Module 3 SLP 3 CHOICES

MGT 599

Dr. Banks

Internal Profile from Simulation

As the manager tasked with the responsibility of setting appropriate prices and strategies for the products it is empirical consider other factors such as market environment from the competitors` prices to the cost of research and development of the product. The product X5 had initial sales Of 886,356 in 2011, while X6 sales were 562,961. Product sales of the x7 product in 2011 were zero due to its introduction to the market. The market saturation levels for the products were not intense mainly because of the reason that the products were in their initial stages. This is a report of the product performance over the period of four years whereby my responsibility was to ensure profit maximization for the firm through the reduction of operational costs and price setting.

2011-2012

Product X5

In the financial year from 2011 to 2012, the product recorded an impressive upturn in revenue from 886,356 to 1,772,711. The price remained constant over the year at an average price of 285$ which was significantly higher than that of its competitors in the similar market. In the year 2011, the market saturation of the product was at 16% which represented an opportunity for growth. The product was in its initial stages of growth which meant there were plenty of early adaptors that could be absorbed to boost the overall product reach. R&D allocations were increased to forty percent since the product required additional research to ensure it competes in the market. The product had been on the market for three years which meant the product had already amassed necessary consumer trust. However, for the product value to increase, it was necessary to ensure that the product evolved to meet the various customer preferences. The R&D allocation increased the cost of production for the tablet which in turn led to increased revenue and profit margins.

Product x6

The product price decreased from 400 to 385 which was in a bid to increase the overall sales of the product. The profit margins burgeoned to 141,800,000 which represented an increase in profit. The customers of the product preferred quality over pricing. The reduction in price plus the level of quality attracted additional clients. This is because the product gained a competitive advantage over its clients since the prices were significantly lower compared to competitor`s products. Further, since the target segment of the product was interested in quality, it was an added advantage to maintain the impressive quality levels while reducing the cost of the products. The R&D costs were added to 38% in a bid to increase customer satisfaction. The additional costs incurred in the R&D contributed to the increased sales levels. The product performed better than its competitors due to the additional research that led to modifications of the product to suit customer needs and preferences. The demands of a targeted market segment dictates that additional research must be carried out since customers had an inclination towards quality and performance of the tablet (Harris, 2011).

Product x7

The product was launched in 2011, and as a result required additional input concerning research, this saw the R&D costs rise to 40%. Additionally, the product price was increased to 350$ to cater for the additional expenses that result from R&D costs. The increased prices meant that the clients had to pay more to acquire the product which led to the decrease in sales levels. The product recorded losses in its first year of operations primarily due to the high costs of production that consequently led to burgeoned prices. This was not received well by early adaptors and other segments of the market.

2012-2013

Product X5

The product experienced rapid growth as it was in the middle stages of the growth stage. The prices were increased from the initial 285$ to 290$ which attracted a different segment of clients. The R&D allocations were further increased to cater for the need of additional research. Although the clients were satisfied with the performance of the product, it was necessary to keep up to notch with the requirements of the clients which changed over time due to competitors. The growth experienced at this stage was rapid since the customers were already assured of the level of quality and did not mind paying more for the products (Agarwal & Ansell, 2016). This led to the increased profits; the profits escalated to 177, 682,000 in the second year due to the increased revenue from units sold. The R&D allocations were increased at this stage which appeared as an inappropriate move especially due to the level of the product in the life cycle. This led to increased costs of production which reduced the anticipated profit margin.

Product x6

In the 2012-2013 financial year, the product performed brilliantly against its competitors and recorded increased profits from 143,690,060$ to 275,798,000 in 2013. The product outperformed its competition at in that financial year due to the increased performance resulting from maintained costs. The R&D allocations increased to 39% in the next financial year. The high returns in the form of profits were due to the research and development allocations which helped transform the product to suit the specific needs of its client. At this stage, the market saturation was at 56% which meant there was still room for additional growth.

Product X7

The product experienced a significant rise in sales although the sales return was still below the recommended threshold. Therefore, this meant that the product operated in losses for the second year in a row. The cost of production increased through the R&D costs that were incurred throughout production. However, the increased costs demotivated the clients who perceived the product as expensive. Additionally, the products were not well received by clients who preferred superior quality at affordable prices to quality and pricy products. The costs incurred from the operations were not convenient for the firm especially due to the high costs of R&D. This meant that the organization was disadvantaged due to operational losses. It was an inappropriate move to increase the R&D costs since this forced the prices of the product to increase so as to cater for the production costs. For a new product entering the consumer market, it would be appropriate to release the product to the market after weighing the various pros and cons associated. A new product should not be more expensive that products from already established competitors. At this stage, the market saturation level was a mere 7%.

2013-2014

Product x5

The product had reached a market saturation level of 78% and had reached the declined phase after peaking in the previous financial year. The R&D allocation at this rate was reduced to 5% for investigating the required pricing strategies. However, the profit margins reduced from 177, 682,000$ to 139,455,768$ in 2014 since most of the clients had shifted preferences to other products by competitors. The sales reduced drastically, and profits were further reduced due to the R&D allocations that spent additional costs in the production process. The product had reached most of its target market by this time.

Product x6

The product experienced further growth from 275,798,000 to 302,450,678$ as it entered the peak in its lifecycle. The R&D allocations were reduced to 30% since the product had already reached its maturity and was about to enter the decline stage. At this level, the market saturation was at 81% since the product had reached most of its targeted market. The product costs were not changed at this phase to maintain uniformity in projections. The slashed R&D costs helped reduce the overall costs involved in production which helped sustain the high profits of the firm. Further, the saturation level indicated that the product needed no further research since it had neared the decline phase.

Product x7

Based on the disappointing turn of events and overall returns, the X7 tablet production was cut. This was in a bid to reduce the losses incurred throughout the production process. It was a wise move to cut production since the products costs were draining the organization while the additional research was proving detrimental to the organization`s operations.

2014-2015

Profit Margin for Sally Smothers according to "Tablet Development Sim", 2016

X5

The market saturation at this point had reached 88% meaning the product was experiencing rapid declines in sales. Therefore, the A&D allocation was reduced to 25% in a bid to maximize revenue recorded. However, this move was not appropriate since the product had already reached the decline stage meaning no additional research was required. The dip in profit and revenue saw the X5 record losses in the in the final months of the financial year with the final projection standing at losses of 24,431,285.

X6

The X6 experienced a rapid decline in profit levels from 302,450,678 to 60,756,766. The decline stage required modifications in financial practices. This led to reduced prices of the product in a bid to maintain normal sales projections. However, the R&D costs were maintained at 30% instead of reducing the costs to zero. This was responsible for the gigantic dip in profit margins. The market saturation at this point was 88%.

My overall performance in the simulation was higher than Joe Thomas since I recorded higher overall returns of 1,553,678,550. However, my pricing and R&D allocations should have been modified further based on market projections to increase overall productivity. For instance, in the decline phase of a project, it is important to ensure that not much is invested in the R&D section while the prices are regulated accordingly.

References