Essay Question:
Direction: Students are given four essay questions. For each question, provide concise and creative answers. If necessary, students may provide some relevant examples to clarify the answers.
1. Below is the question about the break-even point (BEP) analysis, positioning statement, and total product concept. Using information below, answer the following questions.
You are marketing manager of a manufacturing company which produces one type of liquid detergent called brand "A". Consider the following information: retail price of the product is $10.00 and its retail margin is 30%, while the wholesaler takes a 10% margin. Variable manufacturing cost for brand A is $2.00 per unit, and the fixed manufacturing costs are $2,070,000. The advertising budget for this year is $1,000,000, and the product management expenses (including product manager's salary) is $100,000. The salesperson's commissions are 10% of the manufacturer's selling price, shipping costs are $0.50 per units. The total market demand for window cleaners this year (market size) is 10 million units.
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Profit = Total Revenue - Total Costs
= (# of product units sold * unit selling price) - (Fixed Cost + Variable Cost)
= (# of product units sold * unit selling price) - (Fixed Cost + # of product unit sold * unit variable cost)
= (unit selling price - unit variable cost)* # of product units sold - Fixed Cost)
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1) Calculate the break-even point (BEP) of brand A?
2) Calculate the profit size (or impact) of brand A when its current market share is 20% and the BEP is as calculated above.
3) Suppose that your manufacturing company has achieved current market share 20% by providing 28% price discount approximately. Calculate new BEP with this price promotional plan and discuss why this new promotional plan is not a proper way to maximize company profit.
4) Company decides to redesign current market offering of liquid detergent in order to achieve new 30% market share without implementing the above price promotional plan. To make this goal come true, first of all, develop new positioning statement for a new product of liquid detergent.
5) Suggest your concept of new liquid detergent product using either the concept of Three Levels of Product suggested by Philip Kotler and/or the definition of market offering suggested in the class, given the above positioning statement.
2. Designing an optimal distribution channel is a critical task for any firm in order to complete the exchange process between manufacturer and a group of target customers. Regarding this issue, answer the following questions.
1) Discuss why an intermediary such as retailer or wholesaler is needed between a manufacturer and a group of target customers, using the concepts of specialization, overcoming discrepancies, and contact efficiency.
2) Discuss why the internet technology (IT) has gotten rid of offline retail stores as the intermediary between manufacturer and a group of target customers, called disintermediation phenomenon. Discuss the necessity of disintermediation effort in terms of contact efficiency.
3) As discussed in the class, lots of new online business models have recently appeared as the variation of traditional value chain network (VCN). Choose one of the following online business models and discuss how it modifies the original structure of the value chain network to maximize the customer value (CV).
. ebay.com as an online auctioneer with market maker concept
. priceline.com which is defined as an online reverse auctioneer with market maker concept
. groupon.com as one group buying auctioneer with online version of quantity discount model
3. Suppose that a firm attempts to achieve one of two pricing objectives for a certain brand in the target market. Given the profit equation as shown below, answer the following questions.
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Profit = Total Revenue - Total Cost
= (# of product units sold * unit selling price) - (Fixed Cost + Variable Cost)
= (# of product units sold * unit selling price) - (Fixed Cost + # of product unit sold * unit variable cost)
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1) Suppose that the firm sets the final retail price at a higher level in order to achieve one pricing objective of market share leadership. Discuss if it is an appropriate approach to achieve the market share leadership pricing goal.
2) Suppose that the firm chooses one pricing objective of profit maximization for a certain brand. Discuss how to increase the customer value (CV) to maximize an overall profit of the brand for the firm. This question is about how the profit maximization pricing goal can be achieved with respect to the increase of customer value.