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Tablet SIM
Joe Schmoe's performance was not optimal, and there are a few different changes that can be made. In order to understand the flaws in Joe's performance, it is necessary to understand some key business concepts.
The first of these is profitability, in particular the concept of contribution. This is important to the analysis for a couple of reasons. The first is that the X5 product lost money in its final year. One of the characteristics of this product is that it has high fixed costs of $75 million, double that of the other two products. The contribution to fixed costs is the revenue minus the variable costs. With this information, the breakeven point can be calculated for the X5. In a year when the sales are expected to fall below the breakeven point, the product should be discontinued. Contribution margin is also useful for the X7, because that product is not selling well. It is a low-cost product, so when the final analysis is completed, it is likely that reducing the price of this product is going to be the best approach to generating new sales. The contribution margin analysis will tell us the breakeven price, so that we do not lower the price too much.
Another key concept is the product life cycle. These three products are all at different stages of the product life cycle. The X5 is in either the growth or...
Market saturation has increased from 15% to 27%, but it should be noted that it is going to move out of the growth stage of the cycle in a year or two. During this stage, the company is going to try to maximize sales, but the further along in the life cycle the product is, the less value R&D investments will be. If performance is similar to that Joe experienced, the X5 will be cut from the product lineup in 2016, so R&D investment allocations should take that into consideration.
The X6 has market saturation at the end of 2012 of 16%, so it is still in the growth stage of the product life cycle. Thus, the product should still receive R&D investment, and should be priced accordingly. There are two appropriate pricing strategies for a new product -- skimming and penetration. In this case, the skimming strategy may have been utilized already, so some consideration will need to be given to lowering the price of the X6 slightly in order to make it more competitive. This product appears to be marketed as a technology leader, so investment in R&D will need to be heavy in order to maintain this position in the marketplace.
The X7 is in the introductory stage of the product life cycle. With its low price, it is clearly being marketed as a price leader. Also, there are 15 million potential…
Tablet SIM II The analysis that was conducted revealed a few recommendations for Clipboard Tablet Company that were different from the company's choices under the Joe Schmoe regime. With the opportunity having presented itself to take the company in a different path, the following strategy was enacted: Discontinued The results of this strategy were as follows. For the X5: X5 Profit 151,182,710 83,101,400 X5 Saturation X6 Profit 240,511,901 307,464,930 137,132,198 103,417,497 X6 Saturation X7 Profit -10,298,475 24,820,249 93,863,284 X7 Saturation Cumulative Profit 672,971,018 1,088,357,597 1,325,384,992 1,641,496,441 These figures indicate that the performance was better
Tablet SIM There are a number of different things that need to be taken into consideration when formulating a strategy for the next four years. The first thing is the product life cycle. Based on how long each of these products has been on the market, and the sales trajectory for the products, each is in a different stage of the product life cycle. Arguably, the X5 is headed towards the
Tablet SIM III The results of the last analysis were promising, but ultimately there are strict limitations as to the usefulness of cost-volume-profit analysis. With the X5, the results were successful for the most part, and the X6 also sold to saturation. The X7 sold nowhere near saturation, and therefore money was left on the table. This is where the bulk of the analysis will be conducted. A few extra dollars can
profit analysis was introduced, but the execution was lacking. One of the important factors is that CVP analysis requires a number of data points so that the elasticities of demand for the product can be determined. There is still going to be the wild card of R&D investment, but setting prices is an important determinant of demand. Working on theory rather than data last time, the results were perhaps
Strategic Review Mr. Schmoe's performance over the past four years has been quite poor. Essentially, Mr. Schmoe made no changes to the strategy, and while that worked initially, the company's performance has deteriorated, and is at present in a bad state, where our best products are entering decline and we have no new products in the pipeline, as we still have older models on the market that are making no money.
Eve celebration. You finished analyzing performance Tablet Development a great report turned a days early Sally Smothers. At the new beginning of 2012, decisions are made at three specific levels: Research and development allocations Product pricing, and Potential product discontinuation. The advantage at this stage is that the future evolution of the market is already known and safer decisions can be made. In such a context then, the main decisions include the following: The