Module 8- In-Class Assignment 8 - Harman (1)
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MODULE 8 - ASSIGNMENT #8: Part 1: Place & Pricing strategies
Type of Assignment
: Individual Submission (with group discussion)
Length
: 60 Minutes
Submission
: SLATE Assignments
In your Project Groups, for the product you have selected to launch as part of your term project answer the following questions:
1. What product are you launching?
The product we are launching is Adidas Quantum Boost. It is a pair of shoes with latest smart technology, and it comes with comfort, cushioning and flexibility, and is 100% eco-friendly.
2. What distribution strategy are you going to use? Direct, Indirect, Both? Why? Adidas Quantum Boost uses multichannel distribution, which is a mix of indirect and direct distribution strategy. Multichannel distribution means sales taking place in Adidas branded outlets as well as in retail
stores. It is because through retailers, the consumers will be able to find the product much easily, therefore reaching a much larger audience. Indirect distribution strategy is more cost efficient as direct strategy requires additional costs and infrastructure to take place. Also, Adidas already has very good relationships with retail stores and a lot of its sales takes place in retail stores.
3. Will you use an Internet Marketing Channel to distribute your product? Describe it.
Yes, this product will be distributed and sold on various e-commerce platforms. It will primarily be sold on Adidas website and on other retail websites like Amazon, Sport Chek, Footlocker, and many other. Social media is another big platform to gain the attention of the consumers and market the product. By making a very catchy and attracting advertisement and posting it on major social platforms like YouTube,
Instagram, X (Twitter), Facebook, Google Advertising, etc. it will be very easy to catch the eye of the audience.
1
4. Identify 2 advantages and 2 disadvantages for an Indirect and Direct distribution strategy. Direct Distribution
Advantages:
1.
The company has complete control over the sales, the pricing and marketing for the product. So,
it is easier for the company to make changes and control the customer satisfaction level.
2.
It serves to be a more profitable method, avoiding the high cost of retailers, which leads to a higher profit margin for the company.
Disadvantages:
1.
It requires a high initial investment in technology, infrastructure, and personnel.
2.
Through direct distribution the reach to the costumers is limited and it is not able to reach consumers in all the areas where there is a demand for the product.
Indirect Distribution
Advantages:
1.
In contrast to direct distribution, indirect distribution has an increased reach, reaching in all areas and to a larger percentage of customers.
2.
Wholesalers are used to become more cost effective for a manufacturer to deal with a retailer.
Disadvantages:
1.
It gives the company less control over its products, which makes it difficult to improve customer satisfaction.
2.
It reduces margins as profits are shared with the retailers and wholesalers.
5. What pricing strategies are using? High/Low pricing, Price Skimming, Market Penetration pricing etc? why?
The pricing strategy used is Price Skimming. It is because Adidas is a well-established brand with a loyal customer base, so the customers know about the quality offered by the brand. So, the consumers would
not mind the price of the shoes being high, as they know that they will get a high-quality product in return.
2
Part 2: Break-Even Analysis and Decision Making
Helpful formulas: Profit
= Total revenue – Total cost
or
Profit
= (Unit price X Quantity sold) – Total cost
Breakeven point (BEP) Quantity
= Fixed cost/ (Unit price – Unit variable cost) Breakeven point (BEP) Sales
= Breakeven point (BEP) Quantity * Unit Price
Contribution margin in $
= P – V, where p = price per product, and v = price per variable
Contribution margin in %
= Contribution margin in dollars/price *100
-------------------------------------------------------------------------------------------------------------------------------------
1.
Charlie’s Furniture manufactures 500 kitchen tables every month. Each table requires $50 of raw materials such as lumber and paint and 10 hours of labour at $40/hour. Charlie rents the building where the tables are made at a cost of $5,000/month and his yearly insurance cost is $3,000. Charlie pays himself $4,000/month. He also likes the warehouse to be kept clean and pays a cleaning company $500 per month. What are Charlie’s variable costs per table?
50 + 400 = 450
What are Charlie’s monthly variable costs?
50 + 400 x 500 = 225,000
What are Charlie’s monthly fixed costs?
5000 + 4000 + 500 + 250 = 9750
3000/12 = 250
What are Charlie’s Total Costs per month?
225,000 + 9750 = 234,750
3
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