The External Environment, Internal Profile and SWOT Analysis of SLP

Introduction 

The electronic gadgets market holds great potential for a significant increase in the sale of existing products as well as the introduction of new products in the market. The understanding of the relative potential of each market is vital in informing decisions on marketing including pricing and investments (Cavusgil & Kardes, 2013). Additionally, research and development of new products aids in shaping the market performance of new products both in the short-term and long-term. Just like most other markets, price wars can potentially lead to significant losses and a mass exit of firms. Therefore, avoiding these wars is crucial for the company's longevity and ability to compete in the market favorably. Plummeting of profits unsustainable market trends are both characteristics of a market experiencing price wars. Tsai & Yang, (2013) emphasized on the need for innovativeness and tracking of product performance to avoid losing out on competitors while making marketing decisions. 

The development and sale of tablets is a lucrative venture although huge capital outlays continue to discourage a majority of new entrants. This is not to imply that competition is low, on the contrary, competitors are always coming up with methods of improving their products through research and development. Pricing decisions are also vital to the company's ability to favorably compete and also maintain high revenues while serving the needs of customers. Limited finances necessitate radical decisions on priority areas for investments and the best prices decisions (Hinterhuber, 2015). This paper analyzes the simulated R&D allocation and decisions for pricing for three tablets W1, W2 and W3 for four years from 2012 to 2016. 

The year 2012 

	W1	W2	W3	Total
Sales	968,979	562,961	0	1,531,940
Revenue	276,159,075	247,139,848	0	523,298,924
Cost
Variable Cost	145,346,882	154,814,256	0	300,161,138
Fixed Cost	75,000,000	37,500,000	0	112,500,000
R&D Cost	10,000,000	14,000,000	0	24,000,000
Total Cost	230,346,882	206,314,256	0	436,661,138
Profit
Total Profit	45,812,193	40,825,593	0	86,637,786
Profitability	17%	17%	0%	17%
Performance	1.00	1.02	0.97

An analysis for 2012 reveals that W1 recorded the highest costs among the other products in the focus market, namely W2 and W3. Basing on the information provided by the advisor, W1 was experiencing growth typical of the product lifecycle. The trend is emphasized by the performance of the product from the previous year. Product marketplace maximization for W1 was achieved at 15%. The percentage was calculated from the products overall customer base of 6,000, 000 in comparison to the installed base of 1,035,000 customers. Comparatively, the other products, W2 and W2 achieved a market saturation of 8% and 2% respectively for the same year. Incidentally, a record 17% profit was realized from the year's cumulative score of at 86,637,786. The total cost for W1 tablets is 230,346,882, the highest for all the three products. It will, therefore, be prudent to reduce the price of W1 to increase sales in the competitive market. The price reduction is projected to boost sales hence increase the revenue significantly. Similarly, a price reduction for W2 will have the same effect on sales and revenues. Market performance for W3 is a major consideration in an effort to invest in its R&D financing. 

R&D and Pricing Decisions for 2013 

The price for product W1 went down from 285 to 270 

The price for product W3 went down to 150 from 185 

Greater investment for W3 to the tune of 40% in the R&D cost means that the investment allocation for W1 reduced to28% and that for W2 to 32%. 

The year 2013 

	W1	W2	W3	Total
Sale	2,008,601	1,431,588	265,545	3,705,734
Revenue	542,322,390	628,466,922	39,831,816	1,210,621,128
Cost
Variable Cost	301,290,217	393,686,569	14,604,999	709,581,784
Fixed Cost	75,000,000	37,500,000	37,000,000	150,000,000
R&D Cost	6,720,000	7,680,000	9,600,000	24,000,000
Total Cost	383,010,217	438,866,569	61,704,999	883,581,784
Profit
Total Profit	159,312,173	189,600,354	--21,873,183	327,039,344
Profitability	29%	30%	-55%	27%
Performance	1.03	1.46	0.85

