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MBA interactive project – strategic review

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 Volume
406,882,843
248,254,911
64%
0.639

Cost
Variable Costs
222,634,008
135,837,593
64%
0.639

Fixed Costs
72,000,000
72,000,000
0%
0.000

R & D Costs
7,260,000
10,835,821
-33%
-0.330

Total Costs
301,894,008
218,673,414
38%
0.381

Profit
Total Profit
104,988,835
29,581,497
214%
2.549

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 Volume
492,861,819
406,882,843
21%

Cost
Variable Costs
269,679,108
222,634,008
21%

Fixed Costs
72,000,000
72,000,000
0%

R & D Costs
7,260,000
7,260,000
0%

Total Costs
348,939,108
301,894,008
16%

Profit
Total Profit
143,922,711
104,988,835
37%

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 Volume
378,331,427
492,861,819
-23%

Cost
Variable Costs
207,011,536
269,679,108
-23%

Fixed Costs
72,000,000
72,000,000
0%

R & D Costs
7,260,000
7,260,000
0%

Total Costs
286,271,536
348,939,108
-18%

Profit
Total Profit
92,059,892
143,922,710
-36%

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 Volume
186,025,046
378,331,427
-51%

Cost
Variable Costs
101,787,289
207,011,536
-51%

Fixed Costs
72,000,000
72,000,000
0%

R & D Costs
7,260,000
7,260,000
0%

Total Costs
181,047,289
286,271,536
-37%

Profit
Total Profit
4,977,757
92,059,892
-95%

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 Volume
137,927,070
186,025,046
-26%

Cost
Variable Costs
75,469,529
101,787,289
-26%

Fixed Costs
72,000,000
72,000,000
0%

R & D Costs
7,260,000
7,260,000
0%

Total Costs
154,729,529
181,047,289
-15%

Profit
Total Profit
-16,802,459
4,977,757
-438%

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 Volume
491,132,541
217,363,262
126%
1.260

Cost
Variable Costs
304,034,430
134,558,210
126%
1.260

Fixed Costs
36,000,000
36,000,000
0%
0.000

R & D Costs
7,480,000
11,164,179
-33%
-0.330

Total Costs
347,514,430
181,722,389
91%
0.912

Profit
Total Profit
143,618,111
35,640,873
303%
3.030

Total Profitability
29%
16%
81%
0.813

Economic Value Added
Capital Charge
1,200,000
1,200,000
0%
0.000

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 Volume
786,851,911
491,132,541
60%

Cost
Variable Costs
487,098,802
304,034,430
60%

Fixed Costs
36,000,000
36,000,000
0%

R & D Costs
7,480,000
7,480,000
0%

Total Costs
530,578,802
347,514,430
53%

Profit
Total Profit
256,273,109
143,618,111
78%

Total Profitability
33%
29%
14%

Economic Value added
Capital Charge
1,200,000
1,200,000
0%

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 Volume
809,316,039
786,851,911
3%

Cost
Variable Costs
501,005,167
487,098,802
3%

Fixed Costs
36,000,000
36,000,000
0%

R & D Costs
7,480,000
7,480,000
0%

Total Costs
544,485,167
530,578,802
3%

Profit
Total Profit
264,830,872
256,273,109
3%

Total Profitability
33%
33%
0%

Economic Value added
Capital Charge
1,200,000
1,200,000
0%

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 Volume
342,283,703
809,316,039
-58%

Cost
Variable Costs
212,508,959
501,005,167
-58%

Fixed Costs
36,000,000
36,000,000
0%

R & D Costs
7,480,000
7,480,000
0%

Total Costs
255,988,959
544,485,167
-53%

Profit
Total Profit
87,297,744
264,830,872
-67%

Total Profitability
25%
33%
-24%

Economic Value added
Capital Charge
1,200,000
1,200,000
0%

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 Volume
237,731,058
342,283,703
-31%

Cost
Variable Costs
147,166,845
212,508,959
-31%

Fixed Costs
36,000,000
36,000,000
0%

R & D Costs
7,480,000
7,480,000
0%

Total Costs
190,646,845
255,988,959
-26%

Profit
Total Profit
47,084,213
87,297,744
-46%

Total Profitability
20%
25%
-20%

Economic Value added
Capital Charge
1,200,000
1,200,000
0%

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 Volume
30,341,372
0
#DIV/0!

