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During a recent trip to Japan

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ELECTRIC BICYCLES;During a recent trip to Japan, JSG noticed many bicycles in and around Sakai (a major;city in Nagoya home of Toyota). Amongst the many bicycles he noticed some electric;power assist bicycles.;Electric power assist bicycles (hybrids) rely on a combination of (human) pedal power;and battery to propel the bike (Photo 1). Electric bicycles are available in many sizes and;shapes. Some have multiple gears (for shifting), some have lead acid batteries while;newer (and environmentally more friendly bikes) use Lithium Ion batteries. Batteries are;re-chargeable and have a long service life.;The Japanese retail price for electric bikes ranges from $1,000 USD to $2,000 USD;(100,000 to 200,000 Yen) depending on manufacturer (brand name) and options (motor;size, battery type used, number of gears, etc). For price comparison purposes, the price;of a standard adult bicycle sells in Japan from about 125 to 500 US Dollars (12,500 to;50,000 Yen) depending on brand name, gears and options. Electric bike distribution;(sales) is typically through bicycle stores or department stores.;JSG asked himself, why cant/arent electric bikes sold in the US Market? Thinking;further he said the US population is aging, interested in physical fitness and many have;the discretionary purchasing power to buy an electric bike.;Accordingly JSG is considering marketing the electric bike in the metro NY market;(Southern Connecticut, NY City and Burroughs, Lower Westchester and Northern NJ).;Prior to a final decision he realizes the need for additional information to the following;questions;1) Estimation of Market Potential;Additional Assumptions;1) Demographic Profile of likely buyer;Age- 40 to 70;Household Income: $ 80,000 plus;Interests/life style: Outdoors, physical fitness;2) Purchase probability;a) At a retail price of $800;Optimistic: 10 percent of target demographic population;Most likely: 5 percent of target demographic population;Pessimistic: 1 percent of target demographic population;b) At a retail price of $500;Optimistic: 15 percent of target demographic population;Most likely: 8 percent of target demographic population;Pessimistic: 3 percent of target demographic population;Additional Information;2010 Census data indicates the following number of people/households in the target;demographic population;a) NY and Burroughs;600,000;b) Southern Connecticut 200,000;c) Lower Westchester;100,000;d) Northern NJ;90.000;QUESTIONS;a) Which of the four market areas in the NY Metro Market has the greatest sales;potential?;b) What is the estimated Market Demand (units sold) at retail selling price of $ 800;c) What is the Estimated Market Demand (units sold) at retail selling price of $ 500;d) Based on answers to parts b and c, the individual market areas in the NY Metro;Market having the greatest sales potential are?;At a selling price of $ 800;At a selling price of $ 500;2) Marketing Research;Additional Assumptions;A NY marketing research firm was asked to provide a cost estimate of $20,000 for;conducting a study on the likely sales of the bicycle assuming various levels of market;demand. The researcher provided the following information (payoff matrix);Selling price/ Market demand and probability of occurrence;High;Medium Low (market demand);.20;.30;.50;$800;80;70;- 20;$500;90;80;- 10;Not market 0;0;0;Numbers in cells are forecasted $ales in thousands of dollars;QUESTIONS;a) Expected profit of optimal decision =;b) EVUC =;c) EVPI =;d) Should $ 20,000 be spent for a marketing research study?;e) What is the most that should spend for a research study?;f) Were no research conducted the optimal decision is;3) Break-Even;Additional Information;a) Fixed Costs $ 100,000;b) Investment $300,000;c) Variable Cost $ 350;d) Desired return on Investment;QUESTIONS;a) BE at $800 selling price =;units;b) BE at $500 selling price =;units;4) Financial Performance Measures;Additional Information;The following pro-forma Income Statement was prepared by accountants;Pro-Forma Income Statement;For the year ended 2020;($ thousands);Sales;CGS;Gross Income;Selling Adm Exp;Res&Develop;Operating Income;Depreciation;Interest Expense;Taxes;Net Income;843 (assume all sales on credit);506;337;102.65;31.75;203.12;23.25;3.20;61.85;114.85;COST OF GOODS SOLD;Total Cost of Goods 731;Ending Inventory;225;CGS;506;Additional notes;1) Average accounts receivable = $68;2) Investment = $500, (000);Payback Formula: (number of years to recover cost of investment);Investment/Sales;QUESTIONS;a) Return on Investment (ROI);b) Payback;c) Gross Profit Margin;d) Net