As it is now time for new and innovative times are on the horizon for Clipboard Tablets Company. But before beginning a new start it is worth some time in reviewing and documenting the past so as to learn from the mistakes and bring the company forward. In an effort to identify the strengths, weaknesses, threats and opportunities (SWOT) a look at each of the three products will stimulate a program for the company going forward.
Review of Products
X5 is the product that is the first to market and now three years later is experiencing the typical problem with technology in that it is obsolete and other products are coming to market. It is comparable in price to the competitor's products and customers seem to like the fact that it performs like the more expensive versions. In a post by Tech Republics writer, Brian Posey he lists ten technology products that are obsolete that can still be used.
One of the main problems with X5 was the lack of research and development that might have made is useful for a longer span. There had been no R&D afforded to this product for nearly three years after it hit the market place. The quality of the product should be well maintained and researched into the support and uses of the customer for the product. This year the product hit its maturity stage and will be phased out. The price will reflect the less demand and all attempts will be made to deplete the current supply. The amount of time and expense in phasing out this product will instruct me as to what to expect with the X6 and X7 as the time comes for their obsolesces. However, as CEO the goal will be to maintain their active shelf life for longer than three years.
The second product is the X6 which is suffering under the same fate of the X5. This product is still actively marketable but does have some flaws according to customer comments that R&D will have to allocate some time and monies to repair or at least investigate. Looking at the features of the X6 and the comparable products it appears as though X6 can be marketed to the premium buyer who is not impressed with the bare minimum but wants the bells and whistle in their technology products. Price is commensurate with the advanced features and the discerning buyer will purchase the higher price point for the additional features. For the future, my division will look to produce another higher end product to replace this one but in the year 2016 this one should continue its growth phase as market saturation has not yet been reached. The window of opportunity is still open and will be optimized in this coming year
That brings us to the third product is the famed X7 and the future of the Clipboard Tablet to date. This product is still in its introductory phase and is priced extremely low in the market. This is not a position that my division will take as the higher priced top of the line products develop loyal customer bases. My instructions to the R&D department will be to look for an upgrade very soon for this product, perhaps an X7b for better.
It is understandable that X7 was priced low to obtain market share and that is a laudable philosophy to build the customer base. However, developing the customer base with high end products also garners a high end base of customers and increases the bottom line at the same time. It is comparable to the Harley Davidson or Apple brand versus the Roadster or Dell brand.
The higher skim (additional funds) that is achieved in the development and sale of X7 will be eaten up in marketing to the current customers of the X5 and trying to convert them to the X7. The promo costs such as additional marketing will be high undoubtedly. The figures for this will have to be a factor in the promotion.
Understandably there is some trepidation in my assumption of the sale and marketing position so in an effort to help to ease these fears, the following is a prepared financial chart for the past three years as was under the control of my predecessor. Again this is a chance to learn from the past.
X5 has increased by 14% from 16% to 30% in market profitability. At the price point of $285 it seems to be the correct price point for the product as compared to competitors. Relatively high though are the fixed costs of $75,000,000. As indicated in the prior comments the profitability is high and so is the market penetration as the three year average life span is exhausted this year.
X6 has increased in profitability by 12% points from 16% to 28% with a much higher price point of $430. The fixed costs are about 50% of the X5 though which is a significant factor in discounting the X5 in favor of the higher X6, with fixed costs being at approximately $37,500,00. This lower fixed costs means with additional volume the percentage of profitability is high and since its growth at the higher price point is almost assured, ClipBoard Tablets can expect a spike in profitability from this product. The customers are not price sensitive.
X7 shows the most promise for a greater profitability if the market presentation is handled correctly. Of course since the product is not at the market yet the costs area negative 73%. With a default price of $195 and fixed costs of $37,500,000 it will take some time for the revenues to catch up to the expenses. At this rate the X7 will be unprofitable for a long period of time so the direction in this product will need to be redirected. Without intervention this product will not reach profitability until it is out of its growth stage so some intervention from my leadership team will be introduced with this product.
The prospect for new sales is at this time for the X6 as it is the product that is in the growth phase and as predicted earlier there are some loyal customers for the X5. These customers are looking for the lower price tag. The X7 point to bring it to his market is going to be expensive but there are some people who are interested in being the first in the industry with the latest products, however by far the fastest mover will be the X6. But in looking at the SWOT analysis for the X7 some surprising advantages arise . There are no repeat sales of course for X7 because it is new to market.
The profitability figures indicated that the R&D are increased at this point that there would be expected an increase in the amount of sales for the X5 and X6. During the years of 2012 1nd 2013, the R&D expenditures for X5 are leveled at the X6 point. During the years of 2014 and 2015 the R&D expenses are higher for the X6 than the X5. The X7 is not a factor in those years.
During 2014 and 2015, X5 is going to phase out in the market and serious revenue declines can be expected as though figure show for the X5 over the X6. The X7 was developed during that time frame. The profits from the X5 and partially the X6 were used to develop the X7. The weakness in that strategy also turned into a learning experience for the future. As now the strategies are different for the development of the X7. At this time the idea of ignorance as being bliss is not allowed or acceptable anymore and steps need to be taken to have the X7 become profitable sooner or increase the profitability of X6.
The possible drain on the company from the X7 is a problem for the Clipboard Tablets Company at this time. As a business strategy it is important to recognize threats and the introduction of the X7 would be an internal threat to the company. This reduction in the X7 will allow a higher profitability in the company and eliminate the added debt to take the product to market. The decision of course depends on the owner, and she will decide this based on a number of factors but it is my best estimation that the time is not right for the introduction of a new high dollar product. The elimination of the X7 is an intelligent and best practice product development and pricing decision.
There is a period of four years allotted to the introduction of the X7 by the simulation. Using these four years is wise and allows for a maximization of the score of the X5 and X6. The volumes of the X7 are low enough to allow for that maximization. Making just one X7 at the price tag of $37,500,000 may have made sense to Joe Thomas but it does not to me. The loss is too great and the possibility of time to make up the loss is unrealistic.
The X7 can be introduced at a later date with more R&D to reduce the cost of manufacturing. The weakness that the company would occur does not justify the rush to market at the high price tag. As said earlier the final decision is with Sally Smothers.
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