Cost
Variable Costs
9,335,807
0
#DIV/0!

Fixed Costs
36,000,000
0
#DIV/0!

R & D Costs
7,260,000
0
#DIV/0!

Total Costs
52,595,807
0
#DIV/0!

Profit
Total Profit
-22,254,435
0
#DIV/0!

Total Profitability
-73%
0%
#DIV/0!

Economic Value added
Capital Charge
2,400,000
2,400,000
0%

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 Volume
43,411,367
30,341,372
43%

Cost
Variable Costs
222,622
9,335,807
-98%

Fixed Costs
43,411,367
36,000,000
21%

R & D Costs
222,622
7,260,000
-97%

Total Costs
43,411,367
52,595,807
-17%

Profit
Total Profit
-13,205,976
-22,254,435
-41%

Total Profitability
-30%
-73%
-59%

Economic Value added
Capital Charge
2,400,000
2,400,000
0%

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 Volume
61,833,138
43,411,367
42%

Cost
Variable Costs
19,025,581
13,357,344
42%

Fixed Costs
36,000,000
36,000,000
0%

R & D Costs
7,260,000
7,260,000
0%

Total Costs
62,285,581
56,617,344
10%

Profit
Total Profit
-452,443
-13,205,976
-97%

Total Profitability
-1%
-30%
-97%

Economic Value added
Capital Charge
2,400,000
2,400,000
0%

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 Volume
87,444,976
61,833,138
41%

Cost
Variable Costs
26,906,147
19,025,581
41%

Fixed Costs
36,000,000
36,000,000
0%

R & D Costs
7,260,000
7,260,000
0%

Total Costs
70,166,147
62,285,581
13%

Profit
Total Profit
17,278,829
-452,443
-3919%

Total Profitability
20%
-1%
-2100%

Economic Value added
Capital Charge
2,400,000
2,400,000
0%

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 Volume
122,312,118
87,444,976
39%

