment. Although the WEP implementation can be considerably
strengthened with some simple steps this breaks interoperability with the standard
implementations of WEP. As long as the product does not follow a standard, it might as
well be as strong as practical. In our opinion AES is the best choice due to its efficiency.
The theoretical attacks against AES are not yet practical in the foreseeable future and
until they are we believe AES provides sufficient protection.
Combining strong mutual authentication with a strongly encrypted layer-3 tunnel
provides a good level of protection and it might be adequate for many organizations. If an
organization must protect information as it travels through the wired network then a client
to server layer-3 tunnel is a good solution. For those organizations that are more focused
on the threats to the wireless component of the infrastructure layer-2 tunnels provide a
better choice. By hiding the network layer header, attacks that manipulate the IP address
are much more difficult. Traffic analysis is also severely hindered by this approach.
Client-to-Server encryption can also be overlaid on a layer-2 encrypted tunnel to provide
a very high level of protection. Finally, it is important to protect the integrity of the
message. WEP’s CRC-32 has numerous attacks against it both published and
demonstrated. We do not recommend its use. MD4 and MD5 also have published
vulnerabilities although carrying out successful attacks still remains difficult. We are not
aware of any published practical attacks against SHA-1, which is the NIST approved

standard. Although other cryptographic integrity checks may meet the specific needs of
an organization, we recommend using SHA-1.
There is a very wide range of proprietary security technologies on the market and we
have examined many of them. We require a WLAN that addresses the threats against our
information. We have only found two products that meet our needs. The most common
shortcomings that we found are the use of Layer 3 encrypted tunnels and weak session
authentication.
9.0 Observations
Wireless security has undergone major evolutions in the last 7 years. WEP is widely
considered to be broken. WPA was considered a major security improvement over WAP
but it too has its security flaws.
The vendor solutions have a large infrastructure overhead and they are impractically cost
effective solution. Therefore, there is still the need for a robust security protocol that is
easy to deploy for wireless environments.
The lessons we learned from our study are as follows:
• Security protocol design is very difficult
• Best performed with an a abundance of caution
• Supported by experienced cryptographers and security protocol designers
10.0 References
• A Survey of 802.11a Wireless Security Threats and Security Mechanisms by
Colonel Donald J. Welch, Ph.D., Major Scott D. Lathrop, and Colonel Donald J.
Welch, Ph.D.
• Mobile Computing and Networking:
http://www.cs.utexas.edu/users/csed/doc_consortium/DC98/matocha.pdf.
• Wireless Security Services http://www.paladintek.com/palwss01.pdf.
• Geier, Jim. “802.1X Offers Authentication and Key Management”. May 7, 2002.
URL: http://wi-fiplanet.com/tutorials/article.php/1041171
• Geier, Jim. “802.11 Security Beyond WEP”. June 26, 2002.
URL: http://www.wi-fiplanet.com/tutorials/article.php/1377171
• Phifer, Lisa. “Improving WLAN Security”. November 26, 2001.
URL: http://www.wi-fiplanet.com/columns/article.php/928471
• Walker, Jesse. “802.11 Security Series Part 1-3”. 2003.
URL: http://www.intel.com/cd/ids/developer/asmo-na/eng/20501.htm
• Whiting, Doug; Housley, Russ; Ferguson, Niels. “Counter with CBC-MAC
(CCM): AES Mode of Operation”. 2003
URL: http://csrc.nist.gov/CryptoToolkit/modes/proposedmodes/ccm/ccm.pdf
• Wi-Fi Alliance. “Wi-Fi Protected Access – Overview”. 2003 URL:
http://www.wi-fi.com/OpenSection/pdf/Wi-Fi_Protected_Access_Overview.pdf

• Wi-Fi Alliance. “Enterprise Solutions for Wireless LAN Security”. 2003 URL:
http://www.wi-fi.com/OpenSection/pdf/Whitepaper_Wi-Fi_Enterprise2-6-03.pdf
• Wi-Fi Alliance. “Wi-Fi Protected Access: Strong, standards-based, interoperable
security for today’s Wi-Fi networks”. 2003. URL:
http://www.weca.net/OpenSection/pdf/Whitepaper_Wi-Fi_Security4-29-03.pdf
• Wi-Fi Alliance. “Securing Wi-Fi Wireless Networks with “Today’s
Technologies””. 2003. URL:
http://www.weca.net/OpenSection/pdf/Whitepaper_Wi-Fi_Networks2-6-03.pdf
• Wong, Stanley. “The evolution of wireless security in 802.11 networks: WEP,
WPA and 802.11 standards”. May 20, 2003.
URL: www.giac.org/practical/GSEC/Stanley_Wong_GSEC.pdf
• Wireless LAN Security Protocols, Mathew Gast O'Reilly Emerging Technology
Conference
• Technical Report (ITOC-TR-2003-101) Investigators: Co. Donald J Welch, Major
Scott D. Lathrop, Approved By: Co. Andre Sayles. A survey of 802.11a Wireless
Security Threats and Security Mechanisms
• IETF EAP Charter http://www.ietf.org/html.charters/eap-charter.html
• IETF TLS Charter http://www.ietf.org/html.charters/tls-charter.html
• Wireless LAN Security with 802.1x, EAP-TLS, and PEAP Steve Riley Senior
Consultant MCS Trustworthy Computing Services
• Special Publication 800-48 NIST Wireless Network Security (802.11, Bluetooth
and Handheld devices) By Karygiannis & Les Owens