The tabulated pricing decisions aim to enhance the three products' market positions. Implementation of the R&D and pricing decisions will result in a cumulative score of 413,677,130 up from 86,637,786. The improvement is only possible if pricing decisions are made; otherwise, the score will remain at 86,637,786. The price of W2 was the highest for the year in comparison to the other tablets, W2 and W3. Incidentally, the product cycle for W2 reveals that the tablet is in the growth phase as evidenced by the product's potential in the market. Implying that more of the product can be purchased in the presence of better pricing decisions. A comparison between the performance indexes of the three products in the market highlights the precarious position of W3. W3 performance index of 0.86 is unfavorable when compared to that of W1 at 1.03 and W2 at 1.46. The most commendable pricing decision is a reduction in its market price, mainly because the product is priced higher than the others, hence an increase in sales will be achieved. At a market saturation of 2%, an increase in investments into its R&D costs will be prudent in the quest to increase sales. In comparison, W3 competing products have higher market saturation levels, W1 at 27% and W2 at 16%. Therefore, a reduction in the price of W3 will enable to compete favorably with the other products. 

R&D and Pricing Decisions for 2014 

The price for product W1 went down from 270 to 260 

The price for product W3 went down from to 130 from 150 

The price of W2 reduced to 420 from 439 

Greater investment for W3 to the tune of 44% in the R&D cost means that the investment allocation for W1 reduced to 26% and that for W2 by 30%. 

The year 2014 

	W1	W2	W3	Total
Sales	3,283,173	2,694,925	663,871	6,641,969
Revenue	853,624,894	1,131,868,352	86,303,276	2,071796,522
Cost
Variable Cost	492,475,901	741,104,278	36,512,924	1,270,093,103
Fixed Cost	75,000,000	37,500,00	37,500,000	150,000,000
R&D Cost	6,240,000	7,200,000	10,560,000	24,000,000
Total Cost	573,715,901	785,804,278	84,572,924	1,444,093,103
Profit
Total Profit	279,908,994	346,064,074	1,730,351	627,703,419
Profitability	33%	31%	2%	30%
Performance	1.01	1.38	0.89

The accumulated profit for the three tablets, W1, W2and W3 for the year 2014 was 1,041,380,549. In the absence of decisions on pricing, the score will be much lower at 413,677,130. Additionally, a significant rise in revenue was recorded across the three products. The rise in revenue is attributed to recorded increase in sales for all the three tablets for the year. Despite W3 being priced higher than other competing products in the market, an increase in its sales was recorded for the year. Implying that the product was in its growth phase as it acquired new customers and sales rapidly increased (Bezawada & Pauwels, 2013). W3 also witnessed a slight increase in product marketplace maximization to 3%, with the potential of new customers for the product remaining higher. However, market saturation levels for W1 and W2 for the year were 53% and 36% respectively, figures that are way higher than the 3% level of W3 tablets. As W3 continues to acquire new customers, new sales for W1 are reducing, implying that new customers are taking on W3. However, the low performance of W3 is still a concern hence the need for further investment to boost its sales. The low performance of W3 in the market is likely due to the presence of almost similar products from competitors in the market. Reducing the price of W3 will enable it to favorably compete with others as it continues to acquire new customers. W1 still maintains an excellent market position in spite of it being priced at almost the same level as W3. The position of W1 is due to a large existing market base already established over time. 

R&D and Pricing Decisions for 2015 

The price of W3 reduced from 130 to 110 as its research and development cost went up to 45%. 

The price of W1 was retained at 260 with an investment allocation of 30%. 

A slight reduction in the R&D cost to 25% for W2 was witnessed, but the price for the year remained at 420. 

The year 2015 

	W1	W2	W3	Total
Sale	860,283	2,273,084	1,750,189	4,883,556
Revenue	232,276,442	954,698,175	210,022,723	1,396,994,340
Cost
Variable Cost	129,042,468	625,098,032	96,260414	850,400,914
Fixed Cost	75,000,000	37,500,000	37,500,000	150,000,000
R&D Cost	9,035,294	8,470588	6,494,118	24,000,000
Total Cost	213,077,762	671,068,620	140,254,532	1,024,400,914
Profit
Total Profit	19,198,680	283,626,556	69,768,190	372,593,426
Profitability	8%	30%	33%	26%
Performance	0.99	1.29	0.93

A recorded profit of 1,413,973,975 was achieved for all the products for the year 2015. Again, this was an increase from the 1,041,380,549 cumulative profit recorded in the previous years, indicative of an increase in sales for W3 tablets. Evidently, W2 product appeared to reach a shakeout phase where there was a reduced number of new customers purchasing the product. Comparatively, W1 was competing favorably with other similar products on the market. A performance index of 0.99 for W1 is a slight setback in its market position although the product marketplace maximization value peaked at 96%. Improving the market performance of W1 demands the acquisition of new areas for selling the products. Similarly, the saturation value for W2 increased significantly to 73% as the performance index dropped to 1.29. The performance of W3 stood at 0.93 with significant improvement in saturation level to 7% for the year. The tabulated results show that the prices of these products did not differ significantly from those of competitors in the market. 

