2 Balancing Supply and Demand Capital Investment MarketingProduction Research & DevelopmentSupply$Demand
3 Price Low Price= High Volume Medium price = Medium Volume Walmart has low prices and much stock. They pay many workers and for much merchandise but make a profit. They have expanded into Superstores.Medium price = Medium VolumeTarget has higher prices than Walmart but lower than department stores like Macys. They spend an average amount on workers and merchandise.High price = Low VolumeMercedes Benz sets prices high. The amount of cars sold is lower than other models due to the price. The mark up is amazingly high and that is where profits are made.
4 MarketingTo increase demand of your product you advertise. Advertising will increase your sales. Increased sales = increased demandThe questions areWho is the target market?How do I advertise to that market?How much do I spend on marketing to make a profit?
5 Marketing Venues VIM Mass Mailing FleXiPaper Ads-$2,000 minimum SkyBoard Ads- $4,000 minimumHologen Ads- $6,000 minimum
6 Research & DemandR&D is used to improve your product. All the amenities in cars were done through R&D (moon roof, MP3 hook ups, AWD, FWD, Antilock Brakes, Air Bags, Power windows, etc.)Spending in R&D will improve the product and will increase sales eventually. R&D will effect sales when applied consistently and over time. It is NOT a quick fix for demand.
7 Types of R& DCameraFusion PowerZ-ChipSmell-O-VisionVideo ConferencingGaming ModuleSalellite AntennaWafer-thin CaseTitanium CaseRemote Control
8 ProductionHow many will be produced? Is high, low or medium volume demanded?In JA Titan production is at its maximum efficiency at 80% of capacity.Capacity = 1,490 units1,490 x .80 = 1,192Operating below 80% capacity will cost you moreOperating above 80% capacity will cost you more
9 Capital InvestmentCapital Investment is improving your business. In JA Titan it specifically means how large your company grows.Decisions to increase CI will not affect your production capacity for 2 quarters.Example: in quarter 3 you increase CI. You will not see an increase in Production Capacity until quarter 5.
10 Compare your CI to your pricing strategy. They are linked. How? If you have a low $, high volume strategy your CI will need to increase.To keep up with demand, due to your low $, you will need to expand your company.
11 To grow: CI should be higher than depreciation To stay the same: CI=DepTo shrink: CI<Dep(hint: To grow one unit add $40 to CI. If you want to grow by 100 units add $4,000)