Basic Marketing: A Global Managerial Approach

Perreault−McCarthy: Basic
Marketing: A
Global−Managerial
Approach, 14/e

4. Evaluating Opportunities
   in the Changing Marketing
   Environment

Text © The McGraw−Hill

Companies, 2002

b. Because of economies of scale, both suppliers’ average

cost per machine will vary depending on the quantity

sold. If Mediquip had only 45 percent of the market

and Laser Tech 55 percent, how would their costs

(average total cost per machine) compare? What if

Mediquip had 55 percent of the market and Laser

Tech only 45 percent? What conclusion do you draw

from these analyses?

c. It is possible that Laser Tech may not enter the mar-

ket. If Mediquip has 100 percent of the market, and

quantity purchases from its suppliers will reduce the

cost of producing one unit to $6,500, what price

would cover all its costs and contribute $1,125 to

profit for every machine sold? What does this suggest

about the desirability of finding your own unsatisfied

target markets? Explain.

For additional questions related to this problem, see

Exercise 4-4 in the Learning Aid for Use with Basic Mar-

keting,14th edition.

could adjust sales territories so only four more sales reps

would be needed for good coverage in the market. In

contrast, Laser Tech’s sales reps call on only industrial

customers, so it would have to add 14 reps to cover the

hospitals.

Hospitals have budget pressures—so the supplier

with the lowest price is likely to get a larger share of the

business. But Mediquip knows that either supplier’s price

will be set high enough to cover the added costs of de-

signing, producing, and selling the new product—and

leave something for profit.

Mediquip gathers information about its own likely

costs and can estimate Laser Tech’s costs from industry

studies and Laser Tech’s annual report. Mediquip has set

up a spreadsheet to evaluate the proposed new product.

a. The initial spreadsheet results are based on the

assumption that Mediquip and Laser Tech will split

the business 50/50. If Mediquip can win at least 50

percent of the market, does Mediquip have a competi-

tive advantage over Laser Tech? Explain.

Evaluating Opportunities in the Changing Marketing Environment 123