Capsim Strategy Paper

In other words, customers are willing to purchase low-tech products as long as their prices are relatively low. As a result, Niche Cost Leadership seems to be the most appropriate strategy for these two segments.

CVS needs to think through numerous elements impacting its’ business. Pricing strategies, rivals and their current products, consumer demands and suppliers are examples of these elements. For pricing strategies, CVS should consider closeouts, discounts, product bundle pricing, penetration pricing, geographical pricing, and membership or trade pricing.   For non-pricing strategies, options comprise: enhanced service quality, longer opening hours, advertising, and extended warranties (Kimmons, n.d.). By pricing similar products in a different way they must focus on regional demographics because geographic pricing enables the maximization of profit. For promoting unique or new products at provisional price drops, penetration pricing is the most effective.   Finally, bundle pricing and closeouts can be engaged when several

Michael Porter’s strategies regarding low-cost and differentiation draws contrast if a company wants to compete at a low cost or create niche market through offering a different product or service (Parnell, 2014). Low-cost strategy focuses on basic products or services for the mass market (Parnell, 2014). Due to low-cost, the business is able to offer low prices; however some companies increase their price for greater market margin and to compete with competitors (Parnell, 2014). However, consumers will only pay low to average price for basic items or service (Parnell, 2014). On the other hand, differentiation strategy primary focus can not be on low-cost in most cases. This strategy is looking for an unique niche product or service that an established company and introduce in a market (Parnell, 2014).

Best-cost provider strategy permits companies to aim squarely at the sometimes great mass of value-conscious buyers looking

Also, they have very efficient logistics and a low cost base such as labor, materials and facilities (Ibid, 1985). Essentially, if a firm can achieve and maintain cost leadership, it can obtain above average performance whilst the prices are still affordable in that industry. Hence, the cost leader does not try to be the industry innovator, it seeks to position its products to appeal to the average customer taste. The aimed goal is to increase efficiency and lower its costs in relation to competitors. Some of the

This product has strong antiperspirant and anti-staining prosperities, resulting in a universal appeal for the whole market. There is prospective for between 7.5% and 20% market share inside five years. Expected revenues inside five years are between $7.5M and $13M at a margin of around 50%. Development costs are low at less then $500k. However, at the higher end of the market share in 3 to 4 years, new plant will be required to meet scale at the cost of $6M. To meet potential low price scenarios, the current plan will be to expensive and automation will be required at the cost of $12M. Initial market testing is positive but not great.

Our team decided to choose the “Broad Differentiation” strategy as the basic strategy for our company. We will attempt to differentiate our product line in several distinct dimensions. By providing products that are vastly superior and unique from our competitors and pricing the products with an affordable price, we can gain something that is beneficial for the company in the future, which is customers’ loyalty and awareness. We may change or modify our strategy for the next round depending how it performs against our competitors.

The objective of a company using a low-cost provider strategy is to sell its products at the lowest possible price to attract customers. This is known as a price advantage. Companies using this strategy will typically earn low margins but achieve high sales volumes. Low-cost providers aim their products at the broad market, making them appeal to as many consumers as possible to achieve high sales volume.

Chart is really helpful for our decision to entry here. We wait the price to break fractal (the last high) at 154-155. We saw a good volume and price break at 2nd session of that day, we decide to take position 9400 lot at market price (155). The order is done on a good consolidation movement after price break. We sold it also at that day since:

A Cash Cow is a business unit within a portfolio that has a high market

Team 4 made the judgement to not adjust either brand because customer wants and needs did not change from the previous quarter. The group was confident in the products that were developed in the last quarter, and determined it would be best to stick with the products that were strategically developed in the previous quarter. The first decision made this quarter was the pricing strategy for each of Team 4’s brands. Here, the team reviewed what customers were willing to pay per region in each of the markets chosen; Team 4 also used a tip given by marketplace live; that in this quarter each brand will sell about 250 units each. This lead the group to determine what the cost of production would be for each product. Based on the cost of production and what customers were willing to pay, Team 4 decided it would be best to set prices to allow the company to earn an $800 profit on each product. Prices were set at the following for each brand: RSX9000 - $3450 and Vivaldi - $2750. At this price, each brand would be profitable and would give Team 4 the opportunity to accumulate some revenue to offset the expenses from the previous two quarters without exceeding what customers were willing to pay. Each brand was given a price rebate of $150 in attempt to attract more customer purchases. Team 4 also implemented point of purchase displays for each of the brands to attract customer purchases further.

When figuring pricing strategies within the perfect competition model a firm must consider that the attributes of the product and any cost advantages will eventually be exposed, and will either be mimicked or beaten (Whinston, 1995). Though the perfect competition model is ideal, it is seemingly impossible for a single firm to consistently produce its services and goods at the lowest cost. Thus, the perfect competitor must continuously seek to improve cost management, its production technology, and even the economies of scope. The most effective way to do so is through the cost leadership strategy (Kimmons, 2013). This strategy both requires and allows the corporation to constantly seek ways to further decrease costs, enabling the firm to stay more advanced with leverage over the competition. This process needs to be repetitive, in order to maintain established leverage.

Mydin offers varieties of similar range products as their competitors where they are still able to undercut prices by reasonable percentages. Mydin’s pricing strategy is low price strategy where this strategy emphasizes on low price products as well as maintaining the quality of their products. It also focuses on reducing the cost from their operation to produce lower price products yet good quality. Besides that, Mydin used low price strategy to attract lower and medium income group in across Malaysia. Therefore, lower and medium income families are willing to purchase at lower price and high quality products at Mydin. Nevertheless, Mydin able to sustain its customers for long period of time and it will increase customer loyalty through their low price strategy. In addition, this low price strategy may attract small wholesalers and petty traders in getting cheaper supplies from Mydin. “It has also contributed to the business expansion and is reflected by an increase in number of wholesalers and petty traders who have registered as their frequent buyers (Armum, N.D)”. Furthermore, Mydin also emphasize in bulk buying and bulk selling to enjoy lower prices. Thus, Mydin selling in bulk enable to cut cost as well as sustains lower price for its wholesaler, bulk purchasers and end user. Therefore, Mydin was encouraging people to buy in bulk in order to save more. In addition, Mydin purchase raw materials in bulk in order to save more cost. “Mydin sources merchandise both locally and from other countries including Bangladesh, China, France, Hong Kong, India, Indonesia and some more” (Armum,

The purpose of this writing is to explain the cost/price leadership strategy of a company that has established a strong base in spite of facing competition from various established brands. The company’s focus strategies as well various aspects of strategy clock such as economies of scale is explained. It talks about the key resources the company employs in this cost leadership strategy to cover the market segment, the threats it faces in the foreseeable future with regard to the market share, price and innovation. Also, the counter measures applied by the company in order to counter balance the opportunities, threats and maintaining sustainability.

Pricing strategy does not mean to always be the cheapest, but rather where the company sees itself in the market. It can price its product as premium if it believes that is what the customers see it too. Setting price too low when customers are already willing to pay premium price is an unnecessary loss of profit.