Question

RE: Exercise 3 Product Strategy You have just been hired as manager of the marketing department for a medium-size manufacturing company. On day one, you have a meeting with the management team of the company. The executives have assured you that the company is doing quite well, and they have supplied you with sales figures for the past five years which, in fact, have been steadily increasing. Your first task for the company is to analyze the information and make recommendations. You are given the following data: Table 1 Annual Sales 2015 Annual Sales in thousands of U.S. Dollars) 2016 2017 2018 2019 Product Profit Margin А 10% $120,000 $120,000 $96,000 $80,000 $40,000 B 6% 80,000 104,000 136,000 176,000 240,000 с 7% 56,000 80,000 104,000 144,000 160,000 D 10% N/A N/A N/A 56,000 120,000 E 9% 160,000 152,000 176,000 112,000 80,000 Total $416,000 $456,000 $512,000 $568,000 $640,000 The new product, Product D, was introduced in 2018. All of the products, A, B, C, D, and E, are related Please submit a memo to the CEO of the company (200-400 words, single-spaced). answering the following questions: 1. Over the five-year period, how has the company done in sales and in profits? Why have these changes occurred? 2. What has been the impact of introducing the new product D? 3. What recommendations would you make (1.e., hold, invest, discontinue)? HOLD INVEST DISCONTINUE (Explain) A B С D E

Answer 1

1) It can be clearly seen from the annual sales and profit that the product A and D aren't performing quite well. The profit for both has decreased over the last 5 years. In case of B and C, the sales and profit has increased each year. For D, the annual sales started in the year 2018. D is performing well since last 2 years. The average change in sales in 2019 is 16.638 %. It shows that the company is in safe zone. The highest change in sales is because of product D. Hencce, product D can further show positive response as well. Thus product D should always be in the list of products that company wills to sell for future.

Contribution to the profit is highest for the product B, followed by product D. Also the contribution to sales is highest for product B. Although the contribution to sales till now for product D is not high but since its contribution to profit is high, so it can most certainly increase many folds in the upcoming years.

2) If a new product is introduced for now, if it shows a minimum profit of 16.638 % then only it will be beneficial to the company because the current average profit of the company standas at 16.638%. If a new product is introduced in place of an old product which is not showing much profit, like roduct A or D then it would be more beneficial to the company because that way the company will be able to introduce and test a new product in market with minimum loss. Because even if that product shows a loss of 50% still the average profit of company would not be affected.

3) A- Discontinue

B-Continue

C-Continue

D-Continue

E-Discontinue

The reasons are in the above answers.