R&D and Pricing Decisions for 2016 

The price for W3 increased to 130 from the previous year’s 110 while the R&D cost went down to 445. 

The price of W1 was retained at 260 with its investment allocation remaining at 30%. 

A slight increase in the R&D cost to 25% for W2 was witnessed, but the price for the year remained at 420. 

The year 2016 

	W1	W2	W3	Total
Sale	573,992	630,106	3,964,150
Revenue	149,237,932	264,644,425	515,339,503
Cost
Variable Cost	86,098,807	173,279,088	218,028,251
Fixed Cost	75,000,000	37,500,000	37,500,000
R&D Cost	6,240,000	7,200,00	10,560,000
Total Cost	167,338,807	217,979,088	266,088,251
Profit
Total Profit	-18,100,875	46,665,337	249,251,252
Profitability	-12%	18%	48%
Performance	0.98	1.15	0.97

As expected, the majority of customers for the W3 tablet are new customers with many more potential customers signifying better times in the future. These signs indicate that the product is in its growth phase. An analysis reveals that the performance of W3 is excellent given the competition in the market. A profit of 1,689, 502,505 for all the three products for the year 2016 is a positive sign of the significance of pricing decision undertaken. The rationality of decisions with regard to research and development and marketing is responsible for the increase in profit. The increase in profits for 2016 coincides with market saturation of the two products W1 and W2 at a value of 100%. This is the maturity stage of the two products. Hence, the sales are only to previous customers with no new buyers purchasing the two tablets (Khoroshiltsev, 2017). Such an occurrence calls for the introduction of a new product on the market. The market saturation for W3 is 18% pointing to a steady improvement in performance. However, the performance index remains low at 0.97 implying that further investment is required to improve the performance to a value greater that1.0. 

Conclusion 

Performance indicators such as the products’ market saturation, product performance, the cost of research and development, annual revenues and cumulative profits dictate the main areas of focus to improve the performance of the product and also increase sales. The need to increase investments in research and development while the same time maintaining high profits offers a dilemma for marketing decision makers. However, striking a balance between the two is beneficial for the long-term marketing plans for the company. Decisions for the simulated results for the four years will aim to increase profitability and improve the company’s market share. The tabulated results indicate an increase in the market share for the company for the three products. However, market saturation values point to the need for identification of new areas for selling the company’s products (Wang, 2015). Market saturation values of tablets W1 and W2 were projected to reach 100% at the end of 2016. This is a cause for concern given the competitive nature of the market and the need to continuously improve the performance of the company’s products. Reliance on repeat customers is not sustainable in such a market, hence the need to venture into untapped areas to increase sales. 

References 

Bezawada, R., & Pauwels, K. (2013). What is special about marketing organic products? How organic assortment, price, and promotions drive retailer performance.  Journal of Marketing ,  77 (1), 31-51. 

Cavusgil, T., & Kardes, I. (2013). Defining and Measuring the Middle Class in Emerging Markets.  Research World , (39), 46-49. 

Hinterhuber, A. (2015). Violations of rational choice principles in pricing decisions.  Industrial Marketing Management ,  47 , 65-74. 

Khoroshiltsev, M. I. (2017). The theoretical basis of the assessment and management of the activity of enterprise efficiency.  Journal of Economics and Social Sciences , (11), 4-8. 

Tsai, K. H., & Yang, S. Y. (2013). Firm innovativeness and business performance: The joint moderating effects of market turbulence and competition.  Industrial Marketing Management ,  42 (8), 1279-1294. 

Wang, C. H. (2015). A market-oriented approach to accomplish product positioning and product recommendation for smartphones and wearable devices. International Journal of Production Research ,  53 (8), 2542-2553.