Capsim Approach

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Analysis of Erie

Erie is currently a strong competitor in the Traditional segment. They have two products in this segment, they are both priced the same, however, Echo is spot on the ideal position customers want. The age is of these products are also close to the two years that customers want. The price is a little on the high side, but competitive. The MTFB of the sensors are also very competitive. The company could be a little more accessible. They have stopped the High performance plant and look to have stopped their Performance plant. I assume they are also going to stop the size plant as they only started the last round with 64 units, they may move it to another segment though since they kept capacity. All of the plants they did utilize they used them over 100%. Erie had low sales last round, but I expect them to gain more sales. They had a good margin at 31.3%. They have a low bond rating of CCC. I think if they would have kept a product in one of the other segments they would have had better sales. Their advantage now is having two products in a large segment.

The large segment they are in is the Traditional at 8,809 units demanded growing at a rate of 9.2%. In round 2 they made a good profit selling 2,362 units to this segment. I feel they will have better profit next round because their costs for Echo will be smaller and give it a larger contribution margin. They may be able to hold an advantage until someone else introduces another product to this segment. We may do this in round 3.

I predict their profits mostly to come from the Traditional segment selling 2,700 units at $26.50 with a margin of 32%, the profit would be $22,896,000 in this segment. The may make around $12,000,000 in the Low end market. This gives them a profit of about $34,896,000 in round 3. Their low end sales at $19.00 with 2,100 units sold at 30% margin

I would use the performance evaluation of ROS, they should have a low cost product selling at a good price. They could...
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