I viewed the solution to low utility was to improve the product. This would allow us to raise the price and still see strong sales. This is what occurred. It was hypothesized that a price in the range of $430-$450 would see profit optimization. The $450 was tested and it showed a clear improvement over the X6 performance under Joe Schmoe despite a decline in unit sales. It was believed profit would increase by $31.53M in 2008; in reality this came out to an increase of $144.87M in 2008 and $64.061M in 2009, both figures far better than expectations. The key to future improvement of the X6 will be finding the optimal point for the price of this product. Armed with some information about its price elasticity of demand, that point can be determined with more accuracy. It is worth noting that the product achieved 96% saturation even at the $450 price range, compared with Joe's 98% at $400. The X7 saw a lower price in order to stimulate sales. It finished 2009 under Joe Schmoe with 13% market saturation and profits in 2008 and 2009 of $53.8 million and $91.7 million respectively. The lower price was intended to stimulate significantly stronger demand, as there are 15 million potential customers. Joe Schmoe only reached 2 million of these. With the lower price, I reached nearly 5 million customers for a market saturation of 32%. While this is a fairly small number, it is a significant improvement over Joe's numbers. Profits under my strategy were $176.6 million in 2008 and $348.5 million...
Clearly, where Joe was unable to move this product beyond the introduction stage, I was able to push it into the stronger growth stage. It is possible that if the X7 can be moved up a year in the product life cycle by 2009, the four-year profit could be much higher than the current level even. This would give the product a saturation rate over 50%. There is still significant contribution margin (the variable costs are $60 per unit and the selling price is $150 per unit) to cut the price and spur further sales.
warp, Clipboard Tablet Company had the ability to look back and use data based on previous known financial performance in their decision making. The company made decisions regarding pricing strategies along with the allocation research and development resources following the analysis of past performance. During the second warp period, the company used CVP to make critical financial decisions not only based on the past performance but also the present
CVP Analysis The best way to approach this situation is to understand some basic concepts. First, each product has fixed costs. Thus, the fixed costs are going to exist in every year a product is sold. This has ramifications for the X5 in the final year. The second factor that needs to be considered is cost-volume-profit analysis. This technique is used to determine the contribution to fixed costs that each product makes.
Business Management Comparison of Time Warp 2 and Time Warp Time warp 3 has begun and the plan to make changes to the prices with the aim of optimizing the performance of Clipboard Table Co (CTC). The planned changes that were made at the end of time warp 2 will not be implemented, and the results of time warp three can be compared directly with time warp 2. The third time warp
strategy for the Time Warp 3 was formulated based on careful analysis of the results of Time Warp 2, which provided insight into buyer behavior at different price points for the three tablets. The strategy was set to optimize the profits for all three products at pre-set levels of R&D allocation. There may be better R&D levels, but for Time Warp 3 these were not explored. The strategy for
Figure 1 provides a graphical representation of the effects of consistently high levels of R&D investments spread evenly across all product lines. Figure 1: Outcome of Initial R&D and Pricing Analysis For the implications to Total Income based on these decision points, see Table 2. Note that consistently high R&D spending, not price declines, are what is fueling the overall sales growth. At the end of the second iteration, Sales Volume
In this case, we have a base logic for R&D allocations -- the X6 needs to be feature-rich in order to attract buyers. The X7 needs only to be current in its features. The X5 is more or less locked into a particular sales, revenue and profit trajectory. Adjustments made at this point in the product life cycle may impact total company profitability by a few million in either
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