Strategic Review
Review of the products, their life cycles, how they stack up in terms of price and performance. Financial review for each product: X5, X6, and X7 – sales, costs, profitability, prices, unit margins
The application of three products: X5, X6, and X7 in the duration of five years yielded relevant information in relation to finance, market, and consumer data. This is information is relevant for the enhancement of the performance within the market and industry thus the opportunity to improve and adopt competitive advantage. The starting point and end for this evaluation includes 2011 and 2015 respectively. According to the evaluation, the prices for X5, X6, and X7 include $ 285, $ 430, and $ 190 respectively across the market and industry. Application of R&D in relation to the products in question indicates 0.33, 0.34, and 0.33 for the X5, X6, and X7 products respectively.
This is a reflection of the percentage evaluation of the application of R&D during the course of interacting with the consumers. According to the analysis, there was no shut down incidence relating to zero step assumption. At the initial stage during this evaluation process, existing consumers or customers to the relevant products were 1,035,000, 550,000, and 340,000 for X5, X6, and X7 respectively. The evaluation of the remaining consumers or customers of the products illustrate 6,000,000, 6,000,000, and 17,500,000 for the X5, X6, and X7 products respectively. The total revenue for the evaluation process or performance of the three products in the market demonstrates sales*price. For the X5 product, the total revenue is demonstrated through 285*6,000,000 expressed in dollars.
This translates to $ 1,710,000,000 as the total revenue. In relation to X6, the total revenue is demonstrated through 430*6,000,000 expressed in dollars. This translates to $ 2,580,000,000 as the total revenue. The third products (X7) projected revenues as 190*17500000 in expression of dollars. This translates to $ 3325000000 as the total revenue. From this illustration, the total revenue for the three products (X5, X6, and X7) indicates 3325000000 + 2580000000 + 1710000000 expressed in dollars. This translates to $ 7,615,000,000 for the stated period of evaluation. Total variable cost for the first products is demonstrated through sales*unit cost. This translates to the 150*6000000 thus resulting into $ 900000000. The second product (X6) projects the variable cost as the 275*6000000 thus producing a cost of $ 1650000000.
The last product of the evaluation indicates 55*17500000 thus contributing towards a cost of $ 962500000. The total cost for the products is an illustration of the fixed costs, variable costs, and the application of R&D costs during the implementation of the product in relation to the relevant markets or target audiences. The total cost thus includes $ (962500000 + 1650000000 + 900000000 + 75000000 + 37500000 + 37500000 + 24000000). This contributes towards the realization of the total cost of $ 2,876,500,000. In order to evaluate the level of profits before taxation, it is ideal to subtract the total costs from the total revenues. This generates financial amount of $ 4,738,500,000. This follows an evaluation of the profitability levels through the application of the unit costs as $150, $ 275, and $ 55 for the X5, X6, and X7 respectively. Profitability translates to about 63 percent of the total revenues during the evaluation period.
Market review: New Sales, Repeat Sales, Market Saturation
The analysis of the market focuses on the review of the new sales, repeat sales, and the market saturation. New sales of the products indicate the aspect of the remaining consumers. This translates to the 6,000,000, 6,000,000, and 17,500,000 for the X5, X6, and X7 products respectively. Market penetration of the three products demonstrates high share of about 75 percent in relation to the period of evaluation. Sales of the product elaborate on the new sales and the repeat sales. This indicates that the evaluation of the repeat sales is equivalent to sales minus the new sales during the period of analysis for the three vital products (X5, X6, and X7).
Propose an alternate strategy: a general idea of how you might do better with these products: what pricing and R&D allocations would you have put in place over the last four years, 2012 – 2015.
In order to improve the performance of the organization in relation to the pricing systems within the market, as the chief executive officer, it is ideal to adopt an effective of pricing the products. This is essential towards the achievement of the effective, efficient, and competitive advantage across the market and targeted audiences. This is through appropriate application of the six criteria for the pricing systems within the developing or emerging industry. Assume that the three products (X5, X6, and X7) are new to the market and industry, it is essential to adopt start-up pricing system at the introductory level of the life cycle of the products. This indicates that setting up the price in between what other key players or relevant operators offer to consumers and the profitable level of operation to enhance the ability of the organization in relation to performances and productivity (An & Fromm, 2005).
This is crucial towards the achievement of the goals at the initial stages of development thus enabling the organization to plan effectively and efficiently with reference to deficiencies or relevant products. Assume that the products are in the growth stage in relation to the life cycle, it is essential to adopt and apply the going rates as the pricing system within the market area. This calls for differentiation of the products on crucial factors other than the pricing system such as customer care and effective services. This will enable the organization and its products to standout among other business entities and goods. Assume that the products in question are experiencing maturity within the stated market, it is ideal for the organization and its management to adopt the concept of splitting the difference as the pricing mechanism (Netessine & Tang, 2009).
This will offer the opportunity to interact with the consumers effectively and appropriately across the market thus the opportunity to increase the level of consumers, profits, and revenues. Splitting the differences involves evaluation of the strategies applied by the relevant players within the industry with the aim of counteracting them for the effective purposes or beneficial objectives. In case the competitors offer variation, of the prices of the products in that, some provide low, high, or medium mechanisms, as the chief executive officer, it is essential to develop crucial mechanisms towards splitting the difference between the top and the bottom values of the range. This indicates that the adoption of the pricing system during maturity should neither be too high nor low thus the opportunity to increase the profitability levels of the products (Netessine & Tang, 2009).
Assume that the products are experiencing maturity in relation to the product life cycle, it is essential for the organization to focus greatly on the results rather than the pricing system. As the chief executive officer, I should focus on consumers and effective approaches in enhancing the size of the customers’ base. This involves focusing on the results thus examination of the outcomes to the market for the determination of the pricing system. Since these products contribute significantly to the needs and preferences of the consumers, it would be vital to modify the pricing system within the context of the values. With an assumption that the three products are highly differentiated in relation to the services and features relevant to the market needs and demand, it is essential to adopt and apply premium-pricing system (Kazmi, 2008).
This involves charging above the average market value because of the benefits of high differentiation of the products in comparison to the competitors and other pricing mechanisms. For this mechanism to generate maximum benefits and profit levels, it is ideal to add value to consumers and clients with the aim of generating appreciation from the target audiences. This will transform to the increase in the level of profits and revenues thus enhancing the profitability, market penetration, and consumer base. The application of these pricing mechanisms and differentiations within the market calls for research and development to maximize the opportunities and strengths of the organization. It is essential to conduct market research or surveys to enable the organization adopt and apply quality-pricing system to increase the profit and revenue levels within the market (Monczka, 2010).
References
Monczka, R. M. (2010). Purchasing & supply chain management. Hampshire [etc.: Cengage Learning EMEA.
Kazmi, A., & Kazmi, A. (2008). Strategic management and business policy. New Delhi: Tata McGraw Hill Education.
An, C., & Fromm, H. (2005). Supply chain management on demand: Strategies, technologies, applications. Berlin: Springer.
Netessine, S., & Tang, C. S. (2009). Consumer-driven demand and operations management models: A systematic study of information-technology-enabled sales mechanisms. New York, NY: Springer.
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