Question Details

[answered] Marketing Principles - MKTG 1110 Price & Market


8.? With all of the options given in this case, answer the following questions in an executive summary format. Do show your supporting research data and provide a references page. (45 points possible)


What environmental factors might be of most interest to Washburn and why?

Which manufacturing facility would you recommend and why?

Which retail pricing strategy would you choose and why?? In addition, which U.S. manufacturing facility would you choose?

What is the most likely target market for the new guitar line? Do explain this market in detail using

Demographics

Geographics

Psychographics

Buyer Behaviors

What is your recommendation for moving forward? How and Why?


Marketing Principles ? MKTG 1110

 

Price & Marketing Math Case #4

 

Business Department

 

Eibling Hall 401 Washburn International: Guitars and Break-Even

 

(Case Note: Reliable References are REQUIRED to

 

adequately address the questions in this case.)

 

. Washburn International began manufacturing guitars 1883 in

 

Chicago, Illinois at its original location on Maxwell Street.

 

Eventually, Washburn and the Maxwell Street location would

 

emerge as the epicenter of a musical movement. In later years,

 

Washburn opened another manufacturing facility in Nashville, the

 

home of country music, in order to capitalize on booming guitar

 

sales in the south.

 

http://www.washburn.com/

 

The history of Washburn Guitars is the history of a wide range of musicians.

 

From blues players who shaped rock ?n roll to multi-platinum recording artists to

 

emerging guitar virtuosos. It is a history that can be heard and experienced every

 

time you turn on the radio or listen to a live performance. It is a history built by

 

skilled craftsmen and musicians who share one common love?a passion for the

 

guitar.

 

Washburn?s 125 year history is steeped in the tradition of fine instrument making.

 

The products reflect the hard-working spirit of the Washburn employees who craft

 

and design each guitar. Washburn continues to be a consistent leader in

 

combining design, innovation, and technology to deliver the rich, bold sounds for

 

a vast musical landscape.

 

Washburn guitars are preferred for many first time buyers and professional

 

musicians as well. Prices, designs, and quality of various guitars manufactured

 

by Washburn are formulated to attract market segments that include the first time

 

guitar buyer as well as professional musicians. The company is also well known

 

for its custom made guitars purchased by major recording artists.

 

Washburn may produce ?signature model guitars? signed by Darryl Jones

 

or Joe Perry, but it still has to set prices that enable it to stay in business. The current executive vice president of Washburn International is responsible for

 

setting the prices for the company?s line of guitars. Currently, a new line of

 

guitars is being considered for production with a suggested competitive retail

 

price of $850. Suggested retail prices of $900 and $1000 are also being

 

considered for the new guitar line. Washburn distributes it guitars at major

 

musical retail outlets like Sam Ash.

 

Market research has indicated that Washburn can expect to sell as many as

 

25,000 of the new line of guitars internationally. In addition, the vice president is

 

trying to decide whether it would be more cost effective and profitable to

 

manufacture the new guitar line in the Chicago plant or in the Nashville facility.

 

The Nashville facility enjoys some lower fixed costs because of lower rental

 

costs, taxes, etc.

 

To help in the decision making, the company accountant has provided the current

 

relevant information.

 

Chicago Facility:

 

Retail Markup % 50% Total Fixed Costs $360,000 Labor Costs Per Hour $15 Number of hours required for new

 

unit 8 hrs. Additional Materials cost per unit $150 Nashville Facility:

 

Retail Markup % 50% Total Fixed Costs $250,000 Labor Costs Per Hour $10 Number of hours required for new

 

unit 8 hrs. Additional Materials cost per unit $150 Marketing Principles ? MKTG 1110

 

Price & Marketing Math Case: Answer Sheet

 

Business Department

 

Eibling Hall 401 Questions:

 

1. What factors are most likely to affect demand for the lines of Washburn

 

guitars (a) bought by first-time guitar buyers and (b) by a sophisticated musician

 

who wants a signature model? (5 points possible)

 

First-time guitar buyers would consider factors such as price, quality, and

 

design to define if the that particular guitar is what they are looking for. Beginner

