Tata Simulation
Introduction
The world’s first all-optical notebook computer was launched in 2003 by Quasar. The Neutron is the result of revolutionary efforts by the company. The product processor and memory uses high-speed optical conductors that are five times the speed of existing microchip based companies. The Tata simulator exercise is an aid to decide which industry structure Quasar should use to increase profits, create competitive advantage and explores implications of each on business ventures.
Market Scenario According to Grant (1991), a corporation’s capacity to gross profits in excess of the sum of debt and equity is dependent upon two aspects: having competitive advantage over competitors and the rate of growth in a particular industry. Profits are earned by selling large amounts of products or services at cheaper prices to attract consumers, or selling at a high price when you are the sole company offering a particular product or service. For at least the next three years there is a monopoly market and Quasar owns the patent on the Neutron. This is an exceptional product so there will be challenges in the industry. The intention is to maximize profits while there is little threat of substitutes or threat of entry from other companies (Newman, 2013).
Pricing Strategy Selling 8.2 million Neutrons at $1850.00 yields a profit of 0.29 billion. Jane’s advice (Vice President of Finance) to cut advertising costs by 200 million would add 200 million to the bottom line. Jane is most likely relying on income statements and balance sheets, which has backward looking data (Newman, 2013) but shows that the company would profit by spending less on advertising while the product is still new to the industry. The cost to produce one single unit at this price is a little less than 10 million. The product’s demand is inelastic; it would sell the same number of units without regard to price. Robert’s (Vice President of Marketing) advisement is to
The world’s first all-optical notebook computer was launched in 2003 by Quasar. The Neutron is the result of revolutionary efforts by the company. The product processor and memory uses high-speed optical conductors that are five times the speed of existing microchip based companies. The Tata simulator exercise is an aid to decide which industry structure Quasar should use to increase profits, create competitive advantage and explores implications of each on business ventures.
Market Scenario According to Grant (1991), a corporation’s capacity to gross profits in excess of the sum of debt and equity is dependent upon two aspects: having competitive advantage over competitors and the rate of growth in a particular industry. Profits are earned by selling large amounts of products or services at cheaper prices to attract consumers, or selling at a high price when you are the sole company offering a particular product or service. For at least the next three years there is a monopoly market and Quasar owns the patent on the Neutron. This is an exceptional product so there will be challenges in the industry. The intention is to maximize profits while there is little threat of substitutes or threat of entry from other companies (Newman, 2013).
Pricing Strategy Selling 8.2 million Neutrons at $1850.00 yields a profit of 0.29 billion. Jane’s advice (Vice President of Finance) to cut advertising costs by 200 million would add 200 million to the bottom line. Jane is most likely relying on income statements and balance sheets, which has backward looking data (Newman, 2013) but shows that the company would profit by spending less on advertising while the product is still new to the industry. The cost to produce one single unit at this price is a little less than 10 million. The product’s demand is inelastic; it would sell the same number of units without regard to price. Robert’s (Vice President of Marketing) advisement is to
References: Anand, B. N. Harvard FSS: Crafting Business Strategy and Environmental Scanning. (2006). (Accession Number: 8282c. Lecturers: Anand, Bharat N.. Document Type: Video; Transcript. Publication Type: Video). Harvard Business School Faculty Seminar Series. Grant, R. M. (1991). The Resource-Based Theory of Competitive Advantage: Implications for Strategy Formulation. California Management Review, 33(3), 114-135. Newman, Charles. (2013). Managing strategy in the global marketplace. The Graduate School University of Maryland University College. Porter’s Competitive Strategies (2012). Retrieved from: http://vectorstudy.com/management- theories/porters-competitive-strategies