Many companies introduce products that compete not only with their competitors’ brands but with their own internal brands.

A. Under what conditions would you introduce a new product that you are sure will cannibalize one of your existing products?
B. Why would you consider doing this?
C. Develop an example / problem (i.e., numerical and written) including price and cost data to demonstrate your understanding of this concept. (

First, imagine that you are a small business owner with a very limited promotional budget. You cannot afford large-scale mass media advertising, such as expensive television or radio advertising.

Next, in your discussion post, identify and briefly describe at least five things you could do to promote your business.

First, imagine that you are a small business owner with a very limited promotional budget. You cannot afford large - scale mass media advertising, television or radio advertising. Briefly describe five things you could do to promote your business.

A. A company might introduce a new product that cannibalizes one of its existing products under certain conditions. One such condition would be if the existing product is already in decline or facing strong competition in the market. Introducing a new product that attracts existing customers away from the declining or threatened product can help the company maintain its overall market share.

B. There are several reasons why a company might consider introducing a new product that cannibalizes one of its existing products. One reason is to stay competitive in the market. By launching a new product that appeals to changing customer preferences or emerging trends, the company can prevent losing market share to its competitors. Additionally, introducing a new product can allow the company to leverage its existing brand reputation and customer base, potentially attracting new customers in the process. Lastly, cannibalizing an existing product can also provide an opportunity to improve profitability by phasing out a less profitable product and replacing it with a more lucrative one.

C. Let's consider an example to illustrate this concept. Imagine a fictional company, TechGadgets Inc., that manufactures and sells smartphones. They currently have two smartphone models on the market: Model A and Model B.

Here are the details for Model A:
- Price: $500
- Cost to produce: $300
- Market share: 40%

And here are the details for Model B (the new product being introduced):
- Price: $700
- Cost to produce: $400
- Estimated cannibalization rate: 20%

To determine the impact of cannibalization, we need to calculate the contribution margin for each product and assess the overall market share.

Contribution margin for Model A: $500 (price) - $300 (cost) = $200
Contribution margin for Model B: $700 (price) - $400 (cost) = $300

Market share after cannibalization for Model A: 40% * (1 - 20%) = 32%
Market share for Model B: 20%

Based on the example, TechGadgets Inc. is introducing Model B, which is priced higher and costlier to produce than Model A. However, they estimate that this new product will cannibalize 20% of the existing demand for Model A.

By introducing Model B, TechGadgets Inc. is expecting to maintain a market share of 32% for Model A while capturing a new market share of 20% for Model B. Despite cannibalizing their own product, the company believes that the higher price and contribution margin of Model B will make it more profitable overall.

This example demonstrates how a company might strategically introduce a new product to cannibalize an existing one in order to maintain market share, improve profitability, and adapt to changing customer preferences.