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Larson Inc. is an international company that has operated in America for 5 years and in Germany for over 15 years. The company supplies batteries for electronic equipment. Batteries are sold for anything—from laptops to toys. The company has always maintained a decentralized structure regarding decisions in the areas of marketing, pricing, and trade. After reviewing the profitability of the American and German divisions, profits were much lower than expected and the company decided that decisions of high magnitude should be reviewed and approved through the corporate office.
The corporate office decided that a team would be put together to review any results in the aforementioned areas and to offer recommendations for change. Your group will be reviewing these results. The following is information you need to make informed decisions.
Unemployment – 9.9%
Inflation – 2.3%
GDP (purchasing power parity) – $14.6 trillion
Output per person (GDP per capita) – 2007: $46,800; 2008: $32,560
Fed funds rate – 0.25
Discount rate – 0.50
Population – 305 million
• Export goods production machinery and equipment, 32.4%; industrial supplies, 26.5%; non-auto consumer goods, 11.7%; motor vehicles and parts, 11.5%; aircraft and parts, 7.6%; food, feed, and beverages, 7.3%; other, 4.0% (2008)
• The average battery costs $80 in raw materials and production costs, and at current sales volume or anticipated initial sales volume, fixed costs come to $30 per unit. Your total cost is $110 per unit. Present markup is 35%.
Present pricing strategy in use: cost-plus pricing
• There is a great deal of competition in the American battery market. Larson Inc. finds product differentiation a bit difficult. Packaging is lackluster and commercials are of a serious nature and run infrequently. No other advertisement is present.
• Major slowdown has occurred because of the current financial troubles in the economy. Liquidity has almost...
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