Cumberland Metal Industry

1463 Words Feb 20th, 2012 6 Pages
Cumberland Metal Industry

1,2- The first two questions will be gone through together in order to avoid confusion. Pricing is one of the most important elements to launch a product on the market. Mainly, because it is the only element, together with the marketing mix, that produces revenues. It is fundamental to set the right strategy in deciding and setting the price of a certain product to be sure that is fully understood and appreciated by customers in all its aspects and characteristics. A suggestion to rightly start the pricing strategy would be to follow a value based strategy, in order to understand what mostly consumers want and what price they would like to spend for that type of quality. It is the reverse process of the
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The total manufacturing cost would be computed as seventy dollars per pad more or less; to this it should be considered that the management wants 40%-50% contributing margin after all manufacturing expenses. Thus, CMI pad’s price should be around a hundred and fifty dollars (150$, considering a 50% saving for the contractors). Concluding the whole pricing process, a favourable hint to better succeed in the market and gain the profit maximization would be setting a discounted price at the beginning, in order to try to reduce the enormous distance between the two prices: three dollars for the asbestos pad, and more or less a hundred and fifty dollars for the CMI’s one.

3-This market is potentially very big because, there is still the possibility to penetrate it and become the monopoly of the market. To gain this huge competitive advantage the company, first, should protect itself from the threat of the new entrants, by the construction of high entry barriers. This could be done by the creation of a patent for the product formation, and high costs of entry in the market to prevent this product from being copied and imitated. As long as CMI did not get patent for this product, the company itself should not sell it since this cushion pad is not a high technology product, so easy to copy. To completely succeed and gain the monopoly the