A review of the products Clipboard Tablet Co. manufactures three products, Handheld X5, Handheld X6 and Handheld X7. For the Handheld X5, the price is $265, the R&D cost allocation is 33% and the default decision is to continue with the product of the brand. For the Handheld X6, the price is $420, the R&D cost allocation is 34% and the default decision is to continue the production of the brand. For Handheld X7, the price is $195, the R&D cost allocation is 33% and the default decision is to continue with the production of the brand. These are the decisions concerning pricing and R&D product development, which were provided by Joe Schmoe for the period 2012 to 2015 (Table 1). The default strategies were used in the simulation process to get the results for each product. Product life cycle The product life cycle shows the position of a product in the market. It shows the position of a product in the market immediately after introduction, until the market size declines. The product life cycle ranges from development to product decline. Figure 6: Product life cycle Source: Netmba (2012). Price and performance of the products (sales, costs, profitability, prices, unit margins etc) Table 2: X5 Financials for 2011 2011 2010 This year Last year % Change Revenue Sales Volume 1,535,407 936,811 64% 0.639 Revenue Revenue Volume 406,882,843 248,254,911 64% 0.639 Cost Variable Costs 222,634,008 135,837,593 64% 0.639 Cost Fixed Costs 72,000,000 72,000,000 0% 0.000 Cost R & D Costs 7,260,000 10,835,821 -33% -0.330 Cost Total Costs 301,894,008 218,673,414 38% 0.381 Profit Total Profit 104,988,835 29,581,497 214% 2.549 Profit Total Profitability 26% 12% 103% 1.167 Table 3: X5 Financials for 2012 2012 2011 This year Last year % Change Revenue Sales Volume 1,859,856 1,535,407 21% Revenue Revenue Volume 492,861,819 406,882,843 21% Cost Variable Costs 269,679,108 222,634,008 21% Cost Fixed Costs 72,000,000 72,000,000 0% Cost R & D Costs 7,260,000 7,260,000 0% Cost Total Costs 348,939,108 301,894,008 16% Profit Total Profit 143,922,711 104,988,835 37% Profit Total Profitability 29% 26% 12% Table 4: X5 Financials for 2013 2013 2012 This year Last year % Change Revenue Sales Volume 1,427,666 1,859,856 -23% Revenue Revenue Volume 378,331,427 492,861,819 -23% Cost Variable Costs 207,011,536 269,679,108 -23% Cost Fixed Costs 72,000,000 72,000,000 0% Cost R & D Costs 7,260,000 7,260,000 0% Cost Total Costs 286,271,536 348,939,108 -18% Profit Total Profit 92,059,892 143,922,710 -36% Profit Total Profitability 24% 29% -17% Table 6: X5 Financial for 2014 2014 2013 This year Last year % Change Revenue Sales Volume 701,981 1,427,666 -51% Revenue Revenue Volume 186,025,046 378,331,427 -51% Cost Variable Costs 101,787,289 207,011,536 -51% Cost Fixed Costs 72,000,000 72,000,000 0% Cost R & D Costs 7,260,000 7,260,000 0% Cost Total Costs 181,047,289 286,271,536 -37% Profit Total Profit 4,977,757 92,059,892 -95% Profit Total Profitability 3% 24% -88% Table 7: X5 Financial for 2015 2015 2014 This year Last year % Change Revenue Sales Volume 520,480 701,981 -26% Revenue Revenue Volume 137,927,070 186,025,046 -26% Cost Variable Costs 75,469,529 101,787,289 -26% Cost Fixed Costs 72,000,000 72,000,000 0% Cost R & D Costs 7,260,000 7,260,000 0% Cost Total Costs 154,729,529 181,047,289 -15% Profit Total Profit -16,802,459 4,977,757 -438% Profit Total Profitability -12% 3% -500% Table 8: X6 Financials for 2011 2011 2010 This year Last year % Change Revenue Sales Volume 1,169,363 517,532 126% 1.259 Revenue Revenue Volume 491,132,541 217,363,262 126% 1.260 Cost Variable Costs 304,034,430 134,558,210 126% 1.260 Cost Fixed Costs 36,000,000 36,000,000 0% 0.000 Cost R & D Costs 7,480,000 11,164,179 -33% -0.330 Cost Total Costs 347,514,430 181,722,389 91% 0.912 Profit Total Profit 143,618,111 35,640,873 303% 3.030 Profit Total Profitability 29% 16% 81% 0.813 Economic Value Added Capital Charge 1,200,000 1,200,000 0% 0.000 Economic Value Added EVA 93,225,417 33,165,637 181% 1.811 Table 9: X6 Financials for 2012 2012 2011 This year Last year % Change Revenue Sales Volume 1,873,457 1,169,363 60% Revenue Revenue Volume 786,851,911 491,132,541 