Simulation Strategies

Topics: Profit maximization, Economics, Monopoly Pages: 2 (739 words) Published: May 28, 2010
Simulation Strategies
Quasar Computers has developed an all-optical notebook computer called Neutron that is five times as fast as existing microchip-based computers. They have asked the author to make operational and business strategy decisions in response to market conditions. The author has been asked to create a solution to these conditions using strategic variables available to sustain the economic profits the firm can earn, recommend pricing and non-pricing strategies, and what kind of innovations would sustain the organization’s uniqueness. The first monopolistic scenario, Quasar will need to maximize their profits in a monopoly. Profit maximization will occur when marginal revenue equals marginal cost (McConnell, Bruce, Flynn, 2009). Quasar will be able to achieve this if their selling price is 2,550 and quantity is 5.3 million units. This would generate a total profit of 1.29 billion. The second monopolistic scenario, Quasar has a choice to increase their advertising budget or retain the previous year’s budget of 400 million. Increasing the advertising budget to 600 million would be the best choice to generate the most revenue. This would be a non-price strategy that would make Quasar’s products more attractive. The selling price would reduce to 2,450 with an increase of quantity to 7.7 million units; ultimately, increasing total profits to 2.74 billion. The third monopolistic scenario, Quasar needs to streamline their manufacturing facility costs in order to optimize the production process. The best choice to achieve the highest revenue would be to upgrade the production process to reduce per unit costs and optimize the production capacity. This would allow Quasar to achieve a total profit of 1.91 billion from a selling price of 2,300 and a quantity of 8.8 million units. The oligopoly scenario, Orion Technologies has introduced an optical notebook that requires Quasar to rethink their pricing strategy. The two companies will need...
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