Portfolio Management for New Products: Financial Analysis of Projects
NEW PRODUCT DEVELOPMENT MANAGEMENT – II

NPV: Calc Boogie
Board
Artificial
Skunk
Time
Machine
Cordless
Blender
NPV ($millions) 1.00 4.00 10.00 7.00
Resources Remaining on Project
($millions)
1.00 1.00 5.00 2.00
Resources Required Next Quarter
($millions)
0.10 0.50 2.00 1.50
Probability of Technical Success 0.95 0.70 0.60 0.80
Probability of Commercial Success 0.90 0.30 0.99 0.70
Development Costs Remaining on
Project ($millions)
0.50 0.25 3.00 0.50
Commercialization (Launch) costs
($millions)
0.50 0.75 2.00 1.50
Risk Adjusted NPV (NPVRA)
($millions)
0.90 1.50 5.00 3.50
Strategic Importance 4.00 2.00 1.00 3.00
IRR 10% 12% 20% 15%
Consider the data from the following table:
Question 1: Calculate the “Bang for Buck” for each of the four projects. What is the
ranking of the projects based on this calculation?
Answer: According to the following “Bang for the Buck Index” formula
NPV of the project
Bang for Buck Index = -------------------------------------------------------------------
Total resources remaining to be spent on the project
NPV
($millions)
Resources Remaining
on Project ($millions)
Bang for Buck
Index
Boogie Board 1.00 1.00 1.00 (Rank 4)
Artificial Skunk 4.00 1.00 4.00 (Rank 1)
Time Machine 10.00 5.00 2.00 (Rank 3)
Cordless Blender 7.00 2.00 3.50 (Rank 2)
Ranking based on “Bang for Buck” calculation
Rank NPV
($millions)
Resources Remaining
on Project ($millions)
Bang for Buck
1 Artificial Skunk 4.00 1.00 4.00
2 Cordless Blender 7.00 2.00 3.50
3 Time Machine 10.00 5.00 2.00
4 Boogie Board 1.00 1.00 1.00
Question 2: Calculate the “Bang for Buck using next quarter’s resource
requirements” for the four projects. What is the ranking of the projects based on
this calculation?

Answer: According to the “Bang for the Buck Index” formula
NPV of the project
Total resources remaining to be spent on the project
If we only consider next quarter’s resource requirements for “Bang for Buck Index”
calculations then we have
NPV of the project
Resources Required Next Quarter
NPV
($millions)
Resources Required Next
Quarter ($millions)
Bang for Buck
Boogie Board 1.00 0.10 10.00 (Rank 1)
Artificial Skunk 4.00 0.50 8.00 (Rank 2)
Time Machine 10.00 2.00 5.00 (Rank 3)
Cordless Blender 7.00 1.50 4.66 (Rank 4)
Ranking “R” based on modified “Bang for Buck” calculation
R NPV
($millions)
Resources Required Next
Quarter ($millions)
Bang for Buck
1 Boogie Board 1.00 0.10 10.00
2 Artificial Skunk 4.00 0.50 8.00
3 Time Machine 10.00 2.00 5.00
4 Cordless Blender 7.00 1.50 4.66
Question 3: Calculate the “ECV” for each of the four projects. What is the ranking
of the projects based on this calculation?
Answer: According to the “ECV” formula
ECV = [((PV*Pcs) – C)*Pts] – D
Where ECV = Expected Commercial Value of the Project
Pts = Probability of the Technical Success
Pcs = Probability of the Commercial Success (given technical success)
$D = Development Costs remaining in the project
$C = Commercialization (Launch) Costs
$PV = Net Present Value of the project’s future earnings (discounted to today)
PV or Net Present Value (cash flow without subtracting development and launch cost) of
the project here is equal to the Net Present Value (NPV) of the project plus the “cost