Cost
Variable Costs
37,634,498
26,906,147
39%

Fixed Costs
36,000,000
36,000,000
0%

R & D Costs
7,260,000
7,260,000
0%

Total Costs
80,894,498
70,166,147
21%

Profit
Total Profit
41,417,620
17,278,829
67%

Total Profitability
34%
20%
21%

Economic Value added
Capital Charge
2,400,000
2,400,000
0%

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%

Remaining Customers
4,148,689
5,000,000
-17%

Market Saturation
31%
17%
82%

Sales volume
First-Time Customers
1,369,625
851,311
61%

Repeat Sales
165,782
85,500
94%

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%

Remaining Customers
2,779,064
4,148,689
-33%

Market Saturation
54%
31%
74%

Sales volume
First-Time Customers
1,575,220
1,369,625
15%

Repeat Sales
284,636
165,782
72%

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%

Remaining Customers
1,203,845
2,779,064
-57%

Market Saturation
80%
54%
48%

Sales volume
First-Time Customers
1,007,431
1,575,220
-36%

Repeat Sales
420,235
284,636
48%

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%

Remaining Customers
196,414
1,203,845
-84%

Market Saturation
9%
80%
-89%

Sales volume
First-Time Customers
196,414
1,007,431
-81%

Repeat Sales
505,567
420,235
20%

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%

Remaining Customers
0
196,414
-100%

Market Saturation
100%
97%
3%

Sales volume
First-Time Customers
0
196,414
-100%

Repeat Sales
520,480
505,567
3%

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%

Remaining Customers
4,525,998
5,000,000
-9%

Market Saturation
18%
9%
100%

Sales volume
First-Time Customers
1,061,657
474,002
124%

Repeat Sales
107,706
43,529
147%

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%

Remaining Customers
3,464,341
4,525,998
-23%

Market Saturation
37%
18%
106%

Sales volume
First-Time Customers
1,654,207
1,061,657
56%

Repeat Sales
219,250
107,706
104%

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%

Remaining Customers
1,810,134
3,464,341
-48%

Market Saturation
67%
37%
81%

Sales volume
First-Time Customers
1,537,048
1,654,207
-7%

Repeat Sales
389,895
219,250
78%

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%

Remaining Customers
273,085
1,810,134
-85%

Market Saturation
95%
67%
42%

Sales volume
First-Time Customers
273,085
1,537,048
-82%

Repeat Sales
544,257
389,895
40%

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%

Remaining Customers
0
273,085
-100%

Market Saturation
100%
95%
5%

Sales volume
First-Time Customers
0
273,085
-100%

Repeat Sales
566,026
544,257
4%

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!

Remaining Customers
15,000,000
0
#DIV/0!

Market Saturation
2%
0%
#DIV/0!

Sales volume
First-Time Customers
132,963
0
#DIV/0!

Repeat Sales
22,533
0
#DIV/0!

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%

Remaining Customers
14,867,037
15,000,000
-1%

Market Saturation
3%
2%
50%

Sales volume
First-Time Customers
189,992
132,963
43%

Repeat Sales
32,630
22,533
45%

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%

Remaining Customers
14,677,044
14,867,037
-1%

Market Saturation
4%
3%
33%

Sales volume
First-Time Customers
270,104
189,992
42%

Repeat Sales
46,989
32,630
44%

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%

Remaining Customers
14,406,941
14,677,044
-2%

Market Saturation
6%
4%
50%

Sales volume
First-Time Customers
380,925
270,104
41%

Repeat Sales
67,511
46,989
44%

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%

Remaining Customers
14,026,016
14,406,941
-4%

Market Saturation
8%
6%
44%

Sales volume
First-Time Customers
530,642
380,925
38%

Repeat Sales
96,600
67,511
44%

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.
Conclusion
The simulations developed for the period 2004 to 2008 can be applied in making decisions for the period 2012-2015. In 2015 the management should continue with the production of Handheld X5, and Handheld X6. However, the management should differentiate the products because they have reached the maturity stage. For Handheld X7, the management should conduct intensive promotion to make all customers aware about the existence of the product.
 
 
 
Works Cited
Forio. PDA SIM simulation. 2012. Web. 30May, 2012 http://forio.com/simulation/pdasim
Netmba. The Product Life Cycle. 2012. Web 30 May 2012 http://www.netmba.com/marketing/product/lifecycle/
 
 
 
Appendix
Figures
Figure 1: Revenue change from 2004 to 2005
Source: Forio (2012)
 
 
Figure 2: Profit change from 2004 to 2005
Source: Forio (2012)
 
 
 
 
Figure 3: Change in sales between 2004 and 2005
Source: Forio (2012)
 
 
 
 
 
Figure 4: Change in prices between 2004 and 2005
Source: Forio (2012)
 
 
 
 
 
Figure 5: Change in performance between 2004 and 2005
 
Source: Forio (2012)
 
 
 
 
 
 
Tables
Table 1: Total income change from 2004 to 2005

Financials for 2005

This year
Last year
%change

Revenue
Sales volume
2,600,902
1,611,165
61%

Revenue volume
774,307,366
470,680,709
65%

Cost
Variable costs
445,756,975
268,950,985
66%

Fixed costs
140,000,000
140,000,000
0%

R&D costs
20,000,000
20,000,000
0%

Total costs
605,756,975
428,950,985
41%

Profit
Total profit
168,550,391
41,729,725
304%

Total profitability
22%
9%
145%

Economic value added
Capital Charge
5,520,000
5,520,000
0%

EVA
163,030,391
36,209,725
350%

 
 
 
 
