Market Simulation (2012-2015.)

Executive Summary

Clipboard Tablet Company is a communication tablet manufacturer whose products are X-5, X6, and X7 (Epson, 2012). The company’s products have been on the market for seven, six, and five years respectively. The price and performance of product X7 matters to customers, whereas for X5 they are only sensitive to price but not performance. In relation to tablet X6, customers do not care about the changes in price but are sensitive to performance. In analyzing market strategies for the various financial years, pricing and allocation of cost to products is complex, variable and interconnected.

In order to develop a strategy for the year 2016, this market forecasting applies simulation to forecast and evaluate performance for each product in the financial years 2012, 2013, 2014, and 2015. The goal of the forecast is to maximize the profitability of the tablet products by balancing the allocation of costs and product pricing (Clancy, Krieg, & Wolf, 2006). In a nutshell, the company’s growth witnessed a positive growth in sales, revenue, and profit. The profit increased from $352,144, 973, in 2012, to %1,473,237,118, in 2014. However, the company eliminated product X5 due to stagnation in sales. In 2016, the prices will remain at $430 for X6 and $ 170 for X7, while the cost will be 50% each.

Yearly Market Analysis

Year 2012: The Company priced X-5, 6, and 7 tablets at 285, 430, and 190 dollars, and allocated the costs as 33%, 34%, and 33% respectively. In total, the company sold 3,102,177 units bringing in $ 1,055,294,575, in the form of annual revenue. The fixed, variable, and R&D costs summed up to $784,720,740. In relation to the margins, the company raised a profit of $270,573,835, which is equivalent to 26% of the annual revenue. This is 10% increase in profit as compared to 2011. In terms of product-performance comparison, X5 sold more units than the other two products. It registered 1,647,592 of sales. The yearly revenue collected from tablet X5 was $469,563,809, while the product profit was $139,504,962, equivalent to 30% of the annual revenue from the product. Product X7 experienced the lowest, comparable sales with unit sales of 165, 586 units and, therefore, posted a negative profit of 73% compared to 0% of the previous year. In average, total annual revenue from each of the three brands were on a rising trend. However, tablet X7 had a decline in profit, unlike the positive growth in the profits of the other products.

Year: 2013: In this financial year, the company set prices at 285, 430, and 190 dollars for tablets X-5, 6, and 7, in that order. In addition, there were changes in cost allocation to 34%, 33%, and 33%, in the same order of products. In comparison to the previous year, the general annual revenues and margins increased for all the three products. In addition, X7’s income and profitability improved. In relation to the 2013 annual income, the products achieved unit sales of 4,517,754 products, annual income of $ 1,574,590,782, making 30% in general profits. In terms of the profit attributed to individual products, X5 attained a 34% profit from the sale of 2,145,622 units. X5’s profit is higher by 4% than the figure realized in the previous year. Product X6 attained a 31% profit coming from customer purchases of 2,134,931 product units. This level of profit is higher by 3% than the figure posted by the product in 2012. The company sold 237,202 units of X7, realizing a profit of -30%. In the previous year, the profit attained from the sales of X7 was negative 73% and; therefore, the 2013 profit is a significant change towards attaining a positive figure.

Year 2014: In the financial year 2014, the company only altered the price of X7 to $170, while the other product prices remained the same as set for 2013. However, cost allocation remained unchanged from the figures set for the previous year. The result for the adjustments is that the individual profits and revenue for X-5 and X-6 dropped whereas X7 expressed a continued growth in annual sales, profit, and revenue. The general profit was 30%, coming from the sale of 4,630,914 units, equivalent to 1,608,712,408 dollars in revenue. X5 experienced a drop in sales and profit, registering only a 32% profit and sales of 1,858,493 units. X6 also experienced an insignificant increase in profit improving from 31%, in the previous year, to 32%. X7 handheld expressed a significant growth in profit, rising the previous year’s -30% to 0%. The tablets X5 and X6 were both on a decline in terms of sales.

Year 2015: In 2015, the company discontinued the production of tablet X5, but did not alter the prices of X6 and X7. The total sales were 1,802,473 units, while annual revenue was $598,856,305. As a proportion of the total revenue, the profit was $153,274,494, which is equivalent to 26%. The profit from X6 dropped from 30% to 26% compared to 1014. The revenue from the product dropped to $483,644,102, with only 1,124,754 units sold compared to 2,337,422 units purchased by customers in 2014. In relation to X7, the total number of units sold was 677,719, while the revenue received was $115,212,202. This represents a 25% profit, the highest figure of X7 profit since 2012.

General Review (Market Advice.)

In relation to the information provided by the market advisor, the price of X6 was higher than the prices of equivalent products in the market. Its sales are in the growth phase of the product life cycle. In addition, a high proportion of possible clients for X6 did not purchase the product in 2012. On the other hand, the performance of X5 was in line with the performance of other products of the same category. The cumulative profit score through 2012 was 352, 144,973. In 2013, market information showed that the price for tablet X7 was higher than the prices of similar, competing products. The X7 handheld tablet was in the growth phase. The product had many potential customers remaining in the market. In addition, market information also showed that the majority of customers for X7 were new customers. Its performance was below par as compared to competing products in the market. The cumulative profit score for 2013 was $830,740,435. In 2014, market information revealed that customers paid about the same price for the products (X5, X6, and X7) as they paid for equivalent products. In addition, the X5 handheld was in the shakeout phase of the product lifecycle, and its new sales are declining. The cumulative profit score for year 2014 was 1,315,627,937. In 2015, market information suggested that customers paid the same price for the Clipboard Tablet company products as they paid for equivalent competing products. The final cumulative profit score is 1,473,237,118. This is the highest score relative to the performances of the previous four years. However, the highest score obtainable score is around $2,100,000,000.

Decisions for 2016

The Clipboard Tablet Company has grown through a positive path of profit since 2012 all through 2015. The totals for general revenue and profits are increasing. The profit has grown from $352,144, 973, in 2012, to %1,473,237,118, in 2015. However, the decline in X5’s revenue and profit is the causative factor for the diminishing, overall earnings, in spite of the observed profitability throughout the time period. The aggregate profit for 2015 is the highest compared to the aggregate for 2012, 2013, 2024, and 2015. The alignment of the product prices with the market rates is pivotal for the rise in sales and profit. The company, having eliminated X5 from the market, intends to stick to the prices of 2015 for X6 and X7 as informed by market information. In addition, the balance in cost allocation is also essential to sustainable profitability of the remaining products (Berry, 2010). In terms of the cost, the products will share the cost at a rate of 50%.

References

Berry, T. (2010). “Sales and Market Forecasting for Entrepreneurs”. New York, NY: Business Expert Press.

Clancy, K., Krieg, P., & Wolf, M. (2006). “Market New Products Successfully”. Lanham, MD: Rowman & Littlefield Publishers.

Elson, J. (2012). “Tablet Development Simulation”. http://forio.com/simulate/jelson/tablet-development-sim-1/simulation/#p=page0

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