!" #$at i% t$e ca%e - t$e conte&t' - ()5 page !) Mueller Le$*u$l +ML", a Geran proucer o. apparel .a%tener i% .acing %ti/ copetition% .ro it% 0apane%e copetitor% 1) 0apane%e $a2e price at 3a%tener% 1(4 loer t$an ML6% 7) Mar*et copetition - rule by only 8 a9or player% plu% .e %aller one% proucing only c$eap attac$ing ac$ine% 8) Mar*et po%itioning o. ML : Large-2olue $ere autoatic ac$ine% ere re;uire 5) ML6% ar*et %egent% o Large copanie% purc$a%ing large 2olue% o. i/erent .a%tener% Saller copanie% neeing large ;uantitie% o. %ingle .a%tener o ) Stable ar*et conition% it$ little price copetition =) opetition .actor%? o @uality o. .a%tener% o Per.orance o. attac$ing ac$ine% o @uality o. %er2ice A) Mar*et price% : t$ere oe% not %ee to be a %tanar pricing a% eac$ con%uer% pay% i/erent aount .or t$eir .a%tener%, a*ing it icult to copete on price C) 0apane%e entry into t$e ar*et $a triggere $uge price cut% in $ig$ 2olue %ale% !()Hiroto inu%trie% : o De Mar*eting %trategy to %ell attac$ing ac$ine% rat$er t$an renting t$e to ientife i%tributor% a% t$e copanie% t$at anu.acture bot$ attac$ing ac$ine% an .a%tener% oul %ellrent only to t$e en u%er HF oe% not on t$e ac$ine% an $ence i not $a2e t$e o2er$ea o. o pro2iing %er2ice% o Fn2e%te capital a% *ept to iniu, en%uring lo co%t o Do ri%* o. returne ac$ine% unli*e ML o HF6% entry $elpe ealer% to copete irectly it$ copanie% %iilar to ML it$ a %ignifcant price a2antage !!)ML6% t$reat%? o HF6% %trategy t$reatene !) Sall 2olue cu%toer $o u%e .a%tener% 1) Large 2olue cu%toer% u%ing 0apane%e .a%tener% on ML e;uipent !1)$allenge% be.ore ML? o o not lo%e ar*et %$are o Keeping price le2el% $ig$ in t$e .ace o. 0apane%e copetition o u%toer retention o Loer age% an o2er$ea pro2ie by 0apane%e copetition o Rele2ance o. t$e current co%t %y%te%
1" #$at i% t$e learning .ro t$e cla%% - incluing i%cu%%ion on t$e ;ue%tion% - ! page Key learning% .ro t$e ca%e? !) o%t% are not ri2en by labor) Prouct% an co%t% %$oul be ar*et ri2en) $i% can be ob%er2e by ML6% .a%tener% $ic$ are o2er co%t a% t$e priceco%t buil up $a .orce on %oe prouct% to reco2er t$e co%t% 1) I% per t$e i%cu%%ion% .or t$e ;ue%tion% in t$e ca%e, it i% e2ient t$at t$e .a%tener% can %till be proftable a.ter 1(4 price reuction $en t$e bunle co%t% are unbunle 7) I% t$e ar*eting conition% c$ange, e2en t$e ecient co%t %y%te% can becoe ob%olete a% ML a% better o/ in t$eir ar*et till t$ey .ace a i%rupti2e iea o. HF 8) Unbunling t$e co%t% can $elp in e/ecti2e pricing o. t$e prouct% 5) Unbunling t$e co%t% ill .urt$er $elp% in ienti.ying t$e accurate prouct co%t% an can ienti.y t$e %ource% o. t$e error% in t$e co%ting %y%te ) $e%e bunle co%t %y%te $a $elpe t$e copetitor e&ploit t$e copany an %ucce%%.ully capture t$e ar*et %$are =) Bunling o. co%t% ill al%o a/ect t$e %trategy o. t$e fr by pro2iing a .al%e in.oration on t$e o2erall prouct an o2er$ea co%t% A) 3or an e%tabli%$e %table ar*et, t$e *ey .or t$e fr $ile $anling t$e co%t anageent %ee% to be %ur2i2al C) o%t accounting %y%te can pu%$ t$e fr to ar*et %pecifc prouct% an i% a ouble ege %or a% inaccurate co%t %y%te can reuce t$e proft argin% a% i% t$e ca%e it$ ML !