Milestone1

MileStone 1 - Business Recommendations Name 01/23/2008 Mile Stone 1 - Business Recommendations The analysis by Team C of Larson, Inc. provides information to a company involved in a purely competitive market. Larson, Inc. falls under this business model because to the large number of competitors, lack of product differentiation and few barriers to entry (McConnell, Brue, & Flynn, 2009). The research and recommendations of Team C in these areas help the management of Larson, Inc. make business decisions for the future. Team C provides information to help determine what areas to consider changing and which business alternatives have the best financial outcome for the company. Pricing Strategy Recommendations For any company to be successful they have to have a creative and sold pricing strategy that will separate them from the others. As with any company the goal is make a profit that exceeds costs. In today’s world everything needs a battery from a toothbrush to an airplane. However with the batteries lasting longer and longer, poor economic conditions and other factors facing the industry all sales are down. In review of the American and German markets it appears that there needs to be a different pricing stagy in place in both markets American Market In review of the American market there appears to be more opportunity as their exports consists of 51.5% (machinery and equipment, motor vehicles and supplies, aircraft and parts) of goods associated with some type of use of batteries. As a result, Team C recommends that Larson switches to a low price strategy. As long as the price of the battery does not go below its production costs and is cheaper than the competition Larson should be able to increase its profits at the expense of the competitors. According to McConnell’s game theory, having a low price strategy and assuming the competition has a high price strategy, Larson should realize an increase in market share as well as its revenue (pg, 232). Without knowing the competitions price in the short run Larson may lose money as the competition’s selling price may be less than Larson’s current selling price. However, because this model focuses on sales volume, in the long run, Larson’s should increase profit and market share. In addition to Team C’s recommendation for Larson to differentiate its product through advertisement and other avenues, the low pricing strategy should put them in a position to gain even more recognition and increase revenues. As the market and competition adjusts their prices so should Larson adjust theirs to always stay below the competitions. .; however, more than current cost to ensure a profit is being made In the current economic times people are looking for the product that has the lowest price and reliable. As sales increase and funds become available Team would also recommend that Larson;e look at their automation process and identify ways to decrease costs whether it be to upgrade the technology used or ….. Also as Larson;s find ways to reduce costs and as the economy picks up Team C would recommend switching to or at least evaluate going to a price match strategy. As people haave more money to spend and Larson;s comnine that with does not go beyond the current selling price Larson’s should price their batteries cheaper ; however relatively close to the competitions. S with most things brand recognition is everything however considering the economic condiditions people are looking for more value and are buying cheaper items that last just as long. Using this price strategy will help maximize profits while staying. German Market Although exports are not as great as in America, Germans have more money to spend. In review of the output per person and the maount the German government spends in unemployment payents are far greater than what is in Aemrica. However, based on the overall statistics including low population, slowdown in sales, lack of product differientiation and current economic conditions Team C would recommend that Larson’s take the same approach as in America. Taking the low price strategy would help Larson to gain market share and increase profits. As competitors adjust their prices so should Larson’s as llong as it is above the current productions cots Non-price Barriers to Entry Product Differentiation The batteries produced by Larson, inc. in this purely competitive market lack qualities that set the product apart from competitors. The market for this product consists of the general population, businesses, and manufacturers. The general population requires batteries for use in products daily and businesses require batteries to operate equipment and certain machinery. Larson, Inc. currently spends very little on advertising and packaging of their products. One method to differentiate Larson’s products over competitors comes through brand recognition. An increase in advertising and creating an eye catching logo or catch phrase makes Larson’s product stand out to the consumer. Brand recognition serves as a motivator to the consumer to purchase one brand over another (Hughes, 2010). The packaging of the current product lacks features to differentiate the Larson products from competitors. A change in packaging to include the new logo, brighter color or other feature also helps draw the consumer to Larson’s product first. Another area of product differentiation comes though technological advancements with current products. In a recent story by ABC news, lithium batteries aboard aircraft resulted in 113 incidents of explosion, smoke, and fire. Development of batteries decreasing this risk would increase the marketability of that particular battery by numerous industries, including airlines. As with any technology or product related directly to the technology, development of a new idea creates another avenue for increased revenue. The company must weigh the opportunity cost and efficiency of allocating resources to new product development to determine the cost effectiveness. Conclusion References McConnell, C. R., & Flynn, S. M. (2009). Economics. Principles, Problems and Policies. Retrieved from http://ecampus.phoenix.edu Stoller, G. (August 16th, 2010). Are Lithium-Ion Batteries the Next Threat to Airline Safety. Retrieved from http://abcnews.go.com