FROM: Cristian Oana – Marketing Consultant
SUBJECT: Pricing strategy of future FSI product line.
Purpose and Overview
Please review the following sections based on your current pricing strategy and market research as well as future recommendations. The report contains a SWOT analysis that will highlight the need for a switch in pricing strategy from the current Value Based pricing to Price leadership. FSI is the only manufacturer of the HERO line product having only one competitor (Guardian) which currently holds a market share of 42%. This fact underlines our company standing as an Oligopoly and allows us to lead the way in price determination.
Summary of Past and Current Situations
Self-contained breathing apparatus systems are worn by fire and rescue personnel in hazardous situations where smoke, poisonous gas or low levels of oxygen inhibit search and rescue operations.
FSI has been the leading provider of the digital breathing apparatus system since 1990 holding a consistent price of 1485$ per unit. Almost 100% of FSI’s business is conducted with U.S. fire and rescue departments that belong to regional purchasing organizations. Contracts are one year in length with the exception of the California Region. In 2001 FSI increased the price by 5% to increase revenue.
In 1995 Guardian introduced their own product line-up and managed to capture up to 42% market share. Their current cost is 1500$/unit.
The challenges FSI currently faces is weather a further increase in price will keep its current market share despite competition and maximise revenues for the future. An appropriate pricing strategy must be chosen to ensure the HERO lines’ life cycle. Based on the items highlighted in bold in the following SWOT analysis, a price leadership strategy is recommended.
STRENGTHS * Unique product line that uses reliable digital equipment. * Fire...