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Four Star Motorsports-Pricing Essays

Four Star Motorsports-Pricing Essays Four Star Motorsports-Pricing Paper Four Star Motorsports-Pricing Paper Deliverable 3- Four Star Motorsports Course: 07360, Pricing Strategy - Student: Jing Wang, Yu-Wen Chu * Using regression, estimate the demand curves for each type of tire in each type of demand season (low, medium, high). I recommend that you use Excel to do the regressions. (Note: demand for the two sizes of tire are independent from one another). Yokohama Winter Rally Tire Demand Curve | WR 26 155/65R13| WR 26 185/65R14| Normal Demand| Q=106. 4-0. 544P| Q=104. 8-0. 448P| High Demand| Q=86. 28571-0. 33143P| Q=94. 714-0. 3314P| Low Demand| Q=155. 2-0. 704P| Q=132. 8-0. 704*P| * What is the optimal â€Å"one-price† policy for Sprongl’s rally tires if he sticks with his â€Å"base prices† for the entire year? (Assume his goal is to have no residual inventory and to maximize total revenue). Tire Type| WR 26155/65R13| WR 26185/65R14| Inventory| 280| 265| | | | Price| $150. 82| 159. 8190703| | | | Period 1| 49. 02| 20. 29| Period 2| 24. 35| 33. 20| Period 3| 36. 30| 4 1. 61| Period 4| 24. 35| 33. 20| Period 5| 36. 30| 41. 61| Period 6| 24. 35| 33. 20| Period 7| 36. 30| 41. 61| Period 8| 49. 2| 20. 29| | | | Demand| $280. 00| 265. 00| | | | | | | Revenue| $42,229. 98| $42,352. 05| * If Sprongl elects to use â€Å"dynamic pricing† by changing prices for each tire in each season, what are the optimal prices if his estimated demand curves are estimated correctly? (Note: there is no global optimum solution for this in Solver but several â€Å"local optima† that are similar. I recommend that you calculate the optimum pricing for each tire separately, and then sum the total revenue from each). * What are the pros and cons of fixed and dynamic pricing in this situation? Explain your reasoning. Fixed pricing: Pros: 1. Fixed pricing establishes optimal â€Å"one-price† policy for Sprongl’s two different rally tires. There will be neither haggling nor competition from other period’s price. 2. There will be no arbitrage so that Four Star Sports can easily predict and monitor the inventory. Cons: Resulting either in money left on the table or lost sales Dynamic Pricing: Pros: http://news. wustl. edu/news/Pages/4382. aspx http://smallbusiness. chron. com/dynamic-pricing-strategy-5117. html http://faculty. insead. du/popescu/ioana/Papers/PopescuWu. pdf meiss. com/download/RM-Maglaras-Meissner. pdf 1. Dynamic pricing strategy enables Four Star Motorsports maximize the profit margin and maximize the revenue from *** to *** Cons: 2. The dynamic pricing needs comprehensive data and testing to work well, in this case, we only had very limited data to find our dynamic pricing strategy, which might not reflect the true demand curve. 3. It al so requires advances in point-of-sale technology and widespread adoption of electronic labels for inventory management. : This may increase the cost dramatically. Considering Four Star Sports is a family business, and their revenue may not be high enough to support this expense on new technology. 4. Customers might feel unfair that the same products are charged at different prices. 5. The dynamic pricing may lead to arbitrage, customers with high price elasticity may shift to the low price period to purchase the rally tires; On the other hand some smart people may purchase more than they need during the low price period then to sell at high price period. These will change the demand curve and the competition environment dramatically and influence the inventory management. 6. Dynamic pricing strategy suits frequent purchased consumer goods market better, because the customers’ purchase decisions are heavily influenced by the past observed price. In this case, customer may not purchase rally tires very often, thus the history price has less influence on their decision making.

Harvard Business Review Competitive Forces Paper Essay - 1

Harvard Business Review Competitive Forces Paper - Essay Example In the context of each organization IT can be both an advantage and a disadvantage in regard to a firm’s competitiveness. The specific role of IT is presented below using examples, as appropriate, for making the relevant views clearer. 2. IT and Porter’s Five Forces on competition 2.1 How IT is intertwined with the effects of Porter's "Five Forces" on competition in a company's industry The Five Forces theory of Porter promotes the idea that in order to survive in its industry a company should identify a strategy for facing effectively five forces: a) the threats related to new entrants, b) threats from substitute products, c) the pressures from suppliers, d) the pressures from customers and e) the increasing competition within the industry (Roy 2011, p.26). In practice, it has been proved that in each organization IT could be intertwined with the effects of these Forces. IT could play this role in two different ways: it could either set in risk a company’s compe titive advantages or it could promote these advantages securing the competitiveness of a company. In fact, it seems that in each company IT can influence the performance of the company in regard to the management of all Forces, as including in the Porter’s Five Forces model. Reference should be made primarily to the potentials of IT to provide to firm critical information in regard to the local or the global market (Roy 2011, p.7). By having access to such information managers can identify strategies that can help the firm to face effectively all industry’s forces, as these forces are included in Porter’s Five Forces. For example, information on substitute products available in the market can lead a firm to make appropriate improvements on its existing products so that its market competitiveness is secured (Roy 2011, p.7). 2.2 Description of five specific areas where IT represents a risk to a company's competitive advantage - how IT affects these advantages IT c an set a firm’s competitive advantages into risk. Reference can be made, as an example, to the following areas of an organization: a) Internal communication networks; in most organizations, internal communication is based on IT systems (Naunheim 2011, p.1). The phenomenon is more intensive in organizations of medium/ large size where e-mail is used as the key tool of communication in the workplace (Naunheim 2011, p.1). Ineffective IT systems can cause severe communication problems among employees resulting to the delay or even the failure of organizational tasks (Naunheim 2011, p.1); b) Development of new products/ services; the competitiveness of all organizations is depended on their ability to create products/ services that will have an advantage compared those to the competitors’ (Dosi, Teece & Chytry 1998, p.216). However, in practice not all firms are able to develop such products/ services especially in the long term (Dosi, Teece & Chytry 1998, p.216). This weak ness has been made clear in the following case: IBM had been already a successful company when Apple appeared (Dosi, Teece & Chytry 1998, p.216). Still, it was Apple that managed to conquer the global market by emphasizing on personal computer’s capabilities, even more than IBM, the firm that first introduced the specific device (Dosi, Teece & Chytry 1998, p.216); c) Manufacturing process; today, the major part of each firm’s manufacturing processes is based on IT systems; however, the IT systems used in such activities are not always