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The PDA Simulation Essay Example

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The PDA Simulation

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The PDA Simulation. My reasoning was that a small price increase would provide higher overall revenues. I noticed that the X7 despite a hefty price discount did not penetrate the market well. Sometimes it takes time for a product in its birth stage to reach good market penetration because other products are more recognized by the customers (Kotler, 2002, pg. My advisor said my product was a little underpriced. My profit margins were low but I wanted to increased revenues. My pricing strategy for the X7 is to decrease price by $10. The product is going to receive an 85% R&D budget commitment. The X5 received 1% R&D budget allocation and the X6 got the remaining 14%. The X6 price was maintained at the same level. My overall score after round was 728,447,416 and my 2007 profits were $181,929,121.

I did not achieve any profits from the X7 product and the product became 100% saturated. I wanted to achieve 100% saturation, but I hoped to get some profits before discontinuing the product. On hindsight the more conservative strategy would have been to discontinue the X5 product last round. My new business reality was that 40% of the company revenues came from the X7 product and the remaining 60% from the X6 product. The market saturation for the X7 product was at 8% which means I had only been able to improve the product penetration rate by 1% in comparison with the last time I ran the simulation. My overall score for the simulation is 20,000 points lower than last time. The strategy I used did not achieve better results so far. My R&D budget allocation strategy was 99% allocation to the X7 and 1% for the X6. I decreased the price of X7 by $15 and decreased the X6 by $10. The small price decreased of the X6 was set based on the fact that the advisor said the product is in its growth stage, but since its market saturation reached 51% I do did not lowered it by a higher amount to ensure the X6 survived another round. My score after round 3 was 1,149,642,144 and my 2008 profits were $421,200,728.During this final round I noticed that the X6 had become a liability for the firm due to the fact that it had reached its shakeout stage and sales from new customers were declining. The product had reached a market saturation level of 66%. Once a product reaches the declining stage of its product life cycle a wise alternative is to discontinue the product (Quickmba, 2009). I decided to discontinue the product. During this simulation run I. The PDA Simulation.

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References

Kotler, P. (2002). Marketing Management (11th ed.). New Jersey: Prentice Hall.

Quickmba.com (2009). The product life cycle. Retrieved November 24, 2009 from http://www.quickmba.com/marketing/product/lifecycle/

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