60% Cost Variable Costs 487,098,802 304,034,430 60% Cost Fixed Costs 36,000,000 36,000,000 0% Cost R & D Costs 7,480,000 7,480,000 0% Cost Total Costs 530,578,802 347,514,430 53% Profit Total Profit 256,273,109 143,618,111 78% Profit Total Profitability 33% 29% 14% Economic Value added Capital Charge 1,200,000 1,200,000 0% Economic Value added EVA 169,913,573 93,225,417 82% Table 10: X6 Financials for 2013 2013 2012 This year Last year % Change Revenue Sales Volume 1,926,943 1,873,457 3% Revenue Revenue Volume 809,316,039 786,851,911 3% Cost Variable Costs 501,005,167 487,098,802 3% Cost Fixed Costs 36,000,000 36,000,000 0% Cost R & D Costs 7,480,000 7,480,000 0% Cost Total Costs 544,485,167 530,578,802 3% Profit Total Profit 264,830,872 256,273,109 3% Profit Total Profitability 33% 33% 0% Economic Value added Capital Charge 1,200,000 1,200,000 0% Economic Value added EVA 211,952,926 169,913,573 25% Table 11: X6 Financials for 2014 2014 2013 This year Last year % Change Revenue Sales Volume 817,342 1,926,943 -58% Revenue Revenue Volume 342,283,703 809,316,039 -58% Cost Variable Costs 212,508,959 501,005,167 -58% Cost Fixed Costs 36,000,000 36,000,000 0% Cost R & D Costs 7,480,000 7,480,000 0% Cost Total Costs 255,988,959 544,485,167 -53% Profit Total Profit 87,297,744 264,830,872 -67% Profit Total Profitability 25% 33% -24% Economic Value added Capital Charge 1,200,000 1,200,000 0% Economic Value added EVA 147,970,013 211,952,926 -30% Table 12: X6 Financials for 2015 2015 2014 This year Last year % Change Revenue Sales Volume 566,026 817,342 -31% Revenue Revenue Volume 237,731,058 342,283,703 -31% Cost Variable Costs 147,166,845 212,508,959 -31% Cost Fixed Costs 36,000,000 36,000,000 0% Cost R & D Costs 7,480,000 7,480,000 0% Cost Total Costs 190,646,845 255,988,959 -26% Profit Total Profit 47,084,213 87,297,744 -46% Profit Total Profitability 20% 25% -20% Economic Value added Capital Charge 1,200,000 1,200,000 0% Economic Value added EVA 48,902,076 147,970,013 -67% Table 13: X7 Financials for 2011 2011 2010 This year Last year % Change Revenue Sales Volume 155,597 0 #DIV/0! Revenue Revenue Volume 30,341,372 0 #DIV/0! Cost Variable Costs 9,335,807 0 #DIV/0! Cost Fixed Costs 36,000,000 0 #DIV/0! Cost R & D Costs 7,260,000 0 #DIV/0! Cost Total Costs 52,595,807 0 #DIV/0! Profit Total Profit -22,254,435 0 #DIV/0! Profit Total Profitability -73% 0% #DIV/0! Economic Value added Capital Charge 2,400,000 2,400,000 0% Economic Value added EVA -10,891,725 -21,333,544 -49% Table 14: X7 Financials for 2012 2012 2011 This year Last year % Change Revenue Sales Volume 222,622 155,597 43% Revenue Revenue Volume 43,411,367 30,341,372 43% Cost Variable Costs 222,622 9,335,807 -98% Cost Fixed Costs 43,411,367 36,000,000 21% Cost R & D Costs 222,622 7,260,000 -97% Cost Total Costs 43,411,367 52,595,807 -17% Profit Total Profit -13,205,976 -22,254,435 -41% Profit Total Profitability -30% -73% -59% Economic Value added Capital Charge 2,400,000 2,400,000 0% Economic Value added EVA 4,054,579 -10,891,725 -137% Table 15: X7 Financials for 2013 2013 2012 This year Last year % Change Revenue Sales Volume 317,093 222,622 42% Revenue Revenue Volume 61,833,138 43,411,367 42% Cost Variable Costs 19,025,581 13,357,344 42% Cost Fixed Costs 36,000,000 36,000,000 0% Cost R & D Costs 7,260,000 7,260,000 0% Cost Total Costs 62,285,581 56,617,344 10% Profit Total Profit -452,443 -13,205,976 -97% Profit Total Profitability -1% -30% -97% Economic Value added Capital Charge 2,400,000 2,400,000 0% Economic Value added EVA 25,069,671 4,054,579 518% Table 16: X7 Financials for 2014 2014 2013 This year Last year % Change Revenue Sales Volume 448,436 317,093 41% Revenue Revenue Volume 87,444,976 61,833,138 41% Cost Variable Costs 26,906,147 19,025,581 41% Cost Fixed Costs 36,000,000 36,000,000 0% Cost R & D Costs 7,260,000 7,260,000 0% Cost Total Costs 70,166,147 62,285,581 13% Profit Total Profit 17,278,829 -452,443 -3919% Profit Total Profitability 20% -1% -2100% Economic Value added Capital Charge 2,400,000 2,400,000 0% Economic Value added EVA 53,841,310 25,069,671 115% Table 17: X7 Financials for 2015 2015 2014 This year Last year % Change Revenue Sales Volume 627,242 448,436 39% Revenue Revenue Volume 122,312,118 87,444,976 39% Cost Variable Costs 37,634,498 26,906,147 39% Cost Fixed Costs 36,000,000 36,000,000 0% Cost R & D Costs 7,260,000 7,260,000 0% Cost Total Costs 80,894,498 70,166,147 21% Profit Total Profit 41,417,620 17,278,829 67% Profit Total Profitability 34% 20% 21% Economic Value added Capital Charge 2,400,000 2,400,000 0% Economic Value added EVA 91,694,889 53,841,310 70% Market review (new sales, repeat sales, market saturation) Table 18: X5 Market Report for the year 2011 2011 2010 This year Last year % Change Customer base Installed Base 1,877,311 1,026,000 83% Customer base Remaining Customers 4,148,689 5,000,000 -17% Customer base Market Saturation 31% 17% 82% Sales volume First-Time Customers 1,369,625 851,311 61% Sales volume Repeat Sales 165,782 85,500 94% Sales volume Total Sales 1,535,407 936,811 64% Table 19: X5 Market report for the year 2012 2012 2011 This year Last year % Change Customer base Installed Base 3,246,936 1,877,311 73% Customer base Remaining Customers 2,779,064 4,148,689 -33% Customer base Market Saturation 54% 31% 74% Sales volume First-Time Customers 1,575,220 1,369,625 15% Sales volume Repeat Sales 284,636 165,782 72% Sales volume Total Sales 1,859,856 1,535,407 21% Table 20: X5 Market for the year 2013 2013 2012 This year Last year % Change Customer base Installed Base 4,822,155 3,246,936 49% Customer base Remaining Customers 1,203,845 2,779,064 -57% Customer base Market Saturation 80% 54% 48% Sales volume First-Time Customers 1,007,431 1,575,220 -36% Sales volume Repeat Sales 420,235 284,636 48% Sales volume Total Sales 1,427,666 1,859,856 -23% Table 21: X5 Market for the year 2014 2014 2013 This year Last year % Change Customer base Installed Base 5,829,586 4,822,155 21% Customer base Remaining Customers 196,414 1,203,845 -84% Customer base Market Saturation 9% 80% -89% Sales volume First-Time Customers 196,414 1,007,431 -81% Sales volume Repeat Sales 505,567 420,235 20% Sales volume Total Sales 701,981 1,427,666 -51% Table 22: X5 Market for the year 2015 2015 2014 This year Last year % Change Customer base Installed Base 6,026,000 5,829,586 3% Customer base Remaining Customers 0 196,414 -100% Customer base Market Saturation 100% 97% 3% Sales volume First-Time Customers 0 196,414 -100% Sales volume Repeat Sales 520,480 505,567 3% Sales volume Total Sales 520,480 701,981 -26% Table 23: X6 Market Report for the year 2011 2011 2010 This year Last year % Change Customer base Installed Base 984,002 510,000 93% Customer base Remaining Customers 4,525,998 5,000,000 -9% Customer base Market Saturation 18% 9% 100% Sales volume First-Time Customers 1,061,657 474,002 124% Sales volume Repeat Sales 107,706 43,529 147% Sales volume Total Sales 1,169,363 517,531 126% Table 24: X6 Market Report for the year 2012 2012 2011 This year Last year % Change Customer base Installed Base 2,045,659 984,002 108% Customer base Remaining Customers 3,464,341 4,525,998 -23% Customer base Market Saturation 37% 18% 106% Sales volume First-Time Customers 1,654,207 1,061,657 56% Sales volume Repeat Sales 219,250 107,706 104% Sales volume Total Sales 1,873,457 1,169,363 60% Table 25: X6 Market Report for the year 2013 2013 2012 This year Last year % Change Customer base Installed Base 3,699,866 2,045,659 81% Customer base Remaining Customers 1,810,134 3,464,341 -48% Customer base Market Saturation 67% 37% 81% Sales volume First-Time Customers 1,537,048 1,654,207 -7% Sales volume Repeat Sales 389,895 219,250 78% Sales volume Total Sales 1,926,943 1,873,457 3% Table 26: X6 Market Report for the year 2014 2014 2013 This year Last year % Change Customer base Installed Base 5,236,915 3,699,866 42% Customer base Remaining Customers 273,085 1,810,134 -85% Customer base Market Saturation 95% 67% 42% Sales volume First-Time Customers 273,085 1,537,048 -82% Sales volume Repeat Sales 544,257 389,895 40% Sales volume Total Sales 817,342 1,926,943 -58% Table 27: X6 Market Report for the year 2015 2015 2014 This year Last year % Change Customer base Installed Base 5,510,000 5,236,915 5% Customer base Remaining Customers 