Rubbertech Case Study

Topics: Marketing, Price, Rate of return Pages: 5 (1571 words) Published: March 9, 2010
NCCB503 – MBQC831
Doug Stayman
Rubbertech Case
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Executive Summary
Siam Cement’s offer to purchase an initial order of 200 units at $9,000 per unit, would lead to a net profit of $200,000. While this immediate cash influx may seem advantageous in the short term, it will not offset yearly operational expenses of $250,000 (See Exhibit 1). Additionally, accepting Siam Cement’s offer would position Rubbertech as an Original Equipment Manufacturer (OEM). This decision could impede potential growth that would far exceed the offer that is currently on the table. If Rubbertech does not accept Siam Cement’s offer, they can seize a part of $5.4 million total market share (Eisenstein 2006). In this case, the potential for reward clearly justifies the risk involved. The recommended marketing strategy for Rubbertech is illustrated at a high level below. New Product Introduction

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Life Cycle Engagement Strategy
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Currently, 90% of RSS production occurs within Thailand. Therefore, it would be prudent for Rubbertech to begin their marketing efforts within Thailand. The company can infiltrate more of the total market share for the industry and increase their contribution margin by eliminating the added $1,000 cost attributed to transportation outside of Thailand(Eisenstein 2006). Since Rubbertech is a Thai company, targeting the Thailand first will be an easier transition from a relationship building perspective; they will not need to devote time or resources toward breaking cultural barriers, and can focus on promoting their value proposition. Additionally, Rubbertech has no direct competitors, except manual labor and an Indian company with burgeoning technology that is akin to the RTP (Eisenstein 2006). While the Indian company is in the research and development phase, Rubbertech can develop their brand in Thailand. Market Segmentation

Within Thailandand beyond, the RSS Industry consists of small, medium and large plantations. For each segment of plantations, the only current competition against the RTP is from workers manually removing impurities from RSS. Therefore, we determined the average cost savings from using the RTP versus manual labor for each segment. If the price per RTP unit is assumed to be $10,000, the cost savings for large and medium plants are $84,000 and $26,500, respectively, thus offsetting the price of the RTP for the plant (See Exhibit 3). These cost savings reflect a significant value proposition for these two segments. For smaller plants, the cost savings is $2,000. This amount could be marginal since it may not offset other costs associated with purchasing the RTP (See Exhibit 3). In the interim, Rubbertech should focus on marketing to large and medium sized plantations because they can more easily differentiate their offering with a solid value proposition. Perceived Value Pricing

Rubbertech should focus on marketing to large and medium plantations because those segments have the best value proposition for the customer. If a large or medium plant purchases the RTP, they will realize cost savings that will offset the cost of the purchasing the unit itself. Therefore, Rubbertech needs to leverage the economic value to the customer for each segment. If Rubbertech were to penetrate 20% of the large market and medium market (520 units sold), using the aforementioned pricing strategy, the company will experience a gross profit of $780,000 and net income before tax of $330,000 (See Exhibit 5). With this pricing strategy, Rubbertech will gain a small profit in their first year and still have room to alter their pricing strategy as necessary. Outside of the price itself, Rubbertech has an...

Cited: Eisenstein, Eric and Scott Ward. Rubbertech. The Wharton School, 2006.
Gourville, John T., _Notes on Behavioral Pricing._ Harvard Business School, 1999.
Stayman, Doug. Marketing Slides, Sessions 4 and 5. Cornell-Queens Executive MBA Program, 2009.
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