Determining a product’s lifecycle can enable a manager to make decisions of whether to invest more in a project or discontinue an operation. The three products HandHeld Corporation offers are X5, X6, and X7 devices. I noticed that the X7 product had weak sales. As a new CEO working for this business I seek out the advice of my top executives. Teamwork and cooperation are variables that improve the corporate culture and help firms achieve synergy. Synergy is achieved when the whole becomes more important than the sum of its parts (Schermerhorn & Osborn, Hunt, 2003, p.173). My top advisor indicated that the X7 product was in its growth stage. At that point I decided that discontinuing the product was not the right move because investing more in R&D could help increase the demand for the product.
I noticed that the market saturation of the product in the first year was only 3%. The X7 product line had negative profitability. The company lost nearly $8.5 million on the X7 this year. The costs were higher than the revenues. I wanted to increase the price by 25% to offset the -17% profitability deficiency, but since the customer care about price I decided to go another direction. The problem with the product was the existence of a high fixed cost of $35 million. If I was able to sell more units then I would have more total profits to offset fixed cost. I lowered the price of the product by 10%. I allocated 50% of the R&D budget to the X7 because it had the lowest market saturation out of the three products. The X5 which was the most saturated product received 20% of the R&D budget and the X6 received the remaining 30%. I increased the price of the X6 hand device by $25 because the customer’s are not worried about price. I decreased the price of the X5 by $25 in order to increase its demand. My score after round 1 was completed was a score of 558,204,736. The 2006 profits were $347,929,621. I was able to turn the X7 into a profitable ...
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