paraphrase and change the structure of the paper, make it like a complete new work, pelase change the structure of the paper.
read the prompt, and make up some new good titles as well
even add something necessary you think the original work didnt mention, or delete something unnecessary in the original work,
Slide 1 of 2
UNFORMATTED ATTACHMENT PREVIEW
Prof. Nankin COOK, INC. (Case 9-3) Now that you have read the Cook, Inc. case, it should be clear that you are faced with a pricing decision in this case. You are first on the market with what is literally a life saving medical breakthrough – although you do know that there are more breakthroughs to come (e.g., drug eluting stents) within a relatively short time frame. Your analysis must consider a variety of ways that you might arrive at a price for the cardiac stent and, then, choose the one price structure that makes the most sense to you. When doing your analysis, remember that this is an innovative new product and that Cook will have the market to itself for a while before the competition makes its own inroads. [See the case for how long.] Therefore, one of the questions to consider is the type of pricing strategy that will be used for the introduction of this innovative medical device. While one can consider the above from a philosophical, strategic viewpoint, one must first understand the costs and the various pricing methods that will enable one to arrive at a diverse range of prices from which to choose. That is, which price has the best chance of maximizing profits while satisfying sales growth in the category? Therefore, in order to proceed, consider the following when making your recommendations and explaining the rationale behind those recommendations. 1. Do you think a separate sales force should be established by Cook to sell its new stent? If so, how will that effect cost – quantitatively. 2. How many seminars should Cook run to introduce doctors to the new stent? Note: Questions 1 and 2 pertain to costs. The decisions you make here will derive some of the cost factors that you will use when doing your calculations. 3. What do the following pricing methods indicate the price for Cook’s stent to be? NOTE: Show the relevant calculations in your analysis of each method. a. Use a simple mark-up on cost method to arrive at a number of prices. Be sure to test each price with a breakeven analysis to see if the number of units needed to breakeven at that price is logical based on the facts in the case. That is, how long will it take Cook to payback its investment based on each price tested? b. What price is suggested by using ROI pricing; that is, stating a ROI percentage to arrive at a price? c. Does market skimming (AKA price skimming) make sense here, and, if so, what price do you arrive at? d. What prices are suggested by demand and value pricing methods? Does such an approach make sense for the situation in which Cook finds itself? Running head: COOK INC. CASE ANALYSIS 1 COOK INC. CASE ANALYSIS Name Institution Date COOK INC. CASE ANALYSIS 2 Recommendations: Need for a separate sales team at cook Inc. for sale of new stent The sales team is a group of people who have been mandated by an organization to perform the duties that relate to sales in that organization. To help in the sale of the new stent, a separate sales team is important. The management of the organization should in the near future appoint a sales team to spearhead sales based on the ethics of the company. In the process of recruiting, thorough monitoring should be done in order to ensure that only individuals with appropriate skills are hired in order to drive the sale of the new stent well. The new team should also reflect the culture of the organization and also be able to adapt to the new working environment. To ensure maximum productivity, the team should be equipped with the necessary skills. The new product calls for a new sales team in order to ensure that it is sold to the maximum. Also, the new team should also have the technical know-how of the new product. The knowledge of how the product is sold is also important for the sales team to realize the desired sales goals. The sale may be done directly to the consumers or through retailers who then sell it to the final consumer. In the direct sale, the role of the sales team is ensuring that orders are taken and closed as soon as possible. The promotional activities that the company rolls out make it such that the sales team does not create any demand for the product. Through advertisement, the consumer is able to tell what kind of product is being sold and therefore the sales team will not have to inform them much. COOK INC. CASE ANALYSIS 3 In the other type of sales where the company sells to other businesses who then sell it to other businesses, the organization will train the team for maximum performance. In the training, the team will be equipped with the necessary strategies that help them prospect new customers and also the capabilities of explaining what the company has to offer. The training will also skill such as negotiation of better prices and how to collect new information in the market to help improve stent. During shortages, how they should allocate the products to different people. The company is interested in establishing a long-lasting relationship with these businesses so as to continually sell to them and to also improve customer satisfaction. The company also aims to achieve global sales and this it does by targeting markets that are in particular global territories. The sales team that will handle global sales should be organized such that they are around specific customers or markets. The sales team should be quick to make sales decisions and solve the issues that arise after customer disputes. For an appraisal of the team, the