¶ … New Product in the Market
New Good or Service Business Proposal
Tire Company Plan to Increase Range of Products
Our company deals in sale of small car tires to individuals and companies in Minnesota. The region has grown from dependence on production of raw material for sale in other region to production and manufacturing activities. In the region, there is a significant increase in truck haulage business owing to the growth seen in industrial outputs. This creates a market for truck tires that is yet to be satisfied given the few number of tire supplies in the region. Our company proposes to introduce the supply of truck tires to haulage companies in the region. The demand of tires in general is dependent on the demand in the transport industry and it responds to the number of tire supplies and the market price for tires.
Currently the company sources most of its tires from local U.S. companies that deal in production on tires. To complement intend venture in sale of tires the company will expand its range of tires by importing tires from other countries. The cost of importing tires will increase the companies operational cost by 20% owing to the shipping and customs duty costs. The company will also need to increase its storage capacity to accommodate the increase volumes of tire stocks. The required increase in storage capacity will increase the companies fixed cost by increasing the cost of renting ware houses in their distribution outlets.
Advertising and Marketing
To inform the market of the new additions to their stock of tires a door to door campaign to haulage companies will be undertaken. This will be done through distribution of pamphlets containing information on the company range of tires, the locations and business contact information. The pamphlets will serve as the main advertising campaigns supplemented by audio and television advertisements to inform the market. According to Rajan (2007), advertising serves as a key ingredient in ensuring market familiarity with the product and growth...
Additionally advertisement entices prospective client to find out more about the product and keeps the market informed on the products availability (Rajan, 2007).
The company will also extend its complementary service of tire delivery to the targeted customer depending on the volumes ordered. The intention is to ensure customer satisfaction through after sale services. The delivery service is however limited to deliveries within 25 miles of the outlet centers. After sale service gives the customer a satisfaction in reducing the hustles in acquiring the goods. This is a revenue maximizing measure that also increases the companies competitiveness in the market (Woodside, Golfetto, & Gibbert, 2011).
The company sets its profit markup proportion as fifteen percent of the cost of the commodity. This proportion caters for the expenses incurred in acquiring the products and cost of the distribution. In order to maximize profit the volumes of sales will need to be higher than the breakeven quantity required to set off the companies expenses. The breakeven is an ideal measure in determining the profit maximizing volume of owing to its accuracy and ease of planning. Break even analysis projects the level of output necessary to meet the operational expense and it advises on the sustainability of a business venture (Harrison Jr., Horngren, & William, 2012).
The company will minimize its shipment cost by planning to import products in lump sum and stocking them up in their distribution ware houses. This measure ensures that the unit cost of shipment is low. This provides the company an advantage in low market price for its commodities and thus leverage in price competitiveness. The lower marginal cost that reflects lower product price will afford the company an opportunity to sell more volumes. The marginal revenue for a unit sale will remain the same owing to the company's markup margin. However profit maximization will be realized from the large number of sales achieved from lower pricing. It is observed that although…
