PDA Slim Part 2 Essay Example | Topics and Well Written Essays - 1000 words

PDA Slim Part 2 - Essay Example The strategy chosen implied decreasing the price of the X5, raising the X6 price and raising the X7 product price. The X5 product is entering the latter part of its growth phase thus a 10% price decrease was used, the X6 was increased by 10%, while the X7 price was increased by 20%. The reason for the greater increase in the X7 product was that the product shown negative profitability thus the price had to be increased enough to turn the product line into a profitable one. Based on the original information no product would be discontinued. The allocation of R&D budget strategy is based on giving more money to product with the greatest potential and under saturated markets. Allocation of R&D budget for each of the products was: X5 =15%, X6=50%, X7=35%. Tbe result for the first round was a total profit of 328.2 million. Both the X5, and X5 profits did very well with over 150 million of income each. The X7 profits were -$3.3 million. The X5 product more than double in total revenues, with profitability going up The market saturation of this product went up to 53%. The strategy seemed to work wonders as far as drastically increasing the revenue stream from this product. The X6 product market saturation went up to 33%, while its revenue growth went down 18%. The profitability of the product improved by 7%. The performance of the X7 product was lackluster. Its overall revenues went up a moderate 8%, while its profitability improved by still remained at a -6% level implying an unprofitable operation. The second round followed the same exact strategy with the same weighted distribution. The results from the first round seem very good, thus I continue with the formula. The results were not what I expected. The major problem was that the 10% decrease to the X5 handeld caused an accelerated movement in the product life cycle. The price movement caused the market saturation to reach 98%. The