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Clipboard Tablet Company

Trident University International

Strategic Management

MGT 599

Dr. Sarita Wesley

February 04, 2018

Clipboard Tablet Company

The Clipboard Tablet Co. sells three different tablets, the X5, X6, and X7. The X5 targets the price conscious market, where as the X6 targets the performance market. The X 7 however is new to the market, and is manufactured to meet the needs of customers who appreciate a good mixture of price, and performance. To completely understand where Joe went wrong we much analyze each product individually, and review the current performance of the product within the market. After doing this I will make a recommendation for each of each product. I will provide a strategy for each product and make recommendations for the upcoming years.

The X5

The X5 was the flagship tablet of the company and preformed well above expectations until 2013. It beat the X6 and X7 in profit margin and as intended created a large amount of appeal to the price conscious customer. Priced at a modest 285 dollars per unit it was priced above similar products produced by the competition, but still appealed to many of the lower and middle-income families who were willing to trade a small dip in performance for an affordable basic tablet. The X5 has historically done quite well over the last 5 years in terms of performance against the competition, however the data indicates that sales peaked in 2013 and then began to decline in 2014 with a steep decline by 2015. The decline was most likely due to an extremely high level of market saturation over that time period.

Joe made the decision not to lower prices on the X5 but to keep them the same from 2011-2015, more than likely due to the early success, he assumed the R&D effort would continue to boost profits. Unfortunately, by not lowering prices Joe, created a negative effect on the company, causing customers to realize that they could purchase products with similar capabilites for less money. Since the product was competitive in terms of performance, Joe should have reduced the R&D investment on this product, as consumers were more price conscious than performance conscious for this product.

Since this product competes in a highly saturated price conscious segment of the tablet market, cost savings will have to be created to maintain the current profit margin. This can be done by cutting the Research and development budget significantly while cutting the price 10 percent and adding bundling discounts for accessories should work to increase the attraction over other similar products on the market in the hopes of bringing customers to this company and increasing the market share and maintaining a competitive edge in this segment of the tablet market. The sales have dwindled by about 50% from 2014 and margins have declined significantly as well. Hence, it is critical that all unnecessary R&D costs be eliminated immediately and price discounts should be offered to customers in order to increase sales. The company will also benefit from economies of scale as higher volumes will help in lowering variable costs. (Sahu, n.d.)

("Tablet Development Sim," 2013)

As shown above the point of concern was in 2013 when the market saturation rate hit 48%, action should have been taken to try to capture customers from competitors by lowering prices or reinventing the product image.

X6

This product is aimed at performance conscious market. The sales for this product peaked in 2014, but has shown a significant decline in 2015. The profit margin has been shrinking as well. More than likely this is due to market saturation and the speed of technological advancement in the tablet industry. There has been marginal decline in the performance over the past five years causing the X6 to fall significantly behind its competition in the performance segment of the tablet market. The first-time customers are rapidly declining for the X6 because of its significant lag behind the competition in performance so it is evident that a greater focus in R&D must be taken to better compete with other tablets within this segment of the market. A significant upgrade the performance and features of the product must be made quickly to bring the tablet back to the top of another saturated market. This could be paid for through product price increases over time. Consumers will not shy away from paying higher price for a performing product.

My recommendation will be to make a significant increase in the R&D budget which can then smaller incremental increases over the next 5 years to allow for significant improvements made and allowing in a re-release of the product every year or so. This will continually attract more first-time customers and entice customers who would normally purchase an X6 like product from a competitor. The company should also charge more for the improved versions of the X6. The increase in price should pay for the incremental upgrades. The improved performance will help in enhancing the repeat sales from the existing installed base. The X6 creates a large share of the company’s revenue and profitability and has an installed base close to X5. This should allow the company to refocus on making significant investments into the improved performance and features of the X6, and pass on the additional cost to the customers in the form of price increase. Additionally, possibly decrease the number of X6 tablets which are manufactured each month to increase the demand for the product. Customers will not mind waiting a couple of extra days at the front end of a release for the next big thing. A good example of this is Apple products which release upgrades about once per year. Customers have no issues waiting days even weeks for a new I phone or tablet to be shipped because of the premium performance of the product. Joe should have done this starting in 2013 at the latest when sales of the X6 were at their peak and performance was just beginning to decline compared to that of its competitors.

("Tablet Development Sim," 2013)

X7

This product is the newest on the market and is aimed at customers who are not satisfied with just performance or price, but must have both. The potential market for this product is huge and has only begun to be discovered. Unlike the X5 and X6 products, this market is far from saturated, sitting at 5% in that area.

This fact eludes to tremendous growth potential for the product and the company. Unfortunately, Joe has failed to take advantage of this oppritunityon this opportunity completely by underinvesting in this product in terms of R&D. The X7 has not compared well in terms of performance against competing products. Although the segment has started showing profitability, huge potential exists for this product.

My recommendation for this product will be a heavy investment in R&D. This will allow the company to bring the product performance on line with that of its competitors and offer the X6 at a price that remains comparative to other like products. Right now, the pricing of the X6 is competitive to other similar products. If R&D team can come up with an upgrade in performance that beats competition in price and performance, this X6 has the potential to become the leading product in the company’s portfolio. The additional resources needed to do this can be taken from what was cut from the X5 R&D budget allowing for minimal profits do be drawn from the company. Since the potential Return on Investment (ROI) will be significant the company will be able to recoup the initial investment in a very short timeframe.

I will have my staff work the numbers for you, but the current assumption is that many of the X5 customers may transition to the X7 within the next five years allowing the company to discontinue the X5 and narrow its focus to the continued enhancement of the X6 and X7. I will have my strategy built and submitted through business simulation software in the coming weeks to try to give you a better estimate of how long this will take and how much the initial investment should be.

References

Garmon, M. (2013). Tablet Development Sim. Retrieved February 1, 2018, from

https://forio.com/simulate/michael.garmon/tablet-development-sim/simulation/#p=page2

Sahu, A. P., PHD. (n.d.). Economies ofscale. Retrieved January 31, 2018, from

http://www.referenceforbusiness.com/encyclopedia/Eco-Ent/Economies-of-Scale.html

Point of concern due to market saturation rate of 48%

Point of concern: only a 1% increase in profitability.