The Cumulative Profit Score in 2011 Is 81, 571, 138 That Should Be Improved in 2012 And

//Clipboard Tablets Company manufactures three products that include X5, X6, and X7. In the following discussion, there will be an exploration of the price strategy and Research &Development strategy to enhance the performance of all the three products withthe consideration of different phases of the product lifecycle. There will be an elaboration of strategies over 2012 and 2013 for the overall improvement of the company.//

The cumulative profit score in 2011 was 81,571,138 that will be improved by 2015 regarding the rational strategy for pricing and Research and Development expenses (R&D expense). The Cost Volume Analysis, with the simulation process, can provide assistance to improve the overall situation. The product X5 is in maturity phase, and it is price sensitive that means the strategy regarding pricing and R&D expense should be taken on the basis of price and performance of the product. The product X6 is in the growth phase, and it has no price sensitivity that means there is a need to consider performance without focusing on the price. The product X7 needs to be introduced in the market that means there will be a loss for a couple of years because of taking the time to establish in the market.

Year 2012

The strategy regarding the product X5 is to reduce the price by $10 that means the new price will be $275 with the increase in R&D expense to 40%. The price and the suitability of the product are important for improving the overall performance of the product. The strategy regarding the product X6 is to increase the R&D expense to 44% with the increase in the price to $440. The price of X7 should be reduced to $180 with an increase in the R&D expense to 37% so as to establish the product in the market (Tan, 2014).

Input variables:

Simulation Results:

The score in 2012 has reached 352,243,200. The overall results of 2012 show that there is an improvement in the profitability from 16% to 26% with the increase in the sales volume and sales revenue that can be viewed in respect to the above table. Per unit margin has improved in 2012 because per unit margin is $89, whereas in 2011 it was $53 that shows there is an increase in the overall profitability of the company. There is an improvement in the fixed costs of 37,500,000 because of increase in the R&D expenses.

All the three products are not at saturation point that can be observed with the increase in the sales volume in respect of all the products. The three products are still able to produce new sales. However, X5, in near future, will not be able to generate new sales because it is in maturity phase (Forio.com. Forio Simulate).

Year 2013

On the basis of results of 2012, in 2013, it is decided that there will be a change in the strategy of the product X5 in terms of no reduction. There will be an increase in the R&D expense to 42% in order to improve the suitability of the product to the customers. There will be a change in the strategy with no increase in the price, which is at $440, in case of X6, with an increase in the R&D expense to 44%. The impact of the increase in the price of X6 is not observed as customers have focused on the performance of the product. The product X7 will also need to increase its R&D expense to 41% with the no change in price $180.

Simulation Results:

The overall score in 2013 is 860,241,149. The overall results of 2013 show that there is further improvement in the profitability from 26% to 31% with the increase in the sales volume and sales revenue that can be seen from the above table. Per unit margin has improved in 2013 to $102.50, whereas in 2012 it was $89. There is no improvement in the fixed costs in 2013 as compared to 2012.However, there is a change in the variable cost per unit that can be viewed in respect tothe above table (Forio.com. Forio Simulate).

In 2013, all the three products were not at saturation point because of increased volume of sales and there is still a potential to increase the sales volume in respect of all the three products. The product X7 is still in the loss, but it is improving its situation in the market.

//So far, there has been a discussion on the results of 2012 and 2013, now there will be a description of results of 2014 and 2015 in terms of sale units and revenue with unit margin.The discussion will also explore the pricing and R&D expenses strategies for 2014 and 2015.//

Year 2014

On the basis of results of 2013, it is decided that there should be a further reduction in the price of X5 to $267 with an increase in the R&D expense to 45%. The strategy regarding X6 is to increase its R&D expense to 47% with an increase in the price by $10 that means the new price will be $450. The strategy regarding X7 is to increase the R&D expense to 48% with a decrease in the price to $175 (Tan, 2014).

Inputs:

Simulation Results:

The overall score in 2014 is 1,281,927,788. The overall results of 2014 indicate that there is no further improvement in the profitability rate because in 2014 it is 30%, whereas in 2013, it was 31%. There is a reduction in the overall sales volume with the reduction in the total revenue from all the three products. The reduction is due to the decrease in the sales volume of X5 that means this product is at saturation point. There are no new sales of this product in the market andthe product sale will decrease over the period. Per unit margin has increased in 2014to $102.81, whereas in 2013 it was $102.50. There is no change in the fixed costs in2013 and 2014.

In 2014, X5 is at its saturation point and in the next year, there will be no increase in the sales volume of this product. Other two products are still out of saturation point and will improve their performance in the market. X7 is in profitability, which is in the growth phase and there will be further improvement in the sales of this product (Forio.com. Forio Simulate).

Year 2015

On the basis of results of 2014, the strategy regarding the product X5 is to further reduce the price by $3 and the new price will be $260 with an increase in the R&D expense to 48%. The strategy regarding X6 is to increase the R&D expense to 52% with no change in the price that will be maintained at $450. The strategy regarding X7 is to decrease the price to $170 with an increase in the R&D expense to 53% (Tan, 2014).

Inputs:

Simulation Results:

The overall score in 2015 is 1,490,715,195. The overall results of 2015 indicate that there is further decrease in the profitability rate because in 2015 it is 24%, whereas in 2013, it was 30%. The products X5 and X6 caused such reduction as X6 has attained its saturation point and X5 is in the decline phase. The growth phase is only in respect of X7 that means this product has new sales in the market (Forio.com. Forio Simulate).

In 2015, X5 and X6 have not experienced further growth in the market as they are in the decline phase, and there is no scope of increasing sales with these products. X7 is in the growth phase and will provide higher profitability and sales volume in a couple of years.

References

Forio.com. Forio Simulate. Retrieved July 15, 2015, from

Tan, H. (2014). Simulation and Modelling Methodologies, Technologies and Applications. UK: WIT Press.