13.3 Broad Cost Leader - Practice Round 3

Practice Round 3

R & D Round 3

Cake - Reduce reliability (MTBF) to reduce material cost. Example: Reduce Cake's MTBF to 14000.

New Product - Reduce Reliability to 19000 MTBF. Reposition it moderately towards the current leading edge of the High Tech segment with a slight increase in performance and slight decrease in size.

Marketing Round 3

Cake - Offer a price cut. Slightly reduce promotion and sales budgets. Cake will now be a Low Tech product, therefore the sales forecast should adjust for the loss of High Tech sales. Example: Price $32.00, promotion budget $750, sales budget $750, and sales forecast 1100.

New Product - Offer a price cut to $43.00. Keep promotion and sales budgets steady. Enter a sales forecast of 500.

Production Round 3

For each product, schedule production using the formula:

(Unit Sales Forecast X 1.15) - Inventory On Hand

New Product - Buy 300,000 units of capacity by entering 300 in the Buy Sell Capacity cell.

Finance Round 3

Match your plant investment with a long term bond. If you do not have sufficient new bond debt capacity, issue stock to cover the shortfall.

Follow the guidelines from last round to manage your cash position.

If you are cash poor, issue stock. If you are cash rich, pay dividends and buy back stock. Do not issue current debt.

Save decisions (select "directly to the website").