()Unbunling o. t$e co%t %tructure% can $elp in f&ing t$e rig$t price .or t$e prouct an can a2oi o2erc$arging+eg? t$e IM6% ere being o2erc$arge a% per t$e calculation% in cla%%" !!)#$en .orce it$ %ti/ copetition, t$e inar loo*ing into acti2ity ba%e anageent o. co%t% can $elp in fning t$e rig$t price an rig$t co%t% !1)$e %uen c$ange% to pricing by unbunling can i%rupt t$e current e;uilibriu but t$e %ur2i2al in t$e ar*et %$oul be t$e *ey !7)ML %$oul pull prouct% .ro %aller copanie% a% a t$reat .or en.orcing contract obligation% to %u%tain ar*et %$are 7" Ipplication o. t$e ca%e to a %iilar proble .or one o. t$e group eberJ% copanie%'
aterpillar %ell% con%truction an eart$ o2ing e;uipent in Fnia) Prouct %ol i% bunle it$ teleatic% %olution a% a %tanar o/ering to cu%toer) $e o/ering inclue% ac$ine, teleatic% e2ice) $e o/er al%o inclue% teleatic% 7 year% %ub%cription .or ac$ine ata an ont$ly report%) I% inu%try itne%%e in con%truction %egent, le to opportunity .or $ine%e an Korean anu.acturer% to %et up ba%e an o/er prouct% at uc$ loer price) $e%e copetitor% o/ering oe% not inclue any tec$nology %olution%) 2erall t$e cu%toer percei2e 2alue o. caterpillar a% $ig$ ;uality an reliable ac$ine) Fnu%try %egent in Fnia %$i.ting toar% i-tier %egent t$at i% price %en%iti2e) u%toer a/orability .or $ig$er price ac$ine i% a c$allenge) $i% $a% been a a9or c$allenge .or caterpillar to penetrate in groing ar*et%)
AS IS Product Costing I eep i2e analy%i% %egregating prouct an tec$nology %eparately) Ft i% e2ient .ro belo table, argin .or bare prouct i% $ig$er an teleatic% i% lo%ing argin) 3urt$er analy%i% %$o% t$at teleatic% i% lo%ing argin ue to 7 year .ree %ub%cription t$at i% built) Il%o, eleatic% ata u%age %$o% t$at only 1(4 o. t$e cu%toer% $a2e logge into t$e %y%te in la%t 7 year% inicating t$at t$ere are only .e cu%toer% are really intere%te in teleatic% in.oration $ile a9ority o. t$e ot$er% are not u%ing it) $ere i% an opportunity to reuce ac$ine co%t by a*ing teleatic% a% an attac$ent in%tea o. %tanar) AS IS product costing
Prouc t Re2enue +in la*$% FDR"
o%t o. GS SGI +in La*$%" Proft Det Margin 4
Mac$ine
1
5A ! 7 8)A84
!)11
5=)(7 ()C 7)1C 54
eleatic%
oent%
()=A eleatic% price i% inclu%i2e o. e2ice co%t 7 year ()C= %ub%cription c$arge% ()! -()1C -7=4
Proposed Product Costing Propo%e %olution i% to e bunle prouct, teleatic% an teleatic% %ub%cription) Belo table %$o% prouct co%ting an argin% $en ac$ine, teleatic% an 7 year %ub%cription i% e bunle) Mac$ine price can be reuce by ()=ALa*$% an %ol at !)11la*$% an t$i% $elp% in ipro2e %ale% in i %egent) 3urt$er, t$ere are to option% .or co%ting teleatic% an teleatic% %ub%cription) ne option i% to unbunle %ub%cription an let cu%toer% pay .or it) $i% i% %$on in table belo)
Option 2: Inot$er option i% t$at teleatic% can be bunle it$ a ! year .ree %ub%cription an %till be proftable) o%t o. ! year teleatic% %ub%cription i% ()! an ne teleatic% e2ice proft i% ()(7 a% %$on in table belo