remaining to be spent on the project” (since while calculating the NPV we use the
formula NPV = PV – I where I is investment or negative cash flow).
Hence PV = NPV +1
Now ECV for each project is
PV =
NPV + I
($mil)*
Probability
of
Technical
Success
Probability
of
Commercial
Success
Develop
ment
Cost
($mil)
Commerc
ialization
Cost
($mil)
ECV
Boogie
Board
2.00 0.95 0.90 0.50 0.50 0.735
Artificial
Skunk
5.00 0.70 0.30 0.25 0.75 0.275
Time
Machine
15.00 0.60 0.99 3.00 2.00 4.71
Cordless
Blender
9.00 0.80 0.70 0.50 1.50 3.34
*Investment in this case is Resources remaining to be spent on the project
Boogie Board = [((2*0.90) – 0.50)*0.95] – 0.50 = 0.735
Artificial Skunk = [((5*0.30) – 0.75)*0.70] – 0.25 = 0.275
Time Machine = [((15*0.99) – 2.00)*0.60] – 3.00 = 4.71
Cordless Blender = [((9*0.70) – 1.50)*0.80] – 0.50 = 3.34
Ranking based on “ECV” calculation
Rank ECV
1 Time Machine 4.71
2 Cordless Blender 3.34
3 Boogie Board 0.275
4 Artificial Skunk 0.735
Question 4: Calculate the “ECV/Development costs” for each of the four projects.
What is the ranking of the projects based on this calculation?
Answer: According to the ECV calculations in previous question and given development
cost we can find out “ECV/Development costs” so we can rank order the projects based
on this ratio.
ECV Development
Costs
ECV/
Development

($millions) Costs
Boogie Board 0.275 0.50 0.55
Artificial Skunk 0.735 0.25 2.94
Time Machine 4.71 3.00 1.57
Cordless Blender 3.34 0.50 6.68
Ranking based on “ECV/Development Costs” calculation
Rank ECV/Development Costs
3 Time Machine 1.57
4 Boogie Board 0.55
Question 5: Calculate the “PI” for each project. What is the ranking of the projects
based on this calculation?
Answer: The PI (Productivity Index) is given by
[ECV*Pts – R&D]
PI = -----------------------------------------
R&D
Where
ECV = the expected commercial value of the project (adjusted for commercial Risk)
Pts = the probability of technical success
R&D = the R&D costs remaining in the project
Here ECV = NPVRA
ECV =
NPVRA
Probability of
technical success
(Pts)
Development
Costs
($millions)
PI
Boogie Board 0.90 0.95 0.50 0.71 (Rank 3)
Artificial Skunk 1.50 0.70 0.25 3.2 (Rank 2)
Time Machine 5.0 0.60 3.00 0 (Rank 4)
Cordless Blender 3.50 0.80 0.50 4.6 (Rank 1)
Ranking based on “PI” calculation
Rank PI
3 Boogie Board 0.71
4 Time Machine 0
Question 6: What is the dynamic rank order of the four projects?

Answer: The dynamic rank order of the projects is calculated by ranking projects based
on mean of the three IRR adjusted, NPV adjusted and strategic importance rankings.
Where
IRR adjusted = IRR * Pts
NPV adjusted = NPV * Pts
Pts = the probability of technical success
IRR NPV Strategic
Importance
Probability of
Technical Success
Boogie Board 10% 1.00 4.00 0.95
Artificial Skunk 12% 4.00 2.00 0.70
Time Machine 20% 10.00 1.00 0.60
Cordless Blender 15% 7.00 3.00 0.80
IRR adjusted
NPV * Pts
NPV adjusted
NPV * Pts
Strategic
Importance
Ranking Score
Boogie Board 9.5 (3) 0.95 (4) 4.00 (1) 2.66
Artificial Skunk 8.4 (2) 2.80 (3) 2.00 (3) 2.66
Time Machine 12.00 (1) 6.00 (1) 1.00 (4) 2.00
Cordless Blender 12.00 (1) 5.60 (2) 3.00 (2) 1.66
Ranking based on “Ranking Score” calculation
Rank Ranking Score
2 Time Machine 2.00
3 Boogie Board 2.66
Question 7: What are some observations about the results given by these different
valuation techniques (just briefly list a few)?
Answer: Here is a table of ranking based on different methods for all the four projects.
Bang for
Buck
Quarterly
Bang for
Buck
ECV ECV/De
v. cost
PI Dynamic
rank
order
Boogie Board 4 1 3 4 3 3
Artificial Skunk 1 2 4 2 2 3
Time Machine 3 3 1 3 4 2
Cordless Blender 2 4 2 1 1 1
Looking and comparing the results in the above table, here are some of the
observations.

