From Glo-bus sample paper: A company’s manager should probably give serious cons

Question

From Glo-bus sample paper: A company’s manager should probably give serious consideration to changing from a low cost/ low price strategy for entry-level cameras to a different strategy when

The company’s market share of entry-level camera sales is below 30% in all four geographic regions, it’s credit rating is below A, and its ROE is below 18%

Sizable unfavourable shifts in exchange rates can occur in one or more region, thereby causing the company’s EPS to fall far below investor expectations.

The low – price end of the market for entry-level cameras is overcrowded with competitors, making it difficult to earn attractive profits in the low price end of the entry-level marketplace.

The company’s operating profits per entry-level camera sold are not close to the higher in the industry in at least three geographic regions (based on the information reported on p. of the most recent Glo-bus statistical review)

A big fraction of the companies in the industry are making 4 or more model of entry-level cameras with a P/Q rating of 4 stars or higher

Explanation / Answer

Low cost/low price strategy doesn’t suits company profitability and it keeps on dropping in the entire four regions. The main reason that one can see in this behavior is lack of differentiation in product especially at entry level. The company couldn’t capitalize the low price value that it offers to customers. In this case, company should think of bringing differentiation in its offering especially in those areas where customers see more values. Thus company starts introducing additive services and features that are not available in other competitor products. In this case company can also offer differentiation in Quality and services which is another important attributes of order winner. Thus, maintain a normal price level (value based pricing) and focusing in good quality and services can help the company to gain market share. The company also introduces different products having selective features as USP but maintaining the above two attributes common.

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