Capsim Strategy

Topics: Investment, Leverage, Variable cost Pages: 3 (869 words) Published: January 30, 2013
We chose Broad Differentiator as the basic strategy for our company. Through this strategy, our company will attempt to differentiate our product line in several distinct dimensions. By providing products that are vastly superior and unique from our competitors and pricing the products affordably, we can gain customers’ loyalty and awareness. Since our company’s main focus is premium products we will aim for high contribution margins, around 50%, on average, over all five products. After establishing our company brand and products within the market we will look to increase contribution margin to be between 55%-60% over all five products. Our company’s optimal balance is to have variable costs outweigh fixed costs unless our company gains rapid success.  Fixed costs such as rent, insurance, and salaries will have to be paid regardless of our company’s success, whereas variable costs will rise with the popularity of our products. We plan to cover fixed and variable costs with the sale and profits from our products. Our planned revenues will cover the variable costs, with a large enough contribution margin to cover fixed costs while still providing the company with a profit. Because our company is practicing a Broad Differentiator strategy, we will invest yearly in R&D in each segment of the market.  We will put a special emphasis on high end products in order to be up to date and innovative market leaders.  Specifically, this upcoming year we will be investing between $350- $400 dollars in the Traditional segment, between $650 and $700 in the Low End segment, between $900 and $950 in the High End segment, between $500 and $550 in the Performance segment, and lastly between $350 and $400 in the size segment.   In order for our strategy to be effective, our optimal timing for planned investments will be when demand is predicted to be high.  Hence, we will increase our capacity levels where demand is forecasted to peak.  According to the drift...
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