Sensitivity Analysis:

 

In order to obtain10.5% of market share, our firm must decrease our price to $362 and also increase our price spent on advertising to be $110,900.  In this analysis, the forecast for demand would be 3291.589.

 

Inputs

 

 

Outputs

 

 

 

 

 

 

 

 

Industry Estimates

 

 

Total industry demand:

31343.09

 

Avg. Price (in $):

363

 

 

 

 

Avg. Advertising (in $):

110000

 

Relative Demand:

1.05018

 

RD1:

1

 

 

 

 

 

 

 

Market Share:

10.50%

 

Your Decisions

 

 

 

 

 

Price (in $):

362

 

Forecasted Demand:

3291.589

 

Advertising (in $):

110900

 

 

 

 

 

Or we can choose to decrease our prices to be $361, and only spend $105,000 on advertising.  In this case, we would still obtain at least 10.5% of market share.

 

Inputs

 

 

Outputs

 

 

 

 

 

 

Industry Estimates

 

 

Total industry demand:

31343.09

Avg. Price (in $):

363

 

 

 

Avg. Advertising (in $):

110000

 

Relative Demand:

1.053666942

RD1:

1

 

 

 

 

 

 

Market Share:

10.54%

Your Decisions

 

 

 

 

Price (in $):

361

 

Forecasted Demand:

3302.51778

Advertising (in $):

105000

 

 

 

 

 

Goal Seeking:

 

 

To get 11.5% of the market, you can do any of the following:

 

Decrease price to $359, and spend $110,900 on advertising giving our firm 11.86% share of the market.

 

Inputs

 

 

Outputs

 

 

 

 

 

 

Industry Estimates

 

 

Total industry demand:

31343.09

Avg. Price (in $):

363

 

 

 

Avg. Advertising (in $):

110000

 

Relative Demand:

1.186085

RD1:

1

 

 

 

 

 

 

Market Share:

11.86%

Your Decisions

 

 

 

 

Price (in $):

359

 

Forecasted Demand:

3717.557

Advertising (in $):

110900

 

 

 

 

 

Or we could set our price at $360 and spend $113,000 on advertising, giving our firm 11.56% share of the market.

 

Inputs

 

 

Outputs

 

 

 

 

 

 

Industry Estimates

 

 

Total industry demand:

31343.09

Avg. Price (in $):

363

 

 

 

Avg. Advertising (in $):

110000

 

Relative Demand:

1.155666777

RD1:

1

 

 

 

 

 

 

Market Share:

11.56%

Your Decisions

 

 

 

 

Price (in $):

360

 

Forecasted Demand:

3622.21678

Advertising (in $):

113000

 

 

 

 

Or our firm can spend $125,000 on adverting and price our product at $362, which would be one dollar less than that of our competitors.

 

Inputs

 

 

Outputs

 

 

 

 

 

 

Industry Estimates

 

 

Total industry demand:

31343.09

Avg. Price (in $):

363

 

 

 

Avg. Advertising (in $):

110000

 

Relative Demand:

1.150111

RD1:

1

 

 

 

 

 

 

Market Share:

11.50%

Your Decisions

 

 

 

 

Price (in $):

362

 

Forecasted Demand:

3604.802

Advertising (in $):

125000

 

 

 

 

 

 

 

Scenario Analysis:

 

Worst Case: where competition drops prices to $360 and increases advertising to $115,000.

 

 

Inputs

 

 

Outputs

 

 

 

 

 

 

Industry Estimates

 

 

Total industry demand:

33978.57

Avg. Price (in $):

360

 

 

 

Avg. Advertising (in $):

115000

 

Relative Demand:

0.879347

RD1:

1

 

 

 

 

 

 

Market Share:

8.79%

Your Decisions

 

 

 

 

Price (in $):

362

 

Forecasted Demand:

2987.896

Advertising (in $):

110900

 

 

 

 

In this worst-case scenario, our market share would decrease to be 8.79% and our forecasted demand would be 2987.896.

 

 

Best Case Scenario: where competition increases prices to $366 and decreases advertising prices to $105,000.

 

Inputs

 

 

Outputs

 

 

 

 

 

 

Industry Estimates

 

 

Total industry demand:

28707.61

Avg. Price (in $):

366

 

 

 

Avg. Advertising (in $):

105000

 

Relative Demand:

1.222027

RD1:

1

 

 

 

 

 

 

Market Share:

12.22%

Your Decisions

 

 

 

 

Price (in $):

362

 

Forecasted Demand:

3508.149

Advertising (in $):

110900

 

 

 

 

From this best-case scenario, our firm would have 12.22% share of the market and our forecasted demand would be 3508.149.

 

 

Expected Scenario: where price averages are $363 and advertising price is $110,000.

 

Inputs

 

 

Outputs

 

 

 

 

 

 

Industry Estimates

 

 

Total industry demand:

31343.09

Avg. Price (in $):

363

 

 

 

Avg. Advertising (in $):

110000

 

Relative Demand:

1.05018

RD1:

1

 

 

 

 

 

 

Market Share:

10.50%

Your Decisions

 

 

 

 

Price (in $):

362

 

Forecasted Demand:

3291.589

Advertising (in $):

110900

 

 

 

 

For the expected scenario, our firm would hold 10.5% of the market share and our forecasted demand would be 3291.589.

 

 

Descriptive Statistics for the Scenario Analysis:

 

Market Share:

Mean:               10.50%

High Value:            12.22% (best case)

Low Value:            8.79% (worst case)

 

Forecasted Demand:

 

Mean:               3262.54

High Value:            3508.149 (best case)

Low Value:            2987.896 (worst case)