SLP2 599 Coursework Example | Topics and Well Written Essays - 1000 words

SLP2 599 - Coursework Example Review of Joe Schome’s Strategies Joe did not change prices and research and development allocations for the products for a period of over six years. The strategy adopted was effective in that the company did not make losses. Products X5 and X6 registered profits for all the years. Product X7 made losses for the first three years. However, it improved in performance as the years progressed. Nonetheless, the strategy could not move the company to the next level as expected by Sally Smothers. Moreover, the sales, revenues earned and profits made by the products declined after two years. On the other hand, prices and total costs were maintained for all the years. This means that from the beginning, the profits and sales increased at declining rates. The price for X5 was maintained at $285 and there existed approximately six million customers. Additionally, market saturation was only 15%. However, performance declined and as competition increased, the profitability of X5 declined. By 2015, competition was stiff and market saturation was 94% (Mahajan, Yoram and Eitan 99). The profitability of X5 was only 17%. The price of X6 was also maintained at $430 for all the years. However, X6 also faced stiff competition and by 2015, market saturation was 93%. ... Moreover, it has a lower production cost when compared to the X5 and X6. It also improved in profitability. However, its improvement in performance was at a slow rate. Joe should have encouraged vigorous product development so that the company specializes in production of X7. Generally, Joe’s strategy did not consider the value of customer retention. Hence, first time customers for all the products are high yet repeat sales are low. This also shows that the research and development strategy was not very effective. Proposed Strategies For the first year, the price for X5 should be maintained at $ 285. The research and development allocation should also be maintained at 33%. This would enable the company to make a profit of 16%. In the second year, the company can maintain the price and X5 can be 30% profitable. In 2013, the company can reduce the price as competitors enter the market. This would assist the company to increase sales. The assumption is that the competitors also c harge $285 for X5. The company can charge $280 with the hope of increasing sales from 2,145,622 to 2,500,000. In 2014 and 2015, the company can reduce the price of X5 with the hope of increasing sales. It can also reduce the research and development allocation as it seems to be ineffective. The production of X5 should be discontinued in case customers do not respond positively to the reduction in prices by the end of 2015. This is because there would be stiff competition in 2016 and the number of customers would not be adequate to ensure recovery of production costs. Furthermore, X5 has a very short life cycle. The price of X6 should also be maintained at $430 in 2011and 2012. This would ensure