0 273,085 -100% Customer base Market Saturation 100% 95% 5% Sales volume First-Time Customers 0 273,085 -100% Sales volume Repeat Sales 566,026 544,257 4% Sales volume Total Sales 566,026 817,342 -31% Table 28: X7 Market Report for the year 2011 2011 2010 This year Last year % Change Customer base Installed Base 320,000 0 #DIV/0! Customer base Remaining Customers 15,000,000 0 #DIV/0! Customer base Market Saturation 2% 0% #DIV/0! Sales volume First-Time Customers 132,963 0 #DIV/0! Sales volume Repeat Sales 22,533 0 #DIV/0! Sales volume Total Sales 155,597 0 #DIV/0! Table 29: X7 Market Report for the year 2012 2012 2011 This year Last year % Change Customer base Installed Base 452,963 320,000 42% Customer base Remaining Customers 14,867,037 15,000,000 -1% Customer base Market Saturation 3% 2% 50% Sales volume First-Time Customers 189,992 132,963 43% Sales volume Repeat Sales 32,630 22,533 45% Sales volume Total Sales 222,622 155,496 43% Table 30: X7 Market Report for the year 2013 2013 2012 This year Last year % Change Customer base Installed Base 642,956 452,963 42% Customer base Remaining Customers 14,677,044 14,867,037 -1% Customer base Market Saturation 4% 3% 33% Sales volume First-Time Customers 270,104 189,992 42% Sales volume Repeat Sales 46,989 32,630 44% Sales volume Total Sales 317,093 222,622 42% Table 31: X7 Market Report for the year 2014 2014 2013 This year Last year % Change Customer base Installed Base 913,059 642,956 42% Customer base Remaining Customers 14,406,941 14,677,044 -2% Customer base Market Saturation 6% 4% 50% Sales volume First-Time Customers 380,925 270,104 41% Sales volume Repeat Sales 67,511 46,989 44% Sales volume Total Sales 448,436 317,093 41% Table 32: X7 Market Report for the year 2015 2015 2014 This year Last year % Change Customer base Installed Base 1,293,984 913,059 44% Customer base Remaining Customers 14,026,016 14,406,941 -4% Customer base Market Saturation 8% 6% 44% Sales volume First-Time Customers 530,642 380,925 38% Sales volume Repeat Sales 96,600 67,511 44% Sales volume Total Sales 627,242 448,436 39% Proposed alternate strategy (a general idea of how you might do better with these products: what pricing)Name: Institution: Course: Tutor: Date Strategic Review Background Handheld Corporation manufactures handheld computers which are based on the Palm Operating System. Handheld X5 is one of the products of the company, and has been in the market for 3 years. The product has a plastic case, and the market price of the Handheld X5 is $250. The customers for this product are not worried about the performance of the product, but the price. Handheld X6 has been in the market for 2 years, has a flat metal case and a market price of $400. The customers for this product worry about the performance more than the price. Handheld X6 has been in the market for 1 year, has a price of $200, and has a colored case. The customers of this product are worried about the price as well as the performance. The aim of conducting this simulation is to maximize the cumulative profits of the Handheld Corporation in the production of the three computer models for duration of five years. The financials of the three products have reviewed, and the market information gathered to study the performance of the products. From the simulations decisions have been made concerning the product prices, appropriate research and development strategies to be adopted and discontinuation of the products. The summary about the simulation process has been reviewed. The data used for the simulation was extracted from 2004 to 2008. The performance of the three products and the behaviors of the customers is assumed to be constant. Therefore, the information that was obtained in 2004-2008 is applied in making decisions for the period 2012 to 2015. Default decisions Financials Revenue The simulation started in 2004, and at that period, the revenues collected from the three products were X5 $240,000,000, X6 $200,000,000 and X7 $40,000,000. In 2005, the revenues increased to X5 $360,000,000, X6 $360,000,000 and X7 $50,000,000 (Figure 1). Profit graph In 2004, the profits recorded were X5 $25,000,000, X6 $35,000,000 and X6 had a loss of $20,000,000. In 2005, the profits increased to X5 $80,000,000, X6 $95,000,000 and a loss of $15,000,000 was made for product X7 (Figure 2). Total income From the table above, there has been a positive change in sales volume (61%), revenue volume (65%), variable costs (66%), total costs (41%), total profits total profitability (145%) and economic value added (350%). There was no change in fixed costs (0%), R&D costs (0%) and capital change (0%) (Table 1). X5 Income The incomes for X5 show that, in 2005, there was an increase in sales volume (55%), revenue volume (55%0, variable costs (55%), total costs (35%), total profits (214%), total profitability (103%) and Economic Value Added (231%). There was no change in the fixed costs (0%), R&D costs (0%) and capital change (0%) (Table 2). X6 income In 2005, there was an increase in sales volume (79%), revenue volume (79%), variable costs (79%), total costs (59%), total profits (175%), total profitability (54%) and EVA (181%). However, there was no change on fixed costs (0%), R&D costs (0%) and capital charge (0%) (Table 3). X7 income In 2005, there was an increase in the sales volume (46%), revenue volume (46), variable costs (46%), total costs (10%) and EVA (49%). There was no change in fixed costs (0%), R&D costs (0%) and capital charge (0%). In addition, there was a negative change in total profits (-55%) and total profitability (-69%) (Table 4). Market information Sales graph The sales for X5 in 2004 was $950,000, X6 $50,000 and X7 $180,000. The sales increased to $1,500,000 for X5, X6 $850,000 and X7 $ 200,000 (Figure 7). Price graph The price curve for the three products has not changed for the period of simulation. The prices for the three products remain to be; Handheld X5 $250, X6 $400 and X7 $250 (Figure 8). Performance graph The performance of Handheld X6 has been the highest while the performancfe of X7 has been the lowest. Handheld X5 has a moderate performance (Figure 9). X5 Markets The records about customer base indicate that the installed base increased by 83%, remaining customers declined by 17% and the market saturation increased by 83%. The sales volume records show that first-time customer increased by 52%, repeat sales increased by 83% and the total sales increased by 55% (Table 5). X6 Markets Records on customer base show that in 2005, the installed base increased by 93%, remaining customers reduced by 9% and market saturation increased by 93%. Information about sales volume shows that first-time customers increased by 77%, repeat sales increased by 95% while total sales increased by 79% (Table 6). X7 Markets In 2005, information about the customer base indicated that installed customers increased by 48%, remaining customers reduced by 1% and the market saturation increased by 48%. The sales volume records show that first-time customer increased by 46%, repeat sales increased by 48% and the total sales increased by 46% (Table 7). Make Decisions From the simulations developed above, it is evident that the company should continue producing product X5 and X6. On the other hand, product X7 should be discontinued because it generated negative profits (losses) during the period of simulation. Product X5 is performing well, and the company should continue producing the product. Customers are willing to pay the price despite the existence of other similar products with the same price. Summary Product X5 is in the maturity stage of the market because most of the customers are not worried about the performance of the product but the price (Figure 13). This shows that most of the customers in the market have purchased the product, and they know the performance of the product. The company has experienced repeat sales for the product X5, and this has increased the sales volume of the company. In addition, customers have developed product loyalty for this brand, and this creates profits for the company. Product X6 is on the maturity stage because most customers are worried about the performance more than the price of the product. This shows that some potential customers have not been reached. In