• NPV based ranking does not justify maximizing the value of project portfolio
since the resource constraints to achieve projected NPV and technical/commercial
success risk factors are not considered. Some great projects with huge NPV may
need a lot of resources or may be hard to commercialize.
• Bang for Buck ranking is highly dependent on time frame of resource
requirements. In our example the project ranking is completely different when we
considered the next quarter’s resources vs. total resources. Mature projects
(projects with less outstanding resource requirements) are always favored and
technical as well as commercialization risks factors are not considered in this
ranking.
• Although ECV provides improvements over NPV based ranking methods by
putting in technical and commercial risk factors but it does not provide the right
balance in project portfolio in the sense that a project may have higher risk but it
may be one of the most strategically important projects for the company. This
method adversely affect venturesome projects and it is highly dependent on
financial and quantitative data so the speak, since accurate data is required to
calculate different costs and probabilities.
• Productivity Index is another variant of ECV method as per the financial risk and
probabilities related weaknesses are concerned but it maximizes the value of
portfolio based on a constraint resource.
• ECV/development cost (constraint resource) method improves the ECV method
further by taking in the resource requirement consideration in ranking projects.
• The “Dynamic Rank-Ordered List” provides a great improvement over other
methods of ranking projects based on multiple criteria simultaneously and making
the process simple enough. On the other hand, there is no notion of elevating
constrained resources while ranking projects and this method also heavily
depends on the sanctity of the financial data.
All the project ranking methods are heavily dependent on sanctity of financial and
quantitative data a lot. Magnitude of error-orders provides unreliability in project
rankings.

EMGT 331
Strategic Technical Management
Case Study 2
The US Telecommunications Industry: 1996 - 1999
Case Study #2
Case 11-6: The U.S. Telecommunications Industry, 1996 -1999. Discuss this while you
answer the following questions:

- How has the Telecommunications act of 1996 affected telecom industry?
- During the period of 1996 – 1999, what are the key developments that have
reshaped the local services industry? Why did these happen? What are the
implications?
- During 1996 – 1999, what are the key developments that have reshaped the long
distance industry sector? Why did these happen? What are the implications?
- How has the internet affected the telecom industry? What are the implications for
providers of local and long distance services?
- By 2010, what is the telecom industry likely to look like?
Introduction:
The Telecommunication act of 1996 was termed as ray of hope by many business leaders
of that time. It was the most comprehensive overhaul of telecom policy in last sixty-two
years, since FDR initialed the Communications Act of 1934 in great depression era. Lots
of aspects of business and technology have changed since then, and new laws were
desperately required to reflect those changes. 1996 Telecommunication act focuses on
mainly three aspects of communication services
1. Telecommunication Services
2. Broadcast services
3. Cable services.
Some of the main highlights of the changes are
1. Opening up of local and long distance telephone services.
2. Opening up of the television programming services
3. Removal of federally mandated rate cap on cable services
4. Portion of the broadcast spectrum reserved for the digital television
5. Mandated “v-chip” on TV built after act comes into working
6. Strong control on the quality of material distributed on TV and Internet
How has the Telecommunications act of 1996 affected telecom?
Here are some of the major effects on business and technology environment of the
1996 Telecommunications act.
1. Mergers & Acquisitions: Act resulted into a spate of M&A activities mainly in the
following two categories. (A+ stands for acquisition, M+ stands for Merger)
RBOCs:
SBC: M+ (1997) Pacific Telesis
A+ (1998) Southern New England Telecom
Bell Atlantic: A+ (1997) Nynex
GTE: A+ (1997) BBN
M+ (1998) Bell Atlantic
Long-Distance Carriers:

AT&T: A+ (1994) McCaw Cellular
A+ (1998) Teleport Comm. A+ TCI A+ Vanguard Cellular (Cellular One)
A+ IBM Global Network Services
A+ (1999) MediaOne + ….
WorldCom: A+ (1996) MFS
A+ (1997) Brooks Fiber
MCI: M+ (1997) WorldCom
A+ (1999) SkyTel + CAI Wireless + WirelessOne
Quest: A+ (1998) LCI
A+ (1999) US West
Sprint: Only exception but it invested heavily on Sprint PCS wireless service and
Integrated On-demand Network (ION)
2. Increased Competition:
- Open competition between local and long distance carriers
1) AT&T, nation’s largest long distance telecommunications company, is now
allowed to compete in $108* billion market for local phone services after 12
years
2) ILECs (Local exchange carriers) can enter the $104B* long distance business
within and outside, if they open up their own local market, of their service
region
3) RBOCs (Regional Bell Operating Companies), are allowed to compete in each
other region’s and as well as for long distance services
- Cable companies can provide telephony service on their wires as well
- Wireless telephony
*1998 numbers
3. Convergence of voice and data networks:
- Emergence of Packet or Internet telephony
- Explosive growth of data traffic
- Broadband services and emergence of “data CLECs”
4. Innovative Services:
- High speed data services using telephone company’s copper wire (DSL) & fiber-
optic cable (DWDM), and cable company’s coaxial wire (cable modem)
- Broadband Wireless (Fixed and Mobile)
- Satellite communications (Iridium, Teledesic)
During the period of 1996 – 1999, what are the key developments that
have reshaped the local services industry? Why did these happen? What
are the implications?

Imp ms mba_projects_part1

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