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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