addition, the customers do not have a lot of experience with the product. The customers have repeat sales behavior for this product. The market has not been saturated, and there are few remaining potential customers. Product X7 is experiencing a growth phase, and the product has many potential customers in the market. A large volume of sales of the product is obtained from new customers. The product has the potential of making new sales because most potential customers have not been reached. The market for product X7 has not been saturated because there are many potential customers. However, the product experiences few repeat sales. Alternate strategy From the simulations drawn above, it is evident that Handheld X5 has reached its maturity stage. So it is expected that the product will definitely decline in the near future. The company has reached almost all the customers of the product, and very few or none of the potential customers exists in the market. Therefore, the company is benefiting from repeat purchases from the existing customers in the market. The customers are aware of the performance of the product, but they are worried about the price. Therefore, it is important for the management of the company to reduce the prices to sustainable rates. This will encourage repeat purchases from the existing customers. Reducing the prices will encourage the existing customers to buy more of the product, and more repeat purchases will be made. As such, the company will have many sales in the long run. For Handheld X6, the company should improve on the promotional strategies because the customers are worried more about the performance of the product more than the prices. The product is almost getting to the maturity stage, but it is on the last phase of growth stage. Therefore, there are some potential customers in the market. Conducting intensive promotion for the product will attract the potential customers. In addition, promotion for the product will educate and inform the customers about the performance of the product. This will help buyers made informed decisions about the product. Therefore, the product has the potential to bring many revenues in the short run as well as in the long run. The management should continue producing the product because profits are being generated from the sales of the product. For handheld X7, the company should be very careful when making a decision to continue manufacturing the product. The product has generated losses for the period under simulation. Even though the product is at the initial stages of the product life cycle, the management should be very careful to avoid wasting a lot of resources of the product, which may later create huge losses to the company. However, there is an alternate decision to carry intensive promotion for the product. Since the product has many potential customers, conducting intensive promotion will help improve the sales of the product by attracting the potential customers. The customers are worried about the prices as well as the performance of the product. Therefore, the company should promote the product so that customers can get enough information about the product. Ina addition, the management should consider reducing the price of the product to a reasonable rate. This will attract many customers to buy the product. It is important for the management to give time for the product to be accepted in the market by the customers. At the moment, the customers have not yet learnt about the existence of the product in the market. There is need for intensive campaigns to promote the product among all the potential customers in the market. This strategy will increase the sale of the company, and profits will be released. It is important for the management to continue producing the product, in the short run, as they wait for the acceptance of the product in the market. Discontinuing the product is not a good strategy because the product has not yet reached the maturity stage of the product life cycle. Con
Use the order calculator below and get started! Contact our live support team for any assistance or inquiry.
[order_calculator]