Profit Margin;e) Inventory Turnover;f) Return on Assets;g) Accounts Receivable Turnover;5) Price Elasticity of Demand;Additional Information;Assume;a) At a $800 selling price 600 bicycles can be sold;If the selling price was lowered to $750 then 700 bicycles can be sold;QUESTIONS;a) Degree of price elasticity;b) Is the demand elastic, inelastic or unitary?;c) To maximize profits should price be lowered, raised or left unchanged?;d) What is the importance of elasticity for pricing decisions?;6) Pricing Decisions;Additional Information;Assumptions;a) Cost $ 450;b) Investment $ 300,000;c) Forecasted number of bicycles sold 800;d) Fixed Costs $ 100,000;e) Variable Cost $ 350;QUESTIONS;What price should be charged for each of the following;a) ROI of 5 percent =;b) Mark-up 30 percent =;c) Mark-on 20 percent =;7) Media Metrics (Performance Measures);Additional Information;JSG is considering purchasing advertising space in magazines, newspapers and Internet.;Magazines under consideration;NY Metro Circulation;Cost P/page;Est. Inquiries;Est. Sales;Times;%TAudience;Ad appears Recall of Ad;a) Outdoor Life;b) Time;650,000;1,500,000;$1500;$2000;400;550;30;15;3;2;15;5;Additional Magazine information;a) The NY Metro Target audience for the bicycle is estimated to be 3000 people;b) Expected sales: Outdoor Life = 30 bicycles at $900 each;Time = 15 bicycles at $900 each;Newspapers under consideration;NY Metro Circulation;Cost P/Ad;Est. Inquiries;Est. Sales;Times;% TAudience;Ad appears Recall of AD;advertisement;Newspapers considering;a) NY Daily News 1,500,000 $ 500;b) Village Voice;500,000 $ 300;350;200;25;30;3;4;10;8;Additional Newspaper information;a) The NY Metro Target audience for the bicycle is estimated to be 3000 people;b) Expected sales: NY Daily News = 25 bicycles at $900 each;Village Voice =;30 bicycles at $900 each;Internet Sites Considering;a) Google;People viewing (clicking on) our advertisement;= 8,000,000;Google users clicking on JSG advertisement who are potential customers = 1% of;people viewing (clicking on) advertisement;Number of times a potential customer will come to our site = 2;Percent of people coming to our site who will recall our message =.10;Percent of people coming to our site who will ask for additional information=.05;Cost p/click;= $ 1.00;Expected sales = 200 bicycles at a selling price of $900 each;b) Craigs List;People viewing (clicking on) our advertisement = 3,000,000;Craigs List users clicking on JSG advertisement who are potential customers =;2% of people viewing (clicking on) advertisement;Number of times a potential customer will come to our site = 3;Percent of people coming to our site who will recall our message =.15;Percent of people coming to our site who will ask for additional information=.10;Charges = none;Expected sales = 125 bicycles at a selling price of $900 each;c) EBay;People viewing (clicking on) our advertisement =;8,500,000;EBay users clicking on JSG advertisement who are potential customers = 1% of;people viewing (clicking on) advertisement;Charges.05% of sales revenue and $50 listing fee;Number of times a potential customer will come to our site = 1;Percent of people coming to our site who will recall our message =.05;Percent of people coming to our site who will ask for additional information=.10;Expected sales = 100 bicycles at a selling price of $900 each;QUESTIONS;a) Which magazine do you recommend based on the following metrics (why);Outdoor Life;Media Metric Used;CPM=;CPI=;CPR=;CP$=;CPRP =;CR=;GRP=;Time;R=;GMI=;G$R=;Magazine recommendation and why;b) Which newspaper do you recommend based on the following metrics (why)?;NY Daily News;Village Voice;Media Metric Used;CPM=;CPI=;CPR=;CP$=;CPRP =;CR=;GRP=;R=;GMI=;G$R=;Newspaper recommendation and why;c) Which Internet option(s) (sites) do you recommend based on the following metrics;(why)?;Google;Media Metric Used;CC =;CPM=;CPI=;CPR=;CP$=;CPRP =;CR=;GRP=;R=;GMI=;Craigslist;EBay;G$R=;Internet recommendation and why;8) Budgeting for Advertising and Promotion;Additional Information;Assumptions;1) Expected sales $ 500,000;2) Willing to spend $50 on advertising/promotion for each bicycle expect to sell;3) Competition spends about $ 10 for each bicycle expected to sell;4) To accomplish the sales objective $ 200,000 is needed;5) Expected (forecasted) 750 units;QUESTIONS;How much should be budgeted for Advertising/Promotion expenses for each of the;following methods;Amount budgeted for advertising/promotion;a) Percent of sales method (.10 percent) = $;b) Fixed sum per unit sold;=$;c) Competitive parity;=$;d) Objective-task method;=$

 

Paper#31748 | Written in 18-Jul-2015

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