A company's product has an expected 4-year life cycle from research, development, and design through its withdrawal from the market. Budgeted costs are:The company plans to produce 200,000 units and price the product at 125°!a of the wholelife unit cost. Thus, the budgeted unit selling price is:
Answer(s): D
Whole-life costs include after-purchase costs operating, support, repair, and disposal) incurred by customers as well as life-cycle costs R&D, design, manufacturing, marketing, distribution, and research). Hence, the budgeted unit whole-life cost is US $36 [($2,000,000 + $3,000,000 + $1,200,000 + $1,000,000) - 200,000 units], and the budgeted unit selling price is US $45 $36 125CYo).
A manufacturing company produces plastic utensils for a particular segment at the lowest possible cost. The company is pursuing a cost:
Answer(s): B
A cost focus strategy aims at cost leadership in a particular segment, such as a regional market or a specialty product line. The rationale for a focus strategy is that the narrower market can be better served.
The dominant firm in a market pursues a market-leader strategy. This strategy may involve
Constant innovation to improve products and services, control costs, and increase distribution effectiveness is the basis for a good offensive strategy. The leader must continuously improve the value offered to customers.
During the growth stage of a product's life cycle,
In the growth stage, sales and profits increase rapidly, cost per customer decreases, customers are early adopters, new competitors enter an expanding market, new product models and features are introduced, and promotion spending declines or remains stable. The firm enters new market segments and distribution channels and attempts to build brand loyalty and achieve the maximum share of the market. Thus, prices are set to penetrate the market, distribution channels are extended, and the mass market is targeted through advertising. The strategy is to advance by these means and by achieving economies of productive scale.
In a product's life cycle, the first symptom of the decline stage is a decline in the:
The sales of most product types and brands eventually decrease permanently. This decline may be slow or rapid. This first symptom of the decline stage of a product's life cycle triggers such other effects as price cutting, narrowing of the product line, and reduction in promotion budgets.
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