 
Table 2: X5 Income change between 2004 and 2005

Financials for 2005

This year
Last year
%change

Revenue
Sales volume
1,448,031
936,039
55%

Revenue volume
362,007,649
234,009,768
55%

Cost
Variable costs
202,724,283
131,045,470
55%

Fixed costs
70,000,000
70,000,000
0%

R&D costs
6,666,666
6,666,667
0%

Total costs
279,390,950
207,712,137
35%

Profit
Total profit
82,616,699
26,297,631
214%

Total profitability
23%
11%
103%

Economic Value Added
Capital Charge
1,920,000
1,920,000
0%

EVA
80,696,699
24,377,631
231%%

Source: Forio (2012)
 
 
 
 
Table 3: X6 Income change between 2004 and 2005

Financials for 2005

This year
Last year
%change

Revenue
Sales volume
908,627
508,229
79%

Revenue volume
363,450,944
203,291,529
79%

Cost
Variable costs
227,156,840
127,057,206
79%

Fixed costs
35,000,000
35,000,000
0%

R&D costs
6,868,687
6,868,687
0%

Total costs
269,025,527
168,925,893
59%

Profit
Total profit
94,425,417
34,365,637
175%

Total profitability
26%
17%
54%

Economic value added
Capital Charge
1,200,000
1,200,000
0%

EVA
93,225,417
33,165,637
181%

Source: Forio (2012)
 
Table 4: X7 income change between 2004 and 2005

Financials for 2005

This year
Last year
%change

Revenue
Sales volume
244,244
166,897
46%

Revenue volume
48,848,773
33,379,412
46%

Cost
Variable costs
15,875,851
10,848,309
46%

Fixed costs
35,000,000
35,000,000
0%

R&D costs
6,464,646
6,464,646
0%

Total costs
57,340,498
52,312,955
10%

Profit
Total profit
-8,491,725
-18,933,544
-55%

Total profitability
-17%
-57%
-69%

Economic value added
Capital Charge
2,400,000
2,400,000
0%

EVA
-10,891,725
-21,333,544
49%

Source: Forio (2012)
 
 
 
 
Table 5: Change in X5 Markets from 2004 and 2005

This year
Last year
% change

Customer base
Installed base
1,875,622
1,025,000
83%

Remaining customers
4,149,378
5,000,000
-17%

Market saturation
31%
17%
83%

Sales volume
First-time customers
1,291,729
850,622
52%

Repeat sales
156,302
85,417
83%

Total sales
1,448,031
936,039
55%

Source: Forio (2012)
 
 
 
 
 
Table 6: Change in X6 Markets between 2004 and 2005

This year
Last year
% change

Customer base
Installed base
965,553
500,000
93%

Remaining customers
4,534,447
5,000,000
-9%

Market saturation
18%
9%
93%

Sales volume
First-time customers
825,216
465,553
77%

Repeat sales
83,411
42,676
95%

Total sales
908,627
508,229
79%

Source: Forio (2012)
 
 
 
 
 
Table 7: Change in X7 Markets between 2004 and 2005

This year
Last year
% change

Customer base
Installed base
442,647
300,000
48%

Remaining customers
14,857,353
15,000,000
-1%

Market saturation
3%
2%
48%

Sales volume
First-time customers
208,465
142,647
46%

Repeat sales
35,779
24,250
48%

Total sales
244,244
166,897
46%

Source: Forio (2012)
 
 

Year by Year Decisions: Pricing & R&D Allocations

PRODUCT
DECISION
2012
2013
2014
2015

X5
Price
$       265
$       265
$       265
$       265

R&D %
33%
33%
33%
33%

Discontinue?
NO
NO
NO
NO

X6
Price
$       420
$       420
$       420
$       420

R&D %
34%
34%
34%
34%

Discontinue?
NO
NO
NO
NO

X7
Price
$       195
$       195
$       195
$       195

R&D %
33%
33%
33%
33%

Discontinue?
NO
NO
NO
NO

Table 1: Default decisions for the three products
 


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