A firm is deciding whether or not to place a product on the market. They envisage three posible market reactions: high demand, moderate demand, and low demand. If demand is strong they expect to sell 200,000 a month of the good; moderate sale levels are expected to be 100,000; low sale are estimated at 40,000. The firms alternative are:
A. sell in high, moderate, or low quantities
B. market the product or sell production rights to another firm
C. to market or not to market the product
D. none of the above
(C)
The opening sentence says they are deciding whether to market or not.
The firm's alternatives can be summarized as follows:
A. The firm can choose to sell the product in high quantities, moderate quantities, or low quantities based on the expected demand levels.
B. The firm can choose to either market the product themselves or sell the production rights to another firm.
C. The firm can choose to either market the product or not market it at all, which implies not introducing it to the market.
D. None of the above options provided in the previous alternatives.
To make a decision, the firm needs to evaluate the potential profitability and risks associated with each alternative. This evaluation can be done by considering factors such as production costs, expected revenue, market competition, potential market growth, and any contractual terms and conditions related to selling production rights.
The firm should also conduct market research to obtain reliable information on consumer demand and trends. This can be accomplished through surveys, focus groups, competitor analysis, and industry reports. By collecting and analyzing this data, the firm can quantify and assess the likelihood of each potential market reaction (high demand, moderate demand, or low demand).
Once the expected demand levels are estimated, the firm can use these figures to evaluate the potential profitability of each alternative. By multiplying the estimated demand levels with the associated selling prices and subtracting the production costs, the firm can calculate the potential profit for each scenario. This will help them determine which alternative is the most financially viable.
Additionally, the firm should consider other strategic factors, such as their core competencies, resources, and long-term objectives. If the firm has the capabilities and resources to successfully market the product themselves, it might be more beneficial for them to retain control over the product and maximize their potential profits. However, if they lack the necessary expertise or resources, selling the production rights to another firm might be a more favorable option.
Overall, the firm should carefully analyze all available information, perform a cost-benefit analysis, and consider their own capabilities and objectives to make an informed decision on whether or not to place the product on the market and which alternative to choose.