sales managers should constantly check on them and ensure that they meet what was agreed upon. This will determine either demotion or promotion. For this the company can use metrics such as the number of orders that a salesperson has booked, new customers brought and also those that they have lost. The payment of the sales team is in terms of fixed pay and a commission on the sales made. This method will encourage the sales team to perform well. Number of seminars for doctors when introducing the stent In the activities of Cook Inc. doctors are very key stakeholders. For the product to realize success, the end-user who is the doctor should know how it is used. Cook Inc. will, therefore, conduct several seminars to prepare doctors on the new product. One major conference for the doctors will be held and recorded in order to aid future reference. In every quarter of a year, there will be a mini-seminar that will aim at getting feedback from the doctors for analysis. COOK INC. CASE ANALYSIS 4 Pricing methods of the new stent A. The simple mark-up on cost method This is a pricing method that is used by manufacturers and the service industry due to its nature of being simple. In this method, Cook In. will calculate all conceivable costs that are involved in the production and sale of the new stent. The desired markup is then added. This method is simple to calculate but has a weakness in that it ignores variables such as the pricing used by competitors and the demand for the product in the market. Breakeven sales = fixed costs/ contribution margin The fixed costs are the out of pocket development expenses of $ 450, 000 which is also known as the sunk cost, the initial seminar cost ranges from $ 6,000 to $ 8, 000. There is a separate sales team of 6 to 8 representatives who focus solely on cardiovascular devices from the current line to the new stent. A sales team of 35 is tasked with the sale of diagnostic and catheters to radiologists and hospitals. The average salary is $ 45000 per year. The price of the balloon catheter is $ 80 per unit. The variable costs of the manufacturer were $ 55 per unit. A markup of 30 %, 40%, 50 %, 60 %, and 70% will be applied to the variable costs in order to determine the final price. The different selling prices are shown. COOK INC. CASE ANALYSIS mark selling price variable cost contribution per unit fixed costs break even units break even sales 30% $ 71.50 $ 55.00 $ 16.50 $ 494,000.00 29939.39 $ 2,140,666.67 5 $ $ $ $ $ 35% 74.25 55.00 19.25 494,000.00 25662.34 1,905,428.57 40% $ 77.00 $ 55.00 $ 22.00 $ 494,000.00 22454.55 $ 1,729,000.00 45% 79.75 55.00 24.75 494,000.00 19959.60 $ 1,591,777.78 $ $ $ $ 50% $ 82.50 $ 55.00 $ 27.50 $ 494,000.00 17963.64 $ 1,482,000.00 55% $ 85.25 $ 55.00 $ 30.25 $ 494,000.00 16330.58 $1,392,181.82 60% $ 88.00 $ 55.00 $ 33.00 $ 494,000.00 14969.70 $ 1,317,333.33 65% $ 90.75 $ 55.00 $ 35.75 $ 494,000.00 13818.18 $ 1,254,000.00 $ $ $ $ $ 70% 93.50 55.00 38.50 494,000.00 12831.17 1,199,714.29 The explanation for the calculations The selling price is obtained when we add the markup that is proposed to the variable cost per one new stent which is proposed to be $ 55. 30% markup-selling price=130%*$55=$71.50; 35% markup-selling price=135%*$55=$74.25 40% markup-selling price=140%*$55=$77 45% markup-selling price=145%*$55=$79.75 50% markup-selling price=150%*$55=$82.50 60% markup-selling price=160%*$55=$88.00 65% markup-selling price=165%*$55=$90.75 70% markup-selling price=170%*$55=$93.50 The variable costs for each product are $ 55 and this is applied to the various selling prices. The contribution per unit is the difference between the selling price and the variable cost in each unit. B. Return on investment pricing COOK INC. CASE ANALYSIS 6 This method is usually applied by monopolies in a market. It starts with a rate of return which is the primary objective. This is the percentage of returns we want from an investment. We then set a price structure that helps us achieve a predetermined targeted rate of return. To maintain the predetermined rate of return we are targeting we need t change the prices whenever the prices of the commodity are changing. The estimated fixed costs are around $ 500,000 an estimated rate of return would be applied to this investment in order to determine the amounts to be received. If for instance, the company wants a return of 50 % on any investment, the company would, therefore, have to make at least $ 750,000 from sales to realize this target. C. Market skimming This method is not ideal for the new stent product. This method is mostly used for new products but in our case, it is not viable. It assumes that there will be high demand and there will be no competition. It is also known as price skimming and is not effective for a competitor to follow up products. This is because the early markets have already been tapped. D. Suggested prices by demand and value pricing methods and whether it is sensible in Cook Inc. The method of demand-based pricing is the one in which a product is priced in accordance with the demand it attracts in the market. If the demand for the product is high, then Cook Inc. will set the price at a high price. If the demand is low, then a lower price will serve as an attraction to customers. The value-pricing method focuses on low prices to attract customers with its highquality products. Here, Cook Inc. will deliver high-quality products to its customers at a low price. Numerous research and consumer feedback will inform the company of the nature of the COOK INC. CASE ANALYSIS product it will produce. Therefore demand and value pricing are not appropriate for this case since the products such as diagnostic catheters will sell at $ 8 and $ 10 which is not applicable. 7
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