PDA Sim Essay Example | Topics and Well Written Essays - 1250 words

PDA Sim - Essay Example The X6 is the high end product in its second year of production. This consumer segment shops for performance and increasing the R&D expense should be able to be offset by an associated increase in price. The goal will be to raise the market share to 30%, which will require sales of approximately 1 million units. The X7 is a new entrant that is a combination of attractive price and performance. Currently it is priced at $200 and is the lowest cost PDA in the lineup. Increasing the sales on the X7 should result in lowering the marginal cost and increasing the profit. Last year it lost money due to low sales. According to Pete Cunningham, senior analyst at Canalys, "With the rapid increase in demand for new features and services, smartphones are migrating into the higher volume, mid-range market segments" (qtd. in "Symbian Fast Facts Q4 2007"). It will be assumed that the smartphone and the PDA has similar market dynamics. The strategy question becomes, can we increase price and market share As a compromise, the price will be increased moderately and R&D spending increased significantly. The outcome for run number 1 was $965,929,406. One of the problems with the strategy was that after lowering the price to $200, it hit saturation the next year. ... The theory is that the X7 needs more R&D money allocated to get the performance necessary to gain market share. Part of the strategy will be to recover the increase in R&D costs of the X7 by increasing the price. In addition, the X6 began to lose sales in the fourth year. The new strategy will be to raise the prices on the X6 and X7 at $450 and $250, but decrease the X6 R&D funding, while increasing the R&D on the X7. This is based on the theory that the older and more mature X6 product will not benefit as much from R&D as the newly developed X7. During this run, the X& R&D will increase when the X5 is discontinued as there is a price similarity and the X7 is a newer and better performing product. The beginning scenario: X5 Price $225 R&D 5% X6 Price $450 R&D 35% X7 Price $250 R&D 60% Outcome and Analysis Run Number 2 The profit from run number 2 was 1,048,169,006. This was only marginally higher than run number 1. One of the problems encountered was that the X6 began to lose sales volume during the third and fourth year as it began to saturate the market during the third year. In addition, the X7 sales never caught on, even with the increase in R&D. Run Number 3 Strategy For run number 3, I used the strategy from run number 2 with the following changes: Reduce the price on the X7 and increase its R&D spending. Decrease the R&D on the X6 after the 2nd year. Also, the price will be reduced on the X6 at that time. The beginning scenario: X5 Price $200 R&D 5% X6 Price $450 R&D 30% X7 Price $200 R&D 65% Outcome and Analysis Run Number 3 The profit from run number 3 was 1,156,812,698. This was the highest to date and was approximately 20 percent above the original simulation. The X7 sale volume rose as anticipated, though the X6 fell off