 

musicians are exploring and more likely searching for affordability. On the other

 

hand, sophisticated musicians would be focused on quality, uniqueness, value

 

and sound of the guitar. Price would be less of a factor because they would be

 

willing to pay more to fit their needs. 2. For Washburn, what are some factors that may cause the demand curve for

 

the new guitar line to shift (movement of the demand curve)? (5 points possible)

 

If customer were to find that the sound quality does not meet the

 

standards of the company, that could be a factors affecting negatively the

 

demand curve of the product. At the same time, celebrities and well recognized

 

musician?s endorsements would positively increase demand of the new guitar

 

line. 3. In Washburn?s Chicago plant, what is the break-even point in units and Sales

 

(BEP) for the new line of guitars if the suggested retail price is

 

(a) $850 360,000/(850-270)=1,333.33 units

 

1,333.33x850=$1,133,330.50 sales

 

(b) $900,

 

360,000/(900-270)=571.42 units

 

571.42x900= $514,285.71 sales

 

(c) $1000

 

360,000/(1000-270)=493.15 units

 

493.15x1,000=$493,150.68 sales

 

Show your work. Hint: Calculate Washburn?s selling price to retailers first.

 

(10 points possible) -----------------------------------------------------------------------4. If Washburn achieves the sales target of 25,000 units at $850 suggested

 

retail price, what will its profit be?

 

Show your work. Hint: Calculate Washburn?s selling price to retailers first.

 

(Profit = Total Revenue ? Total Costs) (10 points possible) -----------------------------------------------------------------------profit= (25,000x850)-(360,000+(25,000x270))=$14,140,000 5. Assume that Washburn moves its production to Nashville and that the costs

 

are reduced as projected in the case. Given a $850 suggested retail price,

 

what will be the new

 

(a) BEP in units

 

250,000/(850-230)= 403.22 units

 

(b) BEP in Dollars

 

403.22x850= $342,741.93 -----------------------------------------------------------------------6. Assume that Washburn negotiates a new retail markup of 35%, with a

 

suggested retail selling price of $850, (10 points possible)

 

a) what is Washburn?s new selling price per guitar to retailers

 

(100%-35%)(850)= $637.50

 

(b) what is Washburn?s new BEP in units, and

 

250,000/(637.50-230)=613.49 units , 360,000/(637.50-270)=979.59

 

(c) what is Washburn?s new BEP in dollars? 613.49x637.50= $391,104.29 , 979.59 x 637.50=624,489.79 New Selling

 

Price $________ Chicago Nashville BEP in Units 979.59 613.49 BEP in dollars 624,489.79 391,104.29 7. If for competitive reasons, Washburn eventually has to move all its production

 

to China, (a) which specific costs might be lowered and (b) what additional costs

 

might it expect to incur? To answer this question, visit the following website:

 

China is well-known for its low cost labor per hour, as a result; this would

 

be a cost saving for the company. Also, if the company acquire materials from

 

China, that would inquire a lower cost as well. Additional costs that might occur

 

are transferring cost, shipping cost and outsourcing cost.

 

8. With all of the options given in this case, answer the following questions in an

 

executive summary format. Do show your supporting research data and provide

 

a references page. (45 points possible) What environmental factors might be of most interest to Washburn and

 

why?

 

Which manufacturing facility would you recommend and why?

 

Which retail pricing strategy would you choose and why? In addition,

 

which U.S. manufacturing facility would you choose?

 

What is the most likely target market for the new guitar line? Do explain

 

this market in detail using

 

o Demographics

 

o Geographics

 

o Psychographics

 

o Buyer Behaviors

 

What is your recommendation for moving forward? How and Why? REFERENCE CONCEPTS ? Reliable References are REQUIRED to answer

 

the questions posed by this case. These are simply provided as examples.

 

http://www.namm.org/news/press-releases/pick-holiday-gifts-strike-right-chord

 

http://www.namm.org/library/oral-history/Guitars-Amps-Fretted Here is an example of how professional players view a guitar...might be much

 

different than an amateur...

 

http://studiopros.com/buy-acoustic-guitar

 


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