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SC is trying to launch a new product into a competitive market in north america. Test marketing has revealed the following demand curve for the product.
P= 600-0.005Q
The estimated market for the product is 500000 units per year .The company would like to capture 10% of this market
the company has established a cost card based on 50000 units of sales each year
$
DM 100
DL 30
FOH 70
Total cost 200
The company wishes to achieve a target profit of $10,000,000 for sales of this product per year.
REQUIRD.
a) What price will the company have to charge to capture its required market share and what is the target unit cost to achieve its target profit?
b) What is the size of the target cost gap and how might Scriba company seek to close this gap?the problem for me in this question is the part A ( mainly because i don’t know how to calculate price based on market share)
Given the the market is 500,000 units, and the company wants 10% of the market, it means that they want to sell 10% x 500,000 = 50,000 units.
So you can put Q = 50,000 in the price demand equation and this